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Mine Owner to Pay $200 Million in West Virginia Explosion

December 6, 2011 by Leave a Comment

That amount includes $46.5 million allocated to the families of the victims and those who were injured in the blast, according to a source close to the investigation who requested anonymity because he was not permitted to speak about the arrangement.

Sources close to the investigation said the settlement, which will be announced at a news conference at 11 a.m. by the United States Attorney’s Office for the Southern District of West Virginia, includes terms that protect Alpha — but not individual Massey executives — from prosecution.

The settlement, first reported by the Charleston Gazette, follows months of investigative work by federal officials from the Departments of Justice and Labor, as well as an independent commission appointed by the former West Virginia governor. The findings that had been made public placed the blame for the blast squarely on Massey and what investigators said was its reckless disregard for safety standards, but had stopped short of assigning criminal blame.

Tuesday’s announcement, which will be made public after federal investigators meet with families of the victims in West Virginia, will detail criminal responsibility, that Alpha, and in turn Massey, which it now owns, will accept.

In the past, Massey, which was purchased by Alpha in June, had dismissed investigators charges that its actions led directly to the disaster.

“It’s a record-level settlement,” said a former federal mine safety chief, J. Davitt McAteer, who conducted the independent state investigation, which issued the first findings about the explosion this year. “This is an amount that will get companies to pay attention. It has to affect their bottom line, otherwise it doesn’t mean anything.”

The settlement does not protect individual Massey managers, including the former chief executive, Don L. Blankenship, who have not been charged. In all 18 executives refused to be interviewed by federal investigators, invoking their Fifth Amendment rights.

In addition to the $46.5 million payout to victims and families, the agreement includes $80 million to bolster safety and infrastructure in all underground mines owned by Alpha and Massey; $48 million to establish a mine health and safety foundation to be used to finance academic research on mine safety; and about $35 million in fines and fees that Massey owed to the Mining, Safety and Health Administration, the branch of the Department of Labor that oversees the mining industry.

Under the terms of the agreement, Alpha must also put in place a plan that guarantees it has enough safety equipment, ventilation and methods of clearing potentially explosive rock dust out of all its underground mines within 90 days.

The company will be required to build a state-of-the-art training facility in West Virginia, including a mine lab where it will be able to simulate mining disasters.

A report released in March by the independent team appointed by former Gov. Joe Manchin III of West Virginia and led by Mr. McAteer determined that the disaster could have been prevented if Massey had observed minimal safety standards.

That finding was in line with previous inquiries by federal officials who have said that in the year prior to the explosion, Upper Big Branch was cited by safety inspectors 515 times and ordered to shut down operations on 52 occasions.

The McAteer report accused Massey of having engaged in a pattern of negligence, which allowed a “perfect storm” of poor ventilation, equipment whose safety mechanisms were not functioning and combustible coal dust.

The investigators dismissed Massey’s claims that the blast had occurred because a sudden burst of methane had bubbled from the ground, saying evidence contradicting that theory included the bodies of the miners found near the main explosion. Only two had methane in their lungs.

Federal investigators have also said that Massey kept two sets of books so that accounts of hazardous conditions in Upper Big Branch would be kept hidden from inspectors.

Article source: http://feeds.nytimes.com/click.phdo?i=ad3093323f1c70be76056a376b6d28f4

Filed Under: Business News Tagged With: , ,

As Financial Gloom Deepens, Reform of British Banking Rules May Wait

September 8, 2011 by Leave a Comment

On Monday, a government-appointed banking commission is expected to present its final recommendations on how to protect taxpayers from bearing the costs of any future bank collapses. The plan aims to separate a bank’s deposit-taking business from the riskier trading and investment banking operations, which would be allowed to fail should they run into trouble.

But at a time of heightened economic uncertainty, the government of Prime Minister David Cameron has grown nervous about the proposed changes, said two government officials who declined to be identified because no final decision has been made.

Mr. Cameron is concerned that the changes will drive up banks’ financing costs and in turn limit their ability to lend to British businesses, which would threaten an already weak economy, the officials said.

So even if the Independent Commission on Banking proposes far-reaching changes, London is likely to delay their implementation until after the next election, planned for 2015, the officials said.

“This is a political and not a financial thing now,” said Simon Gleeson, a partner at the law firm Clifford Chance. “What everybody hoped was that by the time we got to reforming banking regulation we’d have a more stable economy. But we don’t and that’s the biggest challenge.”

The British economy grew just 0.2 percent in the second quarter, and the Bank of England has cut its growth forecast for this year to 1.5 percent from 1.9 percent.

The British proposal would make it considerably more expensive to raise capital for investment banking and would be much more painful for Britain’s banks than the so-called Volcker Rule in the United States.

Under the United States approach, originally advocated in a stronger form by Paul A. Volcker, the former Federal Reserve chairman who served as an adviser to President Obama, banks’ freedom to trade with their own capital and manage hedge funds would be limited. But they would still be able to borrow money economically because their balance sheets would remain unified.

British banking executives, nervous that the new rules would increase their financing costs and threaten their credit ratings, have stepped up lobbying efforts in recent weeks.

Barclays and Royal Bank of Scotland would be the most affected by the new rules because they have large investment banking businesses and could see profit drop by a third, according to a research note by JPMorgan Chase.

The chief executive of Barclays, Robert E. Diamond Jr., and his counterpart at R.B.S., Stephen Hester, have held lengthy discussions with the government, arguing in favor of the universal banking model, that is, leaving consumer and investment banking linked. They claimed this had helped their banks to withstand risks, according to a Treasury official who declined to be identified because the talks were private.

In a preliminary report in April, the Independent Commission on Banking suggested limiting the use of consumer deposits to finance the investment banking operation by setting up a so-called ring fence around the consumer operations. On Monday, the commission is expected to give more detail on exactly which businesses should be “ring-fenced” and how strict the separation should be. As an example, banks could be restricted to using deposits only for personal loans and the purchase of government bonds.

Angela Knight, the head of the British Bankers Association, an industry group, said the commission’s proposals would weaken rather than strengthen the financial sector. “Ring-fencing becomes unattractive to investors of all types as it reduces the benefits of diversification, gives borrowers a worse deal, and is inefficient from a capital, funding and operational perspective,” she said.

Among the biggest fears for banking executives is that the new rules would increase the financing costs of investment banking by implying the business would be allowed to fail. Interbank lenders, the executives argue, would demand higher rates in return for the higher risk. The banks’ total financing costs could rise by about £2 billion a year, according to a report by Citigroup analysts.

Eric Dash contributed reporting from New York.

Article source: http://feeds.nytimes.com/click.phdo?i=831467389fc9350a49bcde1b58e03c95

Filed Under: Business News Tagged With: , ,

Britain May Delay Tighter Regulations on Banks

September 8, 2011 by Leave a Comment

On Monday, a government-appointed banking commission is expected to present its final recommendations on how to protect taxpayers from bearing the costs of any future bank collapses. The plan aims to separate a bank’s deposit-taking business from the riskier trading and investment banking operations, which would be allowed to fail should they run into trouble.

But at a time of heightened economic uncertainty, the government of Prime Minister David Cameron has grown nervous about the proposed changes, said two government officials who declined to be identified because no final decision has been made.

Mr. Cameron is concerned that the changes will drive up banks’ financing costs and in turn limit their ability to lend to British businesses, which would threaten an already weak economy, the officials said.

So even if the Independent Commission on Banking proposes far-reaching changes, London is likely to delay their implementation until after the next election, planned for 2015, the officials said.

“This is a political and not a financial thing now,” said Simon Gleeson, a partner at the law firm Clifford Chance. “What everybody hoped was that by the time we got to reforming banking regulation we’d have a more stable economy. But we don’t and that’s the biggest challenge.”

The British economy grew just 0.2 percent in the second quarter, and the Bank of England has cut its growth forecast for this year to 1.5 percent from 1.9 percent.

The British proposal would make it considerably more expensive to raise capital for investment banking and would be much more painful for Britain’s banks than the so-called Volcker Rule in the United States.

Under the United States approach, originally advocated in a stronger form by Paul A. Volcker, the former Federal Reserve chairman who served as an adviser to President Obama, banks’ freedom to trade with their own capital and manage hedge funds would be limited. But they would still be able to borrow money economically because their balance sheets would remain unified.

British banking executives, nervous that the new rules would increase their financing costs and threaten their credit ratings, have stepped up lobbying efforts in recent weeks.

Barclays and Royal Bank of Scotland would be the most affected by the new rules because they have large investment banking businesses and could see profit drop by a third, according to a research note by JPMorgan Chase.

The chief executive of Barclays, Robert E. Diamond Jr., and his counterpart at R.B.S., Stephen Hester, have held lengthy discussions with the government, arguing in favor of the universal banking model, that is, leaving consumer and investment banking linked. They claimed this had helped their banks to withstand risks, according to a Treasury official who declined to be identified because the talks were private.

In a preliminary report in April, the Independent Commission on Banking suggested limiting the use of consumer deposits to finance the investment banking operation by setting up a so-called ring fence around the consumer operations. On Monday, the commission is expected to give more detail on exactly which businesses should be “ring-fenced” and how strict the separation should be. As an example, banks could be restricted to using deposits only for personal loans and the purchase of government bonds.

Angela Knight, the head of the British Bankers Association, an industry group, said the commission’s proposals would weaken rather than strengthen the financial sector. “Ring-fencing becomes unattractive to investors of all types as it reduces the benefits of diversification, gives borrowers a worse deal, and is inefficient from a capital, funding and operational perspective,” she said.

Among the biggest fears for banking executives is that the new rules would increase the financing costs of investment banking by implying the business would be allowed to fail. Interbank lenders, the executives argue, would demand higher rates in return for the higher risk. The banks’ total financing costs could rise by about £2 billion a year, according to a report by Citigroup analysts.

Article source: http://feeds.nytimes.com/click.phdo?i=831467389fc9350a49bcde1b58e03c95

Filed Under: Business News Tagged With: , ,