"Coal Workers Lose Pensions As Execs At Bankrupt Company Get Bonuses"
On Wednesday, a bankruptcy judge in St. Louis freed a bankrupt coal company from its contractual obligations to retired miners. Judge Kathy Suratt-States explained that Patriot Coal could not be held to its $1.3 billion in pension obligations because the laborers who incurred those obligations shared in the responsibility for the company’s failure: “There is likely some responsibility to be absorbed for demanding benefits that the employer cannot realistically fund in perpetuity,” she wrote.
Two weeks prior, Judge Suratt-States approved Patriot Coal’s request to pay $6.9 million in retention bonuses, concentrated on “the company’s top 35 officers,” Bloomberg reported.
Patriot Coal was spun off from Peabody Energy in 2007, as part of a wave of spinoffs that the United Mine Workers of America (UMWA) says was designed to get large pension obligations off of Peabody’s books. One retired Peabody miner, Joe T. Brown, summed it up in an interview with Wyoming Public Media: “I depend on them to pay my medical, it was in the contract,” Brown said. “I never worked for Patriot, but Peabody promised this to me, and I earned it. I worked for them for 33 years.”
After just five years of existence, “Patriot wound up with nearly three times as many retirees as active employees,” labor journalist Mike Elk wrote in late 2012. Peabody Energy, “the world’s largest private-sector coal company” according to its site, had nearly a billion dollars in pure profits in 2012. Those profits represented about 12 percent of overall revenues, and Peabody ranked 316 on the Fortune 500 list for that year. The year before spinning off Patriot Coal, Peabody was a substantially less profitable company.
While Judge Suratt-States was not persuaded, the evidence for UMWA’s portrayal of Patriot as an intentional failure to wipe healthcare and pension obligations to miners off Peabody’s books seems strong. A paper by Temple University professor Bruce Rader on the union’s site sums up the evidence, including this slide from a Peabody presentation on the spinoff:
Rader translates from Powerpoint to plain English: “in every way Peabody was enhanced by the spinoff, Patriot was burdened,” including with “low growth, low margin characteristics, and high capital requirements.” From other documents, Rader found that Peabody assigned Patriot “11.10% of their assets to cover 40% of their legacy liabilities,” at substantial gain to shareholders. With the bankruptcy judge’s decision Wednesday, the shareholder gains became the coalminers’ losses.
The UMWA has vowed to appeal.