Former Alpha workers charged in billing scheme
CHARLESTON, W.Va. -- Three former Alpha Natural Resources employees and a former Alpha supplier have agreed to plead guilty and are cooperating in an ongoing investigation into a false billing scheme at the coal giant's operations, said U.S. Attorney Booth Goodwin.
Goodwin announced charges had been filed against the three former Alpha employees: Edward Ellis Mullins, 41, of Peytona, Joey R. Phalin, 36, of Crab Orchard, and Nicholas R. Coleman, 29, of Lester.
All were local "sourcing agents" responsible for ordering goods and services for Alpha mining operations along W.Va. 3 in Boone and Raleigh counties.
Charges were also announced against Donald Bryan Steele, 43, of Barboursville. Steele is the owner of M&S Hydraulics, a major Alpha supplier with offices in Barboursville and a rebuild shop in Switzer.
Each has been charged with wire fraud and aiding and abetting. All four have agreed to plead guilty and are cooperating with the ongoing investigation, Goodwin said in a news release.
According to the news release, an investigation revealed that several mine sourcing agents, generally responsible for ordering goods and services for mining operations from Alpha suppliers, participated in an illegal scheme to obtain goods for their own personal benefit.
The investigation further revealed that the sourcing agents, working in conjunction with the suppliers, hid numerous illegal transactions by creating false invoices. The false invoices, prepared by the supplier, were intended to look like legitimate purchases, but were really used to provide cash, gifts and other things of value to the sourcing agents and other Alpha employees, officials said.
"Today's announcement is the first step in an ongoing criminal investigation," Goodwin said. "People who accept bribes or who cheat their employers by approving fake bills are committing fraud, plain and simple, and my office will prosecute them to the fullest extent of the law.
"Schemes like this create unfair obstacles for suppliers who want to do business honestly," Goodwin continued, "and they drive up prices for everyone. There's no place for that in the American economy."
Mullins was employed as the sourcing agent for the Shonk Powellton #1 Mine, operated by the Elk Run Coal Company, an Alpha subsidiary.
According to Goodwin, Mullins approached a tire and wheel supplier in November 2011 about supplying him and other Alpha employees with tires and wheels for their personal vehicles.
In exchange, Mullins agreed to allow the tire seller to submit false invoices for payment to Alpha reflecting that tires used in the mining operations had been delivered, Goodwin said.
For its participation, the tire seller was told to "pad" the false invoice, authorities said. The tire seller immediately provided this information to Alpha corporate security, who, in turn, contacted the FBI and West Virginia State Police, Goodwin's office said.
Over the course of the next six months, the criminal investigation revealed that not only Mullins, but also other sourcing agents, including Phalin and Coleman, who were employed by another Alpha subsidiary, Marfork Coal Company, were also engaged in the false billing scheme.
Through the sourcing agents' cooperation and other information, the agents identified an even more prominent supplier involved in the false-billing scheme. In February 2013, the FBI and the State Police confronted Steele, the owner of M&S Hydraulics, a major Alpha supplier. The significant evidence uncovered by the FBI and the State Police led Steele to agree to cooperate immediately in the investigation.Mullins, Phalin, Coleman and Steele each face up to 20 years in prison and a $250,000 fine.