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Feds looking at gambling ring, kickback scheme, more Mingo corruption

CHARLESTON, W.Va. -- Federal authorities began investigating an illegal gambling ring along the West Virginia-Kentucky border, discovered a kickback scheme involving a mine superintendent, and believe they are close to netting another person involved in political corruption in Mingo County, prosecutors revealed Wednesday.

Word of the developments emerged during a little-noticed sentencing hearing for three men who pleaded guilty to their roles in a multimillion-dollar scheme aimed at lowering workers' compensation premiums for contract firms that provided workers to some of the state's largest coal producers.

Few details were provided during a hearing before U.S. District Judge John T. Copenhaver, though some additional information -- aimed at aiding the judge in his sentencing decision -- was provided to the judge during a private discussion at the bench.

Assistant U.S. Attorney Thomas C. Ryan said that the matters discussed "are still in the ongoing investigation stage, but are ripening."

Ryan outlined broad topics of the probes at issue as part of a motion in which he asked Copenhaver to credit defendants Jerome Eddie Russell, Frelin Workman and his son, Randy Workman, with providing prosecutors with "substantial assistance." Such a move can provide for a significantly decreased sentence for defendants who are cooperating with efforts to prosecute others.

Russell, Workman and Workman pleaded guilty and provided information that helped U.S. Attorney Booth Goodwin's office bring charges against a BrickStreet Mutual Insurance Co. auditor who allegedly took bribes to help contract companies save millions in workers' compensation premiums by paying workers in cash and falsifying payroll records.

The scheme involved four mining contract firms  -- Aracoma Contracting LLC, Christian Contracting, T&W Services LLC, and Newhall Contracting. The companies were controlled by Russell, the Workmans and another man, Arthur White Jr., who is scheduled for sentencing today.

The four companies were "employee leasing" services that supplied miners for coal companies, including Alpha Natural Resources and Patriot Coal, under arrangements common in the state's mining industry.

BrickStreet auditor Arville Sargent pleaded guilty in March to "honest services" mail fraud, which means he deprived BrickStreet of its intangible right to his honest services, and to tax evasion.

Russell, Frelin Workman and Randy Workman each pleaded guilty to two criminal counts, admitting to tax evasion and aiding Sargent in the scheme. Each faced a maximum statutory sentence of 25 years in prison and a $500,000 fine.

Standard advisory federal sentencing guidelines recommended sentences of 41 to 51 months for Russell and Frelin Workman and 27 to 33 months for Randy Workman.

Copenhaver sentenced Russell and Frelin Workman both to 30 months in prison and three years probation, and Randy Workman to 15 months in prison and three years probation, giving each man credit for helping prosecutors.

In describing the assistance Russell and the Workmans provided, Ryan said that they've provided information that led prosecutors to two other contracting firms involved in similar schemes.

Prosecutors are preparing to seek a grand jury indictment of officials from one of the firms, and are working on a plea agreement with the other, Ryan said.

The second contracting firm's plea agreement is likely to include "different charges" that relate to the ongoing investigation of "public corruption in Mingo County," Ryan said. One of the firm's officials has been "involved in politics in Mingo County," Ryan said.

Ryan did not publicly name the contracting firms.

Also, Ryan said that the defendants had led prosecutors to a "kickback scheme" in which a coal mine superintendent had used contractors to perform work at his home, and then falsely billed the mine operator for the work.

The mine superintendent, whom Ryan did not name, plans to plead guilty, Ryan said.

Ryan said the BrickStreet case has also provided helpful information about an illegal gambling ring in the Mingo County-Pike County, Ky., area.

"It's been a long-term investigation with a lot of tentacles," Ryan said. "I expect that investigation to take off, frankly, as soon as the agents and I have time to do so."

Also, Ryan told Copenhaver that Russell and the Workmans have "basically been blackballed" from working in any businesses related to the coal industry because word has spread that they're cooperating with the criminal investigations.

Reach Ken Ward Jr. at kward@wvgazette.com or 304-348-1702.


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