CHARLESTON, W.Va. -- Federal authorities have been investigating whether officials at the Bank of Mingo helped a group of coal-mining contract firms use dozens of illegal cash withdrawals to finance a multimillion-dollar scheme aimed at lowering workers' compensation insurance premiums, according to newly unsealed court records.
Earlier this year, FBI agents seized computer hard drives and documents related to Aracoma Contracting from the bank's Williamson branch as part of a probe that has resulted in jail sentences for a former BrickStreet Insurance auditor and four coal contract company officials, according to the court filings.
Investigators alleged that they have "probable cause" to believe that the bank and at least one bank manager "conspired with, or otherwise aided and abetted" Aracoma Contracting in structuring cash withdrawals to help cover up the scheme, FBI Special Agent James Lafferty said in a sworn statement filed as part of the government's application for a search warrant for potential evidence from the bank.
Bank officials could not be reached for comment Monday, but have previously said that they were cooperating with investigators and had done nothing wrong. Neither the bank nor any of its employees has been charged.
Agents carried out the search warrant, approved by then-U.S. Magistrate Judge Mary E. Stanley, in late February. Documents about it were originally filed under seal in federal court in Charleston.
Lafferty's affidavit, along with the search warrant and a list of potential evidence obtained by agents, was unsealed Friday, the same day that former BrickStreet auditor Arville Sargent was sentenced by U.S. District Judge John T. Copenhaver.
Sargent was sentenced to 6 years in prison after he reached a deal with prosecutors and admitted to tax evasion and mail fraud, in a scheme in which he accepted an estimated $1 million in bribes in exchange for helping Aracoma Contracting officials avoid higher workers' insurance premiums from BrickStreet. Four officials from Aracoma Contracting and related firms have also been sentenced to prison sentences ranging from 15 months to 30 months.
The investigation, led by Assistant U.S. Attorney Thomas Ryan, has not received nearly as much attention as ongoing criminal probes of the Upper Big Branch Mine Disaster and of political corruption in Mingo County. But statements by prosecutors and recently filed court records show the coal-contractor probe has led federal investigators to additional information about public corruption in the region, to a potentially large gambling ring, and to more cases where coal companies were defrauding their workers' compensation insurers.
In the case, prosecutors alleged that Sargent worked with Aracoma Contracting and three other contracting firms to defraud BrickStreet, West Virginia's largest workers' compensation provider.
The four companies were "employee leasing" services that supplied miners for coal companies, including Alpha Natural Resources and Patriot Coal, under agreements common in West Virginia's coal industry.
Officials from the four contracting firms paid their employees in cash, allowing them to avoid employment taxes and to hide their true payroll, a move that greatly reduced their workers' compensation premiums, records in the case show.