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NY billionaire controlled Sago Mine since 2001

New York billionaire Wilbur L. Ross Jr. has controlled the company that owns the Sago Mine since at least early 2001, according to court records, corporate disclosures and other publicly available documents.

Ross began buying up Anker Coal Group in 1999, with the purchase of a one-fifth stake in the company, according to U.S. Securities and Exchange Commission filings.

By 2001, Ross had acquired 47 percent of the company — making him by far the largest shareholder, SEC records show.

The ownership documents, reviewed over the last week, raise new questions about statements from International Coal Group managers that they had little to do with growing safety problems before last week’s disastrous explosion.

The Jan. 2 accident — the worst mining disaster in West Virginia in nearly 40 years — killed 12 miners and critically injured another.

In each of the last two years, the Sago Mine south of Buckhannon recorded injury rates three times higher than the national average for similar mines, according to U.S. Mine Safety and Health Administration records.

Also, the Sago Mine experienced a series of a dozen roof falls and was cited for more than 200 safety violations in 2004 and 2005, according to the MSHA records.

In a press briefing last week, ICG Vice President Gene Kitts said his company made changes in mine management as they prepared to close on their deal with Anker on Nov. 18, 2005.

“As it went through a change in management, there were some changes taking place in officials at the mine,” Kitts said. “We recognized that issues such as safety training and the relationship with the regulatory agencies needed to be worked on.”

Officials from the state Department of Environmental Protection, though, say that DEP inspectors have not noticed any change in on-the-ground mine managers.

“To my understanding, they are still dealing with the same people as they have been since the site has been around,” said Randy Huffman, director of the DEP Division of Mining and Reclamation.

In another press briefing, Ben Hatfield, president of ICG, said it was unfair to blame the mine’s poor safety record on him or ICG.

“Much of the bad history was beyond our reach and our ability to control,” Hatfield said.

Indeed, Hatfield and Kitts, both former Massey Energy officials, joined ICG in early 2005, according to corporate news releases.

Hatfield was named president in March 2005, just two weeks before ICG announced its plans to buy Anker. Kitts joined the company in April, just after the Anker deal was announced.

ICG itself was formed in October 2004 to carry out a plan by Ross to buy part of the holdings of bankrupt Horizon Natural Resources. Massey bought the rest of Horizon.

But the formation of ICG and its formal purchase of Anker was just the last step in a six-year effort by Ross to acquire Anker, a Morgantown company that had a high profile in the late 1980s through the mid-1990s.

In 1988, then-company President John Faltis unsuccessfully promoted a mega-landfill in Barbour County. The company was also involved in the controversial Morgantown Energy Associates power plant.

Faltis died in a helicopter crash in October 1997.

Since Faltis’ death, Anker has gone through bankruptcy and has been promoting a resurgence of mining in the high-sulfur — and acid mine drainage producing — coalfields of north-central West Virginia.

Ross began his purchases in 1999. Anker was still three years away from bankruptcy, but was clearly in financial trouble.

Anker’s coal production had dropped by 20 percent, and the company had lost $132 million in the last three years, according to SEC disclosures.

Ross is known for buying up such firms, having been dubbed “The King of Bankruptcy” by Fortune magazine in 1998.

Through his company Rothschild Recovery Fund, Ross paid $11.2 million to buy a 20 percent stake in Anker, according to corporate disclosures filed with the SEC by Anker.

By January 2001, Ross had increased his share of Anker to about 40 percent.

From June 2001 to April 2002, Ross was listed as a director of Anker, according to records from the U.S. Office of Surface Mining’s Applicant Violator System, or AVS, which tracks coal operators across the country.

Later in 2001, Ross bought enough to raise his stake to nearly 47 percent, the SEC records show.

The next year, Anker filed for bankruptcy.

Then, in 2002, former Anker President Bruce Sparks sued Ross and various other Anker investors.

In that suit, filed originally in Harrison County Circuit Court, Sparks alleged that Ross and other Anker board members terminated him, and reneged on a severance package that was to pay him 2 1/2 times his annual salary.

Court records show Sparks alleged Ross “controlled and managed” the various Anker companies.

In a response filed after the case had been moved to U.S. District Court in Clarksburg, a lawyer for Ross denied that allegation.

The case was settled confidentially. But a filing in Anker’s bankruptcy case shows Sparks was paid nearly a $650,000 settlement.

Also, several trade press accounts of the move by Ross into the coal industry indicate that he controlled Anker much earlier than November 2005.

A February 2002 story in the Pittsburgh Business Times said Anker was among the “more significant investments” that Ross has made in the coal business.

An April 2005 newsletter published by the University of Michigan School of Business reported that, before the ICG purchase of Anker, Ross already owned 43 percent of Anker.

A program for a conference on corporate restructuring in Japan, for which Ross was the keynote speaker, said Ross had obtained “controlling interest” in Anker in February 2001.

Ross also serves on the Yale University School of Management’s Board of Advisors. On its Web site, Yale includes a biography of each of the board members.

That biography says Ross “acquired control of Anker” sometime “early in 2004.”

Staff writers Scott Finn and Eric Eyre contributed to this report.

To contact staff writer Ken Ward Jr., use e-mail or call 348-1702.


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