CHARLESTON, W.Va. -- In his Jan. 21 testimony in U.S. Bankruptcy Court in Charleston, Freedom Industries President Gary Southern eliminated any doubt that Freedom is a coal company, and not a chemical company, as Joe Manchin and others have said in an attempt to insulate the coal industry from responsibility for the contamination of 300,000 West Virginians' drinking water.
Southern conceded that Freedom's real owner, behind a web of corporate shells, is J. Clifford Forrest, himself the principal owner of Rosebud Mining Inc., the 21st largest coal company in the country. Southern also explained that Freedom only makes two products: one product (accounting for 80 percent of Freedom's profit) a form of "anti-freeze" that's sprayed on coal as it is loaded into coal cars in the winter and without which the coal car turns into a great big black brick until spring arrives. The other product, crude-MCHM, is used, we now know all too well, to create clean coal (and it's newly discovered byproduct, dirty water).
Freedom is an end-user of chemicals, not a manufacturer of them, and the end use is the coal business. MCHM is manufactured by Eastman Chemical Co. of Tennessee, not Freedom.
In recent weeks, The New York Times, a nationally syndicated columnist and former state DEP Chief David Callaghan in the Gazette, have all reported that West Virginia's junior U.S. senator Joe Manchin disclosed $1.5 million in income from his family owned coal company, Enersystems, Inc. on his Senate financial disclosure forms for the last two years.
They are all correct as far as they go, but the numbers for the four-year period from 2009 through 2012 tell more. Manchin's actual four-year coal income figures are as follows: $1,363,916 in 2009; $417,255 in 2010; $623,623 in 2011; and $865,065 in 2012. Manchin reported $3,269,859 for the period 2009 to 2011, a four-year average of $817,465. Anyway you cut it, this is real money -- real coal money.
The only curious number on Manchin's annual reports is the valuation he places on his share of Enersystems Inc. In the years 2011 and 2012, Manchin placed the value at between $500,001 and $1,000,000, valuations that are extremely low for an asset that yields an average annual income in excess of $800,000. At that value, the annual return on equity would range from 160 percent to 80 percent. A more realistic value based on 10 times earnings (the formula Forrest paid for Freedom) generates a value of $9.6 million, nearly 10 times the value Manchin reported.
For the years 2009 and 2010, Manchin reported values of $1 million to $5 million, but even those significantly higher values seem understated for the $1,781,171 ($1,363,916 + $417,255) in income reported for those two years.
There is, of course, nothing illegal about making money in the coal business, and the fact that Joe Manchin makes more than most people -- in any business -- arguably is a testament to his skills and worthy of applause. And the fact that Manchin, under the more rigorous income disclosure requirements of the Senate, has disclosed his coal income for the years 2009 through 2012, does not mean that he had any legal obligation to report coal income during the six years he was governor, the four years he was secretary of state, or the many years before that when he was a state senator. To be sure, lots of folks knew Joe Manchin had an interest in a family owned coal business. What the public did not know was just how much money Joe made from coal in those days, when he was the state's chief executive officer ultimately responsible for enforcing laws regulating the coal industry.
We can make an informed guess at his income for those year though, by looking at the value of his non-coal assets in 2009, the first year he reported to the senate. Those assets are not reported by a specific value, but rather by a range. The range -- exclusive of Manchin's interest in Entersystems Inc -- in 2009 was $1,513,000 to $4,145,000. If their value is as understated as the value for his coal business, Manchin's non-coal assets, in 2009, would range from as low as $2.5 million to $40 million. One may fairly assume that, no matter how frugally he lived during this period, it is unlikely that Manchin accumulated assets with these values on the $221,778 income he reported as governor in 2009.
It is fair to assume that Manchin's coal income generated a significant percentage of these assets. And that fact explains, at least in part, Manchin's lame, self-serving effort to cleanse the coal industry of responsibility for the Jan. 9 water contamination, an effort Gary Southern blew out of the water on Jan. 21.
DePaulo is a lawyer in Charleston.