This article originally provided by The Wall Street Journal

February 16, 2006

Partisan Vein

A Coal CEO's Unusual Pastime: Firing Up West Virginia Politics

Mr. Blankenship Leads Drives To Cut Taxes, Alter Courts; His Board Cheers Him On

Attacking a Democratic Judge

By DEBORAH SOLOMON

CHAPMANVILLE, W.Va. -- The 30-second television advertisement that aired here last June had all the hallmarks of a professional political attack. As playing cards and poker chips appeared onscreen, an announcer warned that a $5.5 billion bond offering to shore up the state's underfunded employee pension plan would be a "big gamble." The bonds wouldn't save pensions but would make bankers and lawyers rich from fees, the ad said.

Voters rejected the bond issue, a blow to West Virginia's Democratic Gov. Joe Manchin. It was a big victory for the person behind the $650,000 ad campaign: Don L. Blankenship.

Mr. Blankenship isn't a politician. He is the chief executive of a publicly traded company, coal giant Massey Energy Co. Over the past two years he has poured $6 million of his own money into political advertising campaigns, battling Democratic judges and fighting high taxes.

His goal: To eliminate the plaintiff-friendly verdicts and tax burdens that he says make West Virginia a bad place to do business. "It's something that hundreds of thousands of West Virginians would like to do: Fight back against a government that is causing them to have less opportunity than they would like to have," says Mr. Blankenship, 55 years old. "I have a willingness to spend enough money to make the changes that need to be made."

Some critics say Mr. Blankenship's campaigns have more to do with Massey Energy's interests than West Virginia's. He stepped up his political involvement shortly after Massey lost a $50 million jury verdict in August 2002. It was accused of improperly forcing a smaller company out of business. The Richmond, Va., company is preparing to appeal the verdict to the state Supreme Court, whose five judges are elected by state voters.

Massey, the largest coal producer in West Virginia and the fourth largest producer in the country by revenue, behind No. 1 Peabody Energy Corp. of St. Louis, also has had repeated battles with state officials over safety and environmental issues. In recent weeks, four workers have died at Massey-owned mines in West Virginia, two of them in a fire on Jan. 21.

It is rare for someone to become so politically active while simultaneously running a big publicly traded company. Mr. Blankenship personally oversees his media campaigns, including writing ads and designing polls. He discusses politics as a frequent guest on a popular statewide radio talk show and attacks officials in speeches. He denies that his efforts are aimed at helping Massey's bottom line and says he has no ambition to run for office himself.

His efforts are breathing new life into the state's Republican Party and leading Democrats to push for stricter campaign-finance laws. Mr. Blankenship has helped elect the only Republican on the state Supreme Court and lower the state's food tax to 5% from 6%.

His campaigns also have focused attention on the problems of a state whose median household income is $32,589 versus the national median of $44,473. The long-term decline of coal, despite a recent rebound, has hit West Virginia hard. The state has struggled to attract high-paying industries.

To augment its weak revenue from income and property taxes, West Virginia has levied sales taxes on food, gas and other items. Some critics say the taxes encourage West Virginians to cross into Kentucky and Ohio to shop, as those states either don't have such taxes or have lower rates. Meanwhile, West Virginia has gained a reputation as an expensive place to do business because of some plaintiff-friendly court cases. Last year, the state Supreme Court ruled that a woman who wrote a check that bounced to her car-insurance company still deserved coverage after an accident because the company failed to notify her within 10 days that her policy was rescinded.

Mr. Blankenship has seized on these issues, crafting populist messages that link the state's policies to pocketbook issues such as the shortage of good-paying jobs. The state's political shift has helped him. While West Virginia long has been a stronghold for labor and the Democratic Party, it also is socially conservative. Democrats dominate both houses of the Legislature, but Republicans have made inroads there and President Bush won here in 2000 and 2004.

One of the state's few big employers is Massey, which had revenue of $2.2 billion last year and employs about 4,300 West Virginians. Relations between Massey and the state have long been uneasy. The company recently reached a $1.4 million settlement over alleged environmental violations.

More than 13 people, including some contract employees, have died while working at Massey-owned mines in the past five years. In 2001, a report commissioned by then-Gov. Bob Wise said the company's accident record "would be among the highest" if contract workers were included. The report said Massey's official safety record was improved because some accidents involving contractors weren't reported under Massey's name.

Mr. Blankenship says the company's safety record is among the best in what is known as a dangerous industry and calls the number of fatalities "better than average when you consider we have 5,700 people" companywide.

Raised in Mingo County, W.Va., by a single mother in a house without indoor plumbing, Mr. Blankenship says his views were shaped at an early age as he watched his mother struggle against the state's high taxes at the gas station and grocery store she ran.

Mr. Blankenship often speaks about his upbringing. During a recent talk to students at West Virginia University College of Law, Mr. Blankenship used a PowerPoint presentation to burnish his rags-to-riches image and make his case that he is fighting for the little guy.

"This gives you a look into where I came from and why I might take some of the positions I take," he said, as pictures flashed by of his mother's gas station and Mr. Blankenship on his motorcycle and his ranch. He says his primary residence still is in Mingo County and he has the same friends and hobbies he did when he was poor.

Mr. Blankenship received a bachelor's degree in accounting from Marshall University in Huntington, W.Va., and in 1982 joined a Massey subsidiary. He worked his way up the ranks and became the first non-Massey family member to be president of the company in 1990. In 2000, he helped spin Massey out from Fluor Corp., which had bought the coal company's parent in 1981.

During a bitter strike in the 1980s by the United Mine Workers, brought about by Massey's insistence that miners at each site negotiate separately with the company, workers smashed Mr. Blankenship's car windows and even fired shots at him. One bullet found its way into his television set. He keeps the old Zenith in his office as a reminder of the struggle. Today, just 3% of Massey's employees are unionized.

Mr. Blankenship says he is worth "tens of millions of dollars" but won't elaborate. According to Massey's securities filings, Mr. Blankenship owns common stock valued at more than $10 million.

The chief executive often briefs Massey's board on his political activities and has won its understanding, according to board member William R. Grant. "What's best for the state of West Virginia are Don's positions, usually, and that will maximize shareholder value," says Mr. Grant, who is co-founder of Galen Associates, a venture-capital company in New York.

Thrown Into Conflict

Mr. Blankenship's political activism has thrown him into conflict with Gov. Manchin. A particular sore point was the campaign against the pension bonds, which was successful in defeating the measure. Last July, Mr. Blankenship filed a lawsuit in federal court accusing the governor of rescinding a Massey coal silo permit in retaliation for Mr. Blankenship's campaign. State officials say the silo was too close to a school and the governor had nothing to do with the case.

Mr. Blankenship says any response from politicians doesn't bother him. "Once you've had urine thrown on you and been shot at during a strike, you don't worry too much," he says.

Mr. Blankenship's attempt to realign the state Supreme Court has attracted particular ire from critics who say his motives are financial. Massey has been in a long-running legal battle over a contract with a company called Harman Mining. Massey inherited the contract, under which it was obligated to buy a certain kind of coal used in steelmaking, when it bought United Coal in 1997. Harman Chief Executive Hugh Caperton says the deal brought his company about $16 million annually.

Shortly after buying United, Massey cancelled the deal, saying it was entitled to do so because the steelmaker that ultimately was buying the coal was closing down a plant. Harman was forced into bankruptcy-court proceedings and Mr. Caperton sued Massey for breach of contract.

In August 2002, a Boone County, W.Va., jury hit Massey with a $50 million verdict, saying the company illegally put Harman out of business. Mr. Blankenship quickly issued a statement saying the company planned to "vigorously pursue" an appeal to the West Virginia Supreme Court. (The appeal has yet to be filed because of a more than three-year delay in preparing a transcript of the jury trial.)

Bruising Campaign

In 2004, Mr. Blankenship personally bankrolled a bruising $3.5 million campaign to unseat longtime state Supreme Court Justice Warren McGraw, a Democrat. He poured about $2.4 million into a group called And For The Sake Of Our Kids. The group ran television spots accusing Mr. McGraw of "letting a child rapist go free to work in our schools." The ad referred to a Supreme Court ruling that allowed a convicted sex offender to remain on probation and work in a Roman Catholic school as part of his rehabilitation.

Mr. Blankenship also gave direct donations to Mr. McGraw's Republican challenger, a little-known attorney named Brent Benjamin who barely won his primary against a candidate who hadn't even campaigned. Mr. Blankenship says he didn't know Mr. Benjamin or his positions before the campaign but says he "figured it couldn't be worse than McGraw." He sent letters to businesses across the state seeking $1,000 donations.

The campaign was unprecedented in West Virginia history, where most Supreme Court races were staid affairs. Mr. Benjamin defeated Mr. McGraw, 53%-47%. It was the first time a Republican challenger had won election to the state Supreme Court since 1928.

"When you've got a $50 million verdict, which now with interest is $70 million, and you go out and influence a Supreme Court race with $3.5 million, it makes me more than a little skeptical about his reasons for doing it," says Mr. Caperton of Harman. He says he has spent eight years and his life savings fighting Massey.

Mr. Blankenship's "interests are more economic," says Justice Larry Starcher, a Democrat who has been targeted by Mr. Blankenship for defeat in the 2008 election. "I never heard of him before that $50 million verdict."

Mr. Blankenship bristles at that suggestion. Even if the court rules in Massey's favor, he asks, "What would it mean to me? It would impact the stock I own at Massey" but however much it might increase the stock's value won't equal the amount I have already spent on political endeavors.

In December, a divided state Supreme Court rejected a lawsuit filed by Massey and other coal operators seeking a ban on "severance taxes" levied on coal shipped out of state. The companies sought the return of nearly $500 million in back taxes. Justice Benjamin, whose campaign Mr. Blankenship bankrolled, was one of two judges siding with the coal companies.

Mr. Blankenship's spending has spurred calls for campaign-finance reform. Last year, West Virginia became the first state to limit contributions to so-called 527 groups, which are exempt from taxes and can raise money for political activities so long as they don't campaign for specific candidates. The group that ran the "child rapist" ads in West Virginia was a 527. The state now caps contributions at $2,000 an election cycle. Individuals still can spend unlimited sums of their own money on campaign ads.

In recent weeks, Massey has come under criticism for waiting more than two hours to report a conveyer-belt fire at its Aracoma mine to state regulators. Two miners died in the Jan. 19 fire. Last month, state Rep. Lidella Hrutkay, a Democrat from the county where the accident occurred, criticized Mr. Blankenship on the floor of the House, saying he should have poured millions of dollars into improving safety at Massey's mines instead of into state politics.

Mr. Blankenship says he will "let some time pass" before becoming politically active again to deal with the accident. Still, he expects the hiatus to be temporary. His next steps, he says, are to unseat the state's House majority leader (a Democrat), any lawmaker who doesn't agree to completely eliminate the food tax and Justice Starcher, who he says is too plaintiff-friendly.

Write to Deborah Solomon at deborah.solomon@wsj.com