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Coal Companies Destroying Workers’ Healthcare and Lives

[ 34 ] March 26, 2013 |

Mike Elk has a very disturbing story about Patriot Coal, a spinoff of industry giant Peabody Coal, going to bankruptcy court to divest itself of the pension and healthcare obligations guaranteed to workers in contracts Peabody signed with the United Mine Workers of America.

There’s exactly one reason for Patriot to do this–to maximize profit on the backs of the poor. Peabody created Patriot in order to manufacture a bankruptcy crisis; by giving the new company more retirees than active workers, it set the stage for bankruptcy relief of contractual obligations.

But in the UMWA’s eyes, Peabody is the real villain. According to union estimates, 90 percent of Patriot’s retirees are former Peabody miners who “never worked a day in their life” for Patriot. The UMWA charges that Peabody created Patriot as a vehicle to shed its retiree obligations. As evidence, the union cites the fact that when Peabody spun off Patriot Coal in 2007, it handed Patriot three times as many retirees as active workers and $557 million in retiree healthcare obligations. Within five years, Patriot had filed for bankruptcy.

We’ve already seen a disturbing decline in pensions around the country in the public sector. Eliminating hard-fought pension gains in the private sector, not even for the future but for already retired workers, will push working-class retirees into poverty. Slashing healthcare is an even bigger deal in the mining industry. The specter of black-lung disease haunts underground miners, including those working today. What are these people supposed to do?

On a related note, read Dave Jamieson’s piece on how the Senate’s kneecapping of the National Labor Relations Board has hurt the lives of workers. Once again focusing on the coal industry (coal companies really are the worst), Jamieson shows how the lack of a functioning NLRB allows companies to do almost anything they want to workers with no realistic legal recourse that will be resolved in less than a decade. Once again, what are these workers supposed to do?

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Comments (34)

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  1. Linnaeus says:

    Alex Macgillis also wrote a good article about this in The New Republic back in February.

  2. Linnaeus says:

    What are these people supposed to do?

    Work until they can’t any longer, then die. Or not. But the companies don’t care either way.

  3. witless chum says:

    Anytime someone names something “patriot” it pays to cover your wallet with one hand and your genitals with the other.

  4. Cody says:

    Thank god you can’t do something as devious as shedding student loans through bankruptcy though.

    That would just be taking advantage of us good hard working people.

  5. Derelict says:

    Once again, what are these workers supposed to do?

    As our betters in the GOP would tell us, they should grab their bootstraps and get to work! Just because you’re too old and disabled to work in the coal mines doesn’t you can’t work at the Circle K. Or they should just start their own businesses![/snark]

    I keep waiting for some politician to begin questioning these practices, but there are none. I once asked Vermont’s sole congressman, Peter Welch, what should be done about this exact practice of dumping private pension obligations onto the PBGRC. He gave a meally-mouthed response about how the funding for PBGRC should be shored up. Nothing about enacting laws to ban the practice of looting pension funds.

  6. Kurzleg says:

    Given the posters and contributors here, I’m hoping someone has insight about how likely a bankruptcy court is to take Patriot Coal’s claims at face value versus to see them as the transparent dodge that it is. The spin off is relatively recent, and Peabody’s still a healthy, going concern, right?

    • BigHank53 says:

      Who appointed the judge that will hear the case? Court-packing has been one of the right’s quieter long-term strategies.

    • Murc says:

      The problem is that transparent dodges aren’t necessarily illegal.

      Assuming that Patriot isn’t owned in any way, shape, or form by Peabody anymore, I don’t think a bankruptcy court can do dick.

    • Bruce Vail says:

      The individual bankruptcy court judge assigned to the case has a lot of leeway in approving or disapproving Patriot’s claims, which would come in the form of a motion to the court.

      Courts have approved such motions before. Most recently, Judge Robert Drain (Bush appointee) of the Southern District of NY approved the plans of Hostess Brands to withdraw from underfunded union pension plans without penalty, and to cut off any further contributions to health care plans. Drain’s approval cut the legs out from some 15,000 unionized workers in the Teamster and Bakers, and about ten other unions that represented small bargaining units at Hostess.

      • Linnaeus says:

        I remember reading about that, and of course, I remember a lot of people blaming the bakers’ union for that.

        • Bruce Vail says:

          Yes, there was a quite explicit attempt by Hostess owners to blame the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) for the collapse of the company.

          BCTGM argued in court that Hostess was merely trying to manipulate the bankruptcy laws to evade its legal obligations to the health and pension funds, bust the unions, and sell off the assets to the highest bidder. BCTGM was correct, of course, but Judge Drain sided with Hostess nevertheless.

          • Linnaeus says:

            I made a similar argument to some folks I knew, but it didn’t go anywhere. They were convinced that management really tried, but just made mistakes, and the union was ruining everything.

            • Bruce Vail says:

              Judge Drain is guilty of malpractice in this case, in the eyes of many.

              The owners of Hostess are actually investment funds (ala Bain Capital) whose purpose is to buy inexpensive companies, do some harsh financial re-engineering, and then sell the company at a profit. So this was their purpose at the outset and any assertion that they wanted to manage the company back to health (with the cooperation of the unions) was clearly suspect. The glaring evidence of this was the appointment in early 2012 of CEO who was not a turnaround artist, or an experienced marketing or manufacturing exec, but a finance guy specializing in liquidations.

              The whole sad case points to some glaring problems in the corporate bankruptcy process that deserve attention.

  7. Josh G. says:

    This seems like a textbook fraudulent conveyance, though federal courts have shown a disturbing willingness to allow workers to get screwed out of their pensions by the bankruptcy process.

    Courts would never accept as a general principle that someone can foist debts onto a less creditworthy third party without the consent of the creditor. If people could do this, then you’d see situations where an elderly person on their deathbed signed up to take over all their family’s debts – student loans, mortgage, credit cards, the whole shebang – and then the creditors would be completely SOL when they died. That would never fly, but companies get away with the same thing all the time.

  8. Malaclypse says:

    Now, I’ve never worked anywhere with a defined-benefit pension. But I do remember readin’ about ‘em in accountant-numberin’ school, and I seem to recollect that you need to accrue the present-value of the liability at the time it was incurred (as in, back when the retirees were working). Now, I’m not going to slog through all the SEC filings, but it looks like that liability is $1.6B now, yet was only $537M at the end of 2007. That’s one hell of a variance, that one might think the SEC would be wondering about.

  9. fledermaus says:

    “That’s one hell of a variance, that one might think the SEC would be wondering about.”

    I can pretty much guarantee you that they are not.

  10. DrDick says:

    Destroying the health and lives of miners has always been the agenda of the coal companies.

  11. VCarlson says:

    I’m pretty sure I remember Monsanto doing this very thing – spinning a company off, and loading it with pension obligations for already retired workers. A quick Google search turns up Solutia, which sounds about right, and 10 years ago, which also sounds about right. Interestingly, the Wiki entry makes no mention of this. Guess they have pretty good cleanup people.

  12. Joe B. says:

    An interesting fact about this case. Patriot Coal CEO Ben Hatfield was the boss of International Coal Group in 2004, when ICG bought the Cannelton mine from bankrupt Horizon Natural Resources (the subject of Dave Jamieson’s article). This is not the first time Hatfield has been involved in a company trying to write off its pension obligations.

    You may also remember ICG as the owners of the Sago mine.

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  14. [...] A couple of months ago, I noted how coal giant Peabody Coal had created a spinoff corporation called Patriot Coal with the explicit mission of sending it toward bankruptcy in order to eliminate 20,000 pensions. [...]

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