Court Grants Corporations Impunity to Mug Retirees
When a kid snatches an old lady’s purse, it’s punished as a crime. But when a corporation manipulates bankruptcy law to deny thousands of retired coal miners benefits they labored their entire lives to earn, it’s endorsed by federal court.
Late last month, a bankruptcy judge sanctioned a scheme in which corporations create shill companies with a dram of assets and a sea of retiree responsibilities. Such a debt-burdened outfit quickly goes bust. Bankruptcy court, the judge said, can’t consider the intent of a company’s creation, but can approve a plan to reorganize it by betraying decades of promises to retirees.
Corporations have reneged many times before on pledges for pensions and retiree medical benefits. This, however, is a new twist on that old scam. It’s alarming because what the bankruptcy court approved provides a template for companies angling to reduce costs by abandoning their commitments to retirees. It’s a swindle that must be stopped.
Of course, lots of people get hurt in bankruptcies, not just workers. All kinds of creditors – from the local accounting firm to the big copy paper provider – get stuck with cents on the dollar owed. But this case, the Patriot Coal Corp. case, is different. That’s because Patriot’s bankruptcy was deliberate. Peabody Energy kneecapped Patriot on purpose at the outset.
“There can be no Patriot Coal stock to dispute, or tonnage payments to negotiate, or companies to reorganize, unless there are men and women willing to bend their knees to excavate coal.”
So said Bankruptcy Judge Kathy A. Surratt-States in her decision. Peabody and Patriot would not exist without those bended knees.
The judge also noted the suffering of workers, more than 900 of whom wrote to her:
“Many discuss the horrendous conditions of the coal mines when those individuals first began to work, and how hard it was to achieve the promises made pursuant to both the previous and the current CBAs (collective bargaining agreements). Some discuss how physically, mentally and emotionally grueling being a coal miner was, many of whom worked as coal miners for over 30 years – a sacrifice made with due consideration of the promised health care from cradle to grave. . .
“Many coal miners talk of six (6) and seven (7) day work-weeks, of over 12 hours a day. Some letters discuss various injuries sustained while working in coal mines, limbs of self and relatives lost, and the lives lost of relatives and friends. . .And, as counsel for the UMWA (United Mine Workers of America) so eloquently stated, many current and retired coal miners do not have cost spreading abilities, because, for many, cost spreading ‘means cutting your pills in half. Cost spreading abilities for retirees means making a choice today over medicine or food.’”
And then she said none of it mattered. She contended she was forbidden from considering that. She also insisted that under bankruptcy law she couldn’t take into account whether Peabody, the world’s largest private-sector coal company, deliberately established Patriot in such a way that it would fail so that it could receive sanction through bankruptcy to desert its retiree health care obligations.
Peabody “spun off” Patriot coal in 2007 in what sounds like a pretty bad deal for Patriot. Peabody gave Patriot 13.3 percent of Peabody’s coal reserves and 72 percent of Peabody’s health care liabilities.
Patriot showed a fondness for debt, however. In 2008, it bought Magnum Coal Co., a similarly debt-hobbled firm. Arch Coal set up Magnum in 2005 by giving it 12.3 percent of Arch assets and 96.7 percent of Arch’s retiree health care liabilities.