U.S. Attorney Files Charges in Multi-Million-Dollar Kickback Scheme Orchestrated at Logan County Mine
Charges Cover Widespread Multi-Million-Dollar Fraud Uncovered in “Pay-to-Play” Kickback Scheme at Arch Coal’s Mountain Laurel Mining Complex in Logan County
|U.S. Attorney’s Office May 30, 2014|
CHARLESTON, WV—United States Attorney Booth Goodwin today filed a variety of charges in United States District Court in Charleston arising out of a joint federal and state criminal investigation into cash kickbacks paid to Arch Coal, Inc. (“Arch”) employees working at the Mountain Laurel Mining Complex (“Mountain Laurel”) near Sharples, Logan County, West Virginia. The charges lay out a far-reaching scheme orchestrated by Arch employees, including the former Mountain Laurel General Manager David E. Runyon, 45, of Delbarton, Mingo County, to receive cash kickbacks from certain vendors in exchange for receiving work. According to the charges, vendors were required to pay hundreds of thousands of dollars over several years to ensure that vendors received and continued to receive work at Mountain Laurel.
“This kind of pay-to-play scheme hurts honest coal-industry vendors who refuse to pay bribes as a way to get customers,” commented U.S. Attorney Booth Goodwin. “The corrupt way that these defendants did business should be a thing of the past. It’s bad for the economy and, ultimately, bad for consumers.”
According to the charges:
David E. Runyon, 45, of Delbarton, Mingo County, is charged with extorting certain vendors for cash kickbacks in exchange for ensuring that those complicit vendors continued to receive work from Mountain Laurel. As outlined below, Runyon and other Arch employees are charged with receiving kickbacks approaching $2 million over a five-year span from sometime in 2007 through sometime in 2012. Runyon faces up to 25 years’ imprisonment and a fine of up to $500,000 if convicted.
Gary K. Griffith, 62, of Oceana, Wyoming County, was charged with making a materially false statement to federal and state law enforcement when interviewed in the Mountain Laurel kickback scheme investigation. According to the charge, he was the maintenance manager at Mountain Laurel, and received cash kickbacks in the amount of at least $250,000 on behalf of him and mine general manager David E. Runyon from a vendor who refurbished shuttle cars. When he was asked by federal agents about receiving kickbacks either personally or on behalf of Runyon, he denied it. Griffith faces up to five years’ imprisonment and a fine of up to $250,000 if convicted.
Stephen B. Herndon, 37, of Holden, Logan County, the former Mountain Laurel warehouse manager and now owner of Tri-State Mine Service, Inc., is charged with “structuring” a cash withdrawal from a local bank. The term “structuring” is used to describe criminal conduct when an individual engages in cash transactions with a financial institution in increments of $10,000 or less for the purpose of avoiding the financial institution’s currency transaction report (“CTR”) filing requirement with the Department of Treasury. Herndon faces up to five years’ imprisonment and a fine of up to $250,000 if convicted.
Scott E. Ellis, 44, of Holden, Logan County, Stephen B. Herndon’s business partner in Tri-State, is also charged with structuring a cash withdrawal from a local bank account. According to the Information filed in Runyon’s case, Tri-State, through Ellis and Herndon, paid nearly $425,000 over a five-year period to receive rebuild work from Mountain Laurel. Ellis faces up to five years’ imprisonment and a fine of up to $250,000 if convicted.
Alvis R. Porter, 61, of Holden, Logan County, owner and operator of Quality Oil, Inc., which was doing business as Southern Construction of Logan, provided construction services at the Mountain Laurel Mining Complex. Porter was charged with failing to collect, account for, and pay over trust fund taxes of an employee. As part of Runyon’s charge, Porter paid approximately $400,000 in kickbacks directly to Runyon. Porter faces up to five years’ imprisonment and a fine of up to $250,000 if convicted.
David N. Herndon, 63, of Chauncey, Logan County, was charged with engaging in an unlawful monetary transaction of criminally derived property of a value greater than $10,000. According to the charge, David Herndon owned MAC Mine Service, Inc., which provided contract labor to the Mountain Laurel Mining Complex. D. Herndon participated in a contract labor kickback scheme where in exchange for Runyon not seeking to terminate the contract, and instead extending the contract each year, David Herndon paid illegal cash kickbacks of approximately $340,000 for more than three years. D. Herndon faces up to 10 years’ imprisonment and a fine of up to $250,000 if convicted.
Ronald Barnette, 53, of Holden, Logan County, was charged with making a materially false statement to federal and state law enforcement investigating the Mountain Laurel kickback scheme. According to the charge, Barnette’s false statement pertained to paying kickbacks at Mountain Laurel for work that Barnette’s company received in rebuild miners and bolters at Mountain Laurel. Barnette ultimately admitted to making approximately $300,000 in cash kickbacks to Runyon over the course of the scheme. Barnette faces up to five years’ imprisonment and a fine of up to $250,000 if convicted.
Gary L. Roeher, 52, of Holden, Logan County, was charged with filing a false tax return. According to the charge, Roeher deducted approximately $43,000 as a business expense for his company, CM Supply, when Roeher actually used the funds to install an in-ground swimming pool at his residence. Roeher faces up to five years’ imprisonment and a fine of up to $250,000 if convicted.
Chadwick J. Lusk, 32, of Davin, Logan County, was charged with honest services mail fraud. According to the charge, Lusk, while the purchasing agent at Mountain Laurel, defrauded Arch Coal of its right to honest services by receiving illegal cash kickbacks in a crib block kickback scheme. Gary L. Roeher, who owned CM Supply, Co., paid Lusk a portion of the profits for the crib blocks that Arch Coal purchased from CM Supply, Co. to use at Mountain Laurel to provide roof support in the underground mine portion of Mountain Laurel. Lusk faces up to 20 years’ imprisonment and a fine of up to $250,000 if convicted.
James H. Evans II, 39, of Verdunville, Logan County, owned and operated Baisden Recyling, which had a contract with Arch Coal to recycle scrap metal at the Mountain Laurel Complex. Evans was charged with conspiracy to commit honest services fraud, as he recycled scrap cable at Mountain Laurel. Evans paid Arch’s $30,000 commission on the scrap cable to Runyon through another Arch employee, Stephen B. Herndon, rather than to Arch. Evans faces up to five years’ imprisonment and a fine of up to $250,000 if convicted.
Today’s charge stems from an investigation being conducted by the FBI, IRS Criminal Investigation, United States Postal Inspection Service, and the West Virginia State Police. Assistant United States Attorneys Thomas C. Ryan and Meredith George Thomas are handling the prosecution.
NOTE: An information is merely an accusation, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt.