A Diamond in Corruption

Harold Simpson fleeced, deceived, and defrauded. Another corrupted example of Fletcher’s ineptness.

From the Lexington Herald-Leader:

An Eastern Kentucky coal operator with one of the worst records in the nation of not paying fines for mine safety violations has pleaded guilty to fraud. Harold Simpson, who has operated mines in Perry, Bell and other counties, told companies that provided workers' compensation insurance that he had only half as many employees as he really did, according to the charge.

Comp premiums are based largely on the number of employees at a mine, so that meant Simpson paid only half of what he should have. The document charging Simpson, called an information, said he covered the scheme by paying employees partly in cash, wrote checks to fictitious people to generate cash for such payments, and gave false payroll records to three insurance companies between 1999 and June 2006. Simpson, 56, of Ewing, Va., pleaded guilty Tuesday to one count of mail fraud, based on mailing inaccurate payroll information to the three companies.

Federal prosecutors agreed not to file charges against Simpson's wife, Linda, who was listed as president of one of his companies. The payroll records that Simpson sent insurance companies helped trip him. Greg Duerstock, an agent with the U.S. Postal Inspection Service, said the investigation started after a miner who worked for Simpson got hurt and filed a workers' comp claim. After Simpson's insurer found the man was not listed on Simpson's payroll, it investigated and found he had quite a few more employees than he'd reported. That led to the federal inquiry, Duerstock said.

The charge against Simpson carries a maximum penalty of 20 years. However, under federal sentencing guidelines, Simpson's sentence will be less than 10 years, said Assistant U.S. Attorney Ken Taylor, who prosecuted. The government and Simpson's attorney, Steven Reed of Louisville, don't agree on how to calculate the amount of money Simpson's actions cost insurance companies, according to the plea agreement. That figure, which a judge will have to decide, will play a role in how much time Simpson gets.

Reed was not available for comment yesterday. Simpson is scheduled to be sentenced June 25. U.S. District Judge Joseph Hood released him on his own recognizance after the plea, meaning he didn't have to post bail.

Mining 'scofflaw'

This week's charge against Simpson is the second time in recent years he has been involved in a federal criminal case. In 2002, regulators filed charges against Simpson's company and a foreman, Mark Mills, alleging they endangered miners.

The charges in that case said Simpson's company did not follow rules for supporting the roof of the mine, which could have caused a deadly rock fall; did not have a proper fire-suppression system; and did not use required ventilation measures to provide clean air to workers and carry away gases and dust that could blow up. Mills said in a plea document that he followed the ventilation plan only when inspectors came in the mine. A judge sentenced him to three years' probation.

Simpson pleaded guilty on behalf of the company and paid a $20,000 fine. He said he was not aware of violations by Mills and other foremen but should have been. Simpson gained notoriety last year because the U.S. Mine Safety and Health Administration said he had not paid more than $1.1 million in fines for health and safety violations at his mines, dating back many years. That was the most of any coal operator in the country, MSHA said; one agency official said Simpson operated as a "scofflaw."

Seen as part of a weak system

Some mine-safety advocates pointed to Simpson as an example of weaknesses in the system of collecting federal mine-safety penalties. MSHA can't shut down a mine because of unpaid fines. Critics had long said MSHA's fines were too low and that it didn't push to collect, undermining the deterrence of the penalties.

The debate was part of a larger argument that MSHA had not done enough in recent years to protect miners, though the agency said it had moved aggressively against unsafe operators. The new mail-fraud charge against Simpson is not related to the issue of his unpaid fines, which are not a criminal matter.

MSHA filed a lawsuit in February 2007 against Simpson and his companies, Simpson Mining Co. Inc., and Motivation Enterprise Inc. The lawsuit does not seek to collect the big backlog of fines that MSHA says he owes, but rather asks that a judge order Simpson to post a large bond to cover any future fines. The agency has filed a similar action against Stanley Osborne of Pike County and two of his companies, Misty Mountain Mining and Midgard Mining LLC. Simpson and Osborne have denied they owe the fines and argued there is no authority in federal law to force them to post a bond for potential future fines.