It's been a rough, disturbing, eleven days for the people of Charleston, West Virginia, a city already hurting before the chemical spill that devastated their local economy and caused 300,000 residents to be fearful for their long-term health.
While Charlestonians discuss ways to recoup their economic losses, the value of adequate regulations, and whether their restored water supply is, in fact, safe, another event is about to unfold which the good people of West Virginia may find equally rough and disturbing. Soon, residents will be watching the machinations of multi-millionaire, J. Clifford Forrest III, as he navigates the bankruptcy reorganization process to protect his $20 million dollar investment in Freedom Industries and sheds the corporate responsibilities and liabilities assumed through its purchase.
Perhaps it shouldn't be surprising that the trajectory of Charleston history should intersect with the personal story of Forrest - there is a common point-of-interest, after all: coal. Forrest is the owner of Rosebud Mining Company in Kittanning, Pennsylvania, which he established in 1979 after graduating in the same year from the University of Pittsburgh. During the ensuing two decades, he bought a coal cleaning plant and put eight mines into operation in western Pennsylvania.
The 2000s were particularly lucrative for Forrest, as the number of Rosebud mines and coal prep plants burgeoned and he simultaneously diversified into trucking and rail operations. Consequently, Forrest also owns Kiski Junction Railroad, Inc. which, in 2008, received a $4 million dollar state grant to extend the line to serve Logansport Mine, owned by Rosebud. The line also hauls for the Allegheny Ludlum Bagdad Plant to the Norfolk Southern railroad system and offers scenic tourist train rides.
Beginning in 2010, Forrest started acquiring other companies in the mining industry and expanded Rosebud into Ohio through the purchase of Buckeye Industrial Mining Company. Today, Rosebud is the 3rd largest coal producer in Pennsylvania and the 21st largest in the United States.
In 2009, Forrest also purchased The Lodge at Glendorn, a lovely luxury resort near the Allegheny National Forest where "past presidents have rested" and the least expensive accommodation is over $700 a night.
Although the resort doesn't specify the particular presidents and their political persuasions, Forrest clearly has an interest in Republican politics. In October, 2012, under the name of Rosebud Mining Company (search Rosebud Mining for the 2012 election cycle), Forrest contributed $240,000 to the GOP super PAC, "Fight for the Dream", registered to a UPS mailbox in an Allentown shopping mall. His contribution represents over one-third in dollar amount of those made during the cycle. The super PAC was terminated in May, 2013.
There's an interesting backstory involved, which OpenSecrets characterizes as "financial gymnastics designed to avoid revealing the donors behind campaign advertisements while adhering to the letter of campaign finance law. Furthermore, a lobbyist for a Fortune 500 energy company played a role in the scheme."
Briefly, the super PAC "Fight for the Dream" and a 501(c)(4) nonprofit called "Restore the Dream" were set up with the assistance of a lobbyist for Devon Energy (a natural gas and oil company based in Oklahoma), who is also counsel to the Oklahoma Republican Party. "Restore the Dream" transferred monies to "Fight for the Dream" which immediately made transfers to the D.C. GOP super PAC "Freedom Fund for America's Future." The funds were used in the primary by Freedom Fund for negative ad buys against Tom Smith (R) which "highlighted Smith's history as a Democrat and accused him of raising taxes as a local official." Interestingly, Smith is a former coal company owner. When Smith won the race, Freedom Fund purchased negative ad buys against Bob Casey, who ultimately won the governorship.
Clearly, Forrest intends to shepherd the assets of Freedom Industries through bankruptcy. The Charleston Gazette, which has been doing top-notch journalistic coverage, has reported that Forrest set up a Pennsylvania holding company called Chemstream Holdings, Inc. specifically to purchase Freedom Industries. Notably, however, Chemstream was incorporated in 2012. Chemstream is listed as the sole owner of Freedom Industries on its bankruptcy filing. Freedom's proposed lender in bankruptcy is WV Funding LLC. A DIP Agreement (debtor in possession) filed with the bankruptcy court shows a signature line that reads "WV Funding LLC by Mountaineer Funding LLC." According to the Gazette, "Mountaineer Funding was incorporated with the West Virginia secretary of state on Friday. Its one listed member is J. Clifford Forrest, Freedom Industries' owner." This would make Forrest both the owner of bankrupt Freedom and its lender who will bail it out. In bankruptcy, the lender enjoys priority to the assets because it incurs the risk of lending to the bankrupt entity. It will be interesting to see how the judge handles this situation, since Forrest could end up with the assets regardless of how the case unfolds.
There is every indication that Freedom's assets are integral to Rosebud's future operations in Ohio. Shortly, the Ohio Department of Natural Resources will decide on a permit application by Rosebud to mine 9,000 acres in Carroll County, Ohio.
On this map, Carroll County (in yellow) abuts Columbiana County (in orange) which is directly to left of Pittsburgh. The blue line is, of course, the Ohio River.
Despite Kennedy’s [prior owner convicted of tax fraud] reluctance to send tax dollars to Washington, in 2009 Freedom Industries was happy to accept stimulus funds which helped the company stay afloat. David Gutman recalled that “sand, silt and mud had built up in the river, making it difficult for barges to travel the 2.5 miles from the company’s river terminal to the Elk’s confluence with the Kanawha” [which flows into the Ohio River].
The company was in deep trouble until the Army Corps of Engineers dredged the waterway, thanks to a $400,000 grant from the American Recovery and Reinvestment Act. “It could’ve put us out of business,” Dennis Farrell told the Charleston Daily Mail. “At some point we wouldn’t have been economically fit to run the facility. That’s our claim to fame: the barges.”