CHARLESTON, W.Va. -- A former Massey employee and a former business owner were sentenced in separate wire fraud schemes that cost Alpha Natural Resources more than $1 million.
Joey R. Phalin of Crab Orchard and Donald Bryan Steele appeared Thursday before U.S. District Judge Thomas Johnston for separate sentencing hearings. Johnston said the false billing scheme seemed to be a widespread practice.
Phalin, a former Massey sourcing agent, received five years of probation. Steele, the former owner of M&S Hydraulic, will serve 18 months in prison.
The sentences come from two separate investigations. Investigators first discovered sourcing agents were billing Alpha for tires that were actually for personal use. It later was revealed the scheme involved much bigger equipment and much more money.
In the tire scheme, along with Phalin, U.S. Attorney Booth Goodwin's office filed charges against Edward Ellis Mullins of Peytona and Nicholas R. Coleman of Lester.
All three, who were former sourcing agents for Massey legacy mines, were charged with wire fraud and aiding and abetting, according to a press release. Both Mullins and Coleman were sentenced Wednesday to five years of probation.
Prosecutors said Mullins approached a tire supplier and agreed to allow the supplier to submit false invoices to Alpha. The supplier provided this information to Alpha corporate security, who turned it over to the FBI and the State Police.
Phalin apologized to the court and Alpha, saying the company had entrusted him to do his job.
Johnston said Phalin was involved in a scheme that defrauded the company of "quite a bit of money" and said he is aware that this was somewhat of a widespread process.
"Just because everyone else is doing it doesn't make it right," he said.
Phalin is joint and severally responsible with Mullins and Coleman to pay $194,305.51 to Alpha.
In the M&S scheme, prosecutors say Steele fabricated invoices to give back to the sourcing agent to say the good was delivered. In exchange, he would receive sometimes thousands of dollars for processing.
Federal prosecutors determined about one-third of the invoices processed through M&S Hydraulics were fake.
Steele's attorney Timothy DiPiero, said Steele was diagnosed with bipolar disorder and in his mania stages, he would make poor decisions. DiPiero said one of Steele's salesman described his highs, when he acted like a Las Vegas gambler, and lows, when he couldn't get out of bed.
Johnston said he didn't see this as a reason for a departure in his sentence, noting this was not an isolated incident and had lasted over a five-year period of time.
Assistant U.S. Attorney Thomas Ryan said Steele provided substantial assistance to the government and had given a detailed list of things he had provided to sourcing agents.
Steele told the court he never thought he would be in this situation.
"I hurt Alpha, my friends and family. I lost my business my father started 30 years ago," Steele said, getting upset.
Johnston said this fraud scheme was significant, "well into the seven figures" and said Steele was "in the center."
Steele was responsible for $1.3 million in restitution, which has been satisfied.