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DEP’s Caperton calls federal conflict of interest review ‘offensive’


Charleston Gazette-Mail

CHARLESTON, W.Va. — The Justice administration’s top environmental regulator is complaining that a federal Interior Department review to ensure he has no financial ties to coal mines is “both troubling and offensive,” according to documents released under West Virginia’s Freedom of Information Act.

Austin Caperton

Austin Caperton, secretary of the state Department of Environmental Protection, objected when a federal ethics officer asked him to provide additional information about his personal finances and his consulting firm, Caperton Energy Co. The Interior Department’s Office of Surface Mining Reclamation and Enforcement requires financial disclosures so it can enforce a federal law that prohibits anyone who regulates the coal industry from having a direct or indirect financial interest in a coal-mining operation.

In a May 23 letter to the OSM, Caperton eventually provided some additional information, but he also insisted there was no reason for federal officials to ask for it, or to continue to examine his current finances or his employment prior to being appointed to the DEP post by Gov. Jim Justice in January.

“I know my business,” Caperton said in the letter. “The idea that your records include any information that could possibly indicate that my disclosures are incomplete is troubling.”

Caperton was especially upset that the OSM had in its request for additional information reminded Caperton — who is a lawyer and an engineer — that under federal rules, omitting required details from his legally required financial disclosure form carried specific penalties, including removal from office and criminal penalties. Caperton called it “troubling and offensive” that the OSM mentioned those provisions of federal rules in its request for information.

Christopher Holmes, a spokesman for the OSM, would say only that his agency “is evaluating Austin Caperton’s financial disclosure filing.”

The 1977 Surface Mining Control and Reclamation Act prohibits anyone at a state agency that polices the coal industry from having a “direct or indirect financial interest in any underground or suface coal-mining operation.” The law and rules require state agency employees to fill out a financial disclosure form, called the OSM 23, when they first take office and then annually.

The OSM is required to “promptly review” disclosure forms for state agency heads to ensure any prohibited financial interests are properly reported and then somehow resolved, such as by reassignment or divestiture.

Caperton, a cousin to former Gov. Gaston Caperton, is a former coal industry official, having been an executive with A.T. Massey Coal and with his family’s company, Slab Fork Coal. Caperton more recently was president of his own energy industry consulting firm, Caperton Energy.

On May 1, Interior Department Deputy Ethics Counselor Nicola Sanchez wrote to Caperton to inform him that federal officials were concerned that two financial disclosure forms, called the OSM 23 forms, that Caperton had filed, “may be incomplete.” Sanchez wrote that “additional information is necessary to ensure that you do not have a direct or indirect financial interest” in any coal-mining operations.

Specifically, Sanchez asked Caperton to provide the names of “any business entities or persons” with whom he or Caperton Energy “did business as an employee, officer, director, trustee, partner or consultant” during 2016. She also asked Caperton to note if any of those business arrangements are ongoing or, if they have terminated, the date of termination of the business relationship.

Caperton responded with his May 23 letter to the OSM.

In that letter, Caperton said that his “only business and employment interest” in 2016 was Caperton Energy. He said his “only continuing business through Caperton Energy is as a consultant” to Dominion Aquaculture, a Richlands, Virginia-based company that raises tilapia. Caperton said that company “does not fall within what the OSM regulations define as a ‘coal mining operation.’ ”

“All other business of Caperton Energy terminated prior to my assumption of duties as Cabinet Secretary of the West Virginia Department of Environmental Protection,” Caperton wrote. “Therefore, there is absolutely no basis for your beliefs that my disclosures are incomplete or that I have any ‘prohibited financial interest.’ Neither is there any basis for you to suggest I may be subject to penalties.”

Caperton said he “did not believe there is anything else I need to disclose,” but then provided the names of the companies he said he did business with as a consultant in 2016.

Those companies are A.L. Lee, Highland Machinery Corporation, Southern Mine Service LLC, and Savannah 605 LLC.

“The first two of these are mining equipment manufacturers; the third is a mining parts and equipment supplier; and the fourth is a land holding company,” Caperton wrote. Caperton said that the mining equipment firms do not qualify as “coal mining operations” that would constitute prohibited financial interests under OSM rules. He said the land company does not fit that definition either.

“In any event Caperton Energy’s business relationships with these four entities ceased before I assumed my current duties and does not run afoul of the regulations defining a prohibited financial interest,” Caperton said.

DEP records show that three of the consulting clients — A.L. Lee, Highland Machinery and Southern Mine Service — all hold stormwater pollution permits issued by the DEP Division of Water and Waste Management.

Separate from the OSM’s ethics rules for coal mining interests, the DEP’s water pollution rulessay generally that the agency secretary or other DEP officials who share authority to issue water pollution permits cannot have received during the previous two years a significant portion of income directly or indirectly from permit holders or applicants for permits. The rules defined “significant portion of income” as $5,000 or 10 percent or more of gross income for a calendar year, whichever is less.

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