Bank of Mingo officials under federal probe

Rachel Baldwin rbaldwin@civitasmedia.com

October 16, 2013

CHARLESTON - An investigation that has been over shadowed by those involving political corruption in Mingo County is now emerging into the spotlight, and involves a local financial chain of banks as well as individuals who are well known in the county and the City of Williamson.

The federal investigation has been ongoing since the first part of this year into what role officials with the Bank of Mingo played in assisting local coal-mining contract companies with illegal withdrawals that enabled them to pay workers in cash, in an attempt to avoid paying workers’ compensation insurance premiums.

Federal Bureau of Investigations (FBI) Special Agent James Lafferty has led the investigation from the beginning, and made the following statement in regards to the federal probe of the financial institution.

“Our investigators allege that they have probable cause to believe that the bank and at least one bank manager conspired with, or otherwise aided and abetted Aracoma Contracting in structuring cash withdrawals to help cover up the scheme.”

This sworn statement was filed as part of the preliminary facts used to secure a search warrant for retrieving potential evidence from the bank. The employees and managers with the Bank of Mingo declined statement, other than to say they are fully cooperating with the investigation and have done nothing wrong.

No bank officials have thus far been charged with a crime, but the manager of the Williamson Branch, Darrin McCormick, has been suspended with pay for the past few months and was listed by name in the affidavit.

In his affidavit, Lafferty alleges that the bank officials appeared to be part of the scheme and specifically named McCormick, who is also the Mayor of Williamson, saying he has probable cause to believe McCormick did indeed aid Aracoma Contracting with their illegal activities.

Lafferty speaks in the affidavit about the investigators obtaining copies of faxes that were sent to McCormick by Aracoma Contracting in advance of arriving at the Williamson Branch to make large cash withdrawals, which also identified by name the individuals from the company who would be coming to the bank to pick up the cash.

“Several of these credit advance requests and denomination sheets were sent as part of one fax transmission, clearly demonstrating to the recipient that the entire withdrawal, although spread across several people, was just one transaction for Aracoma,” stated Lafferty in the affidavit.

Another tidbit of information Lafferty has unsealed is that a statement was made by an Aracoma official in which they claimed that McCormick had suggested the company request cash in an amount greater than $10,000 once in a while so that bank examiners would not suspect they were structuring their withdrawals. The affidavit also included a statement by Michael Brewer, who is a longtime employee of the Bank of Mingo, who told federal investigators about a meeting the bank officials held regarding the federal probe.

The meeting allegedly took place after a federal subpoena was issued in March of 2012 for bank records pertaining to an account in the name of an individual that Lafferty has yet to name. Brewer told the feds that those attending the meeting were Harry Keith White, the Chairman of the Board for the Bank of Mingo, McCormick and bank President Randy Brumfield.

“Brewer learned from McCormick and White that the unnamed account holder knew a federal grand jury subpoena had been served on the bank for their records,” stated Lafferty in the affidavit. “McCormick and White informed Brewer that the FBI would not find anything on the individual yet to be identified.”

In charges filed in August of this year against Aracoma Contracting, federal prosecutors stated that the company generated the cash to bribe Sargent and to pay their employees “under the table” in cash by structuring cash withdrawals at the Williamson Branch of the Bank of Mingo. This type of “structuring” is when cash transactions are broken down in amounts that are less than $10,000, in an attempt to avoid having the bank report the withdrawals to the Internal Revenue Service (IRS).

Harry Keith White was quoted as saying during an interview on this subject in August that “We do not feel that an individual with the Bank of Mingo was involved in any type of scheme,” and stated that his employees were doing best practices and what thy felt was correct. He added that it’s probably an interpretation of the procedure.

The search warrant was served in February of this year and the evidence gathered at that time, along with Lafferty’s sworn affidavit, was unsealed this past week following the sentencing of former BrickStreet Auditor Arville Sargent, a native of Logan County. Sargent received a 6 year prison sentence as part of a plea deal and admitted to tax evasion and mail fraud. He also admitted to being involved in a scheme in which he accepted approximately $1 million dollars in bribes in exchange for assisting Aracoma Contracting officials from Aracoma Contracting in avoiding higher worker’s compensation premiums from BrickStreet. Four officials from Aracoma Contracting and other related firms have also received prison sentences ranging from 15 to 30 months.

The four separate companies were said by the investigators to be “employee leasing”, a service that provides coal companies such as Alpha Natural Resources and Patriot Coal with employees. The contracting company officials paid their employees in cash, allowing them to avoid paying employment taxes and hid the true facts about their payroll. This activity greatly reduced the cost of the companies workers’ compensation premiums.

Statements made by prosecutors in recently filed court records show the coal contractor investigation has led the FBI to additional information about public corruption in the region, a potentially large gambling ring, and to other cases where coal companies were defrauding their workers’ compensation insurers.

Updates on this federal investigation will be released by the Williamson Daily News as they become available.