By Steve Patterson
ST. LOUIS (KSDK) - The United Mine Workers of America are protesting and airing ads in cities across the country, claiming Peabody Energy is purposely denying retiree benefits to more than 20,000 workers.
The miners say Peabody created a spinoff company in an attempt to drop commitments to its longtime employees.
NewsChannel 5's Steve Patterson spent time with both the union and the company to show us both sides of the fight.
In a month of marches, protests and arrests, the United Mine Workers of America have taken their fight with Peabody Energy to the streets of St. Louis. At risk - pensions and healthcare benefits for close to 22,000 retirees and their families. Or as some workers are putting it: everything.
"What they're going to do is not just devastate me, but thousands of people just like me," said one worker.
In 2007, Peabody Energy created the spinoff company Patriot Coal during the height of the coal market.
In the process, Peabody severed ties and handed off legacy costs and responsibilities to the new company.
Five years later, Patriot Coal filed for Chapter 11 bankruptcy.
"Patriot was a highly successful company when they spun off then a number of events occurred that eventually led to it declaring bankruptcy," said Vic Svec, Peabody's Senior Vice President of Investor Relations. "It's been independent for more than five years now. It's not part of Peabody anymore."
Svec denies any responsibility to the mine workers regarding severance.
"With all due respect, all of these employees worked for companies that are a part of Patriot Coal. It's the bankruptcy court that will decide the future obligations for Patriot," Svec said.
"Ninety percent of the people, retirees who are going to be affected by this, never worked a single day for Patriot Coal," said UMWA Communications Director Phil Smith.
Smith said the move is unfair, adding Peabody knowingly saddled Patriot Coal with failure.
"Peabody spun off Patriot because it wanted to get rid of its obligations to these retirees," Smith said. "And they knew that the liabilities that they gave it, combined with the smaller number of assets, the chances were pretty good that Patriot was not going to be a viable company."
The bankruptcy battle playing out in court is similar to 2003, five years after agriculture giant Monsanto created the spinoff Solutia in a similar case. The court found that Monsanto did saddle its spinoff Solutia with too much responsibility, causing the failure. Eventually, Monsanto did have to share in some of the costs.
Business analyst Juli Neimann said it's common for publicly traded corporations to do this.
"They will spin that division off, along with everything they don't want. So it becomes a separate, freestanding company and that is completely legal," Neimann said. "Companies have been doing it for years and years and years and they will continue to do so."
Meaning it's more profitable and less of a hassle for a company to do so?
"They look at the balance sheet; they look at the income statement. They're weighing all the evidence what makes sense for them," Neimann said. "Again: not what is right, what is wrong, what is fair, whatever it is. It's what is legal. What are they entitled to? What can they do within the confines of corporate law right now?"
The only thing in the air now: did Peabody Energy saddle Patriot Coal with too much obligation, asking for failure? If so, they may share in the responsibility.
"Did you put something in the company that would blow up and cause the company to blow up in the future to blow up and become bankrupt?" Neimann said. "If that can be proven, now the courts are going to say 'okay, cough up more money.'"
But according to Neimann, no matter how much screaming is done or how many arrests are made, fate is squarely in the hands of the court.
Peabody Energy reported more than $8 billion in total revenues for 2012. In 2011, Chairman and CEO Greg Boyce earned more than $10 million.