The jury in the trial of Don Blankenship, former chief executive of Massey Energy, appears to be having as much trouble with the question of his accountability as regulators have had with financial bosses

Last week, a jury in West Virginia struggled with a question that has vexed America for years: when can you jail a CEO? It looks like the panel’s members will be struggling again come Monday.

The CEO in question is Don Blankenship; the company is Massey Energy. The trial, held in Charleston, was to determine whether Blankenship is guilty of conspiring to break safety laws, defrauding mine regulators and lying to both investors and regulators about mine safety.

Massey’s Big Branch mine in West Virginia turned out to be anything but safe; an explosion in 2010 killed 29 people. In the year leading up to that catastrophe, mine inspectors had cited it nearly 500 times, often for “significant and substantial” violations. Blankenship faces 30 years in jail if convicted.

As of Friday, the jury has begun its fifth day of deliberations, after the judge ordered members to keep trying to reach a verdict and denied the defences motion for a mistrial. On Thursday, the judge received a note from jurors asking how long they should deliberate, saying: “We cannot agree.”

The prosecutors seem to have laid out a damning pattern of facts. Blankenship clearly raked in millions in compensation – $18m in 2009, and $12m in 2010, the year of the mine disaster. He was a micromanager, with a staff of individuals whom prosecutors derided as “yes men”, who seems – based on some documents and tape recordings he himself made of his own phone calls – to have been concerned about the costs of safety regulations and their impact on production levels. Orders reached the miners to cover up safety violations, and it seemed clear to many from who they had originated, according to testimony.

One of those “yes men”, Christopher Blanchard, who ran the Massey company in charge of the Upper Big Branch mine, testified that he thought Blankenship believed paying fines would prove less costly than paying for safety measures. Had the mine hired more miners or spent more time on safety – both of which would have cost money directly or indirectly – this could have prevented most of the violations. Blanchard received an immunity deal from prosecutors in exchange for his testimony, and also testified for the defense.

But determining where the buck stops seems to be as difficult for this jury as it is for regulators and law enforcement personnel trying to nail CEOs for corporate misdeeds.

Consider, for a moment, the varying fates of Bradley Birkenfeld, a former UBS private banker in Switzerland, and his erstwhile boss, Raoul Weil, who headed the Swiss bank’s entire private banking operation. Birkenfeld raised the veil on cases of US citizens taking advantage of Swiss banking laws to evade US taxes by maintaining secret offshore accounts. He blew the whistle on the scheme as it had worked at UBS, informing the Department of Justice, the Internal Revenue Service, the Securities and Exchange Commission and the US Senate of what was happening.

The result was a massive “win” for US law enforcement and tax authorities, not only in connection with UBS but with other Swiss institutions, enabling them to recoup billions of dollars in unpaid taxes. In recognition of that, Birkenfeld received a record $104m whistleblower award from the IRS. He also received a 40-month jail sentence for withholding some details relating to some of his clients in his initial contacts with Department of Justice officials. His probationary term will end this month.

His colleagues have been far luckier. OK, they don’t have $104m (taxable) in their bank accounts, but they also haven’t spent years locked up or on probation for coming clean about a scheme about which law enforcement and regulators didn’t even seem to be aware until Birkenfeld brought it to their attention. Other trials of UBS bankers ended in periods of house arrest and probation.

And the big cheese, Raoul Weil, arrested in Italy and extradited to the United States to stand trial, accused of helping 17,000 Americas avoid taxes? Facing five years in jail, he stood trial in Florida – and was acquitted.

Indeed, it’s pretty rare for a CEO or the guy running a business, and setting the rules by which the rest of the team must play, to end up in the dock, charged with ultimate responsibility for its misdeeds. Exxon ended up paying $507.5m in punitive damages (reduced from an original award of $5bn) in the wake of the Exxon Valdez oil spill of 1989, one of the worst environmental disasters caused by human beings. Exxon’s CEO, Lawrence Rawl, who might have been expected to take responsibility for multiple failures – the lack of state-of-the-art iceberg monitoring equipment, the navigational errors, the human resources policies that put pressure on the fatigued work crew, permitting an intoxicated captain to remain in charge of the ship – remained at the helm of the company until 1991, when he reached mandatory retirement age.

HSBC has been raked over the coals for being helping drug lords launder their money and bankers relinquished their jobs as a result. But it’s exceedingly rare for the man (or woman) at the top to carry the can all the way to jail.

As in the UBS case, when junior bankers shouldered the blame, lesser executives involved with Massey are already paying the price for their role in the Big Branch catastrophe. Gary May, the former superintendent of the mine, pleaded guilty to conspiring to deceive federal mine inspectors about the existence and extent of safety violations, and was sentenced to 21 months in prison. David Hughart, a former Massey officer, was sentenced to nearly four years in prison, and became the first individual to openly identify Blankenship as being directly involved in the safety violations in open court, during his plea deal.



The government, and juries, once showed an appetite for sending corporate fraudsters to jail – look at Enron’s Jeff Skilling and Kenneth Lay or Tyco’s Dennis Kozlowski.



But most of the cases that have been brought since the turn of the millennium financial crisis involve the small fries of the corporate world. Even the overseers are frustrated. Former Federal Reserve chairman Ben Bernanke, in his memoir of the crisis, The Courage to Act, says that had it been within his power, he would have preferred to see more corporate executives head to jail, instead of just signing off on massive fines to the SEC and other agencies to settle allegations of wrongdoing. “Obviously everything (that) went wrong or was illegal was done by some individual, not by an abstract firm,” he said.

The fat lady may not yet have sung her final note, however. With the statute of limitations set to expire in the United States on financial crisis-related issues, the prospect of never getting their man (or woman) may finally be injecting some vigor into federal prosecutors. They are making a last push in at least two investigations, one involving a case at the Royal Bank of Scotland, the other at JP Morgan Chase. Both reportedly involve criminal probes of transactions relating to flawed mortgage securities.

And in the United Kingdom, where regulators last summer spelled out new rules aimed at making bankers more personally accountable, a new report scrutinizing the near collapse of HBOS seven years ago could result in the bank’s top personnel being held to account after all. An earlier decision not to hold those individuals – including HBOS’s chairman, Lord Stevenson, and two chief executives – personally responsible was described as being “materially flawed”, and as many as ten executives could face lifetime bans from serving as corporate officers or directors.

Still, if it’s looking as if it might be tougher than expected even to convict Massey’s Blankenship of criminal charges, it’s worth remembering just how much more difficult it will be to convict Wall Street’s top guys. It would be therapeutic – and probably effective, since the prospect of jail time will grab a CEO’s attention much more rapidly than a fine, however large, from the corporate coffers – but it’s going to prove elusive, I suspect.

In order to bring criminal charges, a prosecutor needs to prove criminal intent. That is going to be tougher to prove at the topmost levels of corporate life than you might think, especially since we’re now looking at it with the benefit of hindsight. It would be much easier if all prosecutors had to do was prove good old-fashioned stupidity, greed, and incompetence. Or even unethical or amoral conduct.

Tragically, none of these are illegal, much less criminal.