Logan County man sentenced for role in Arch Coal kickback scheme
CHARLESTON, W.Va. – Scott Ellis, 45, of Holden, West Virginia, was sentenced today by Judge Thomas Johnston to three years of probation and a $3,000 fine announced United States Attorney Booth Goodwin. Ellis had previously pleaded guilty in July of 2014 to structuring, a federal crime that involves the breaking down of cash banking transactions in amounts of $10,000 or less to avoid triggering a financial institution’s reporting requirements to the Internal Revenue Service (IRS). Ellis also admitted that he and his business partner, Stephen Herndon, paid hundreds of thousands of dollars in kickbacks to the general manager of Arch Coal’s Mountain Laurel mining complex, located in Logan County.
Ellis admitted that he owned Tri-State Mine Service, Inc., a vendor at Mountain Laurel that rebuilt mining equipment. Ellis gave Herndon a half interest in Tri-State in approximately March 2011, after Herndon left his position at Mountain Laurel as the warehouse manager. To ensure that Tri-State received the rebuild work from Mountain Laurel, Ellis, later joined by Herndon, engaged in a bid-rigging scheme where, in exchange for a guaranteed winning bid on certain jobs, vendors had to pay cash kickbacks to a person identified in other court documents as David Runyon.
Ellis initially delivered the cash to Herndon, while he worked at Mountain Laurel, or Runyon. While Herndon was the warehouse manager at Mountain Laurel, from approximately 2006 through March 2011, he served as a facilitator of kickback payments by vendors at Mountain Laurel to Runyon.
To generate the necessary cash, Ellis, later joined by Herndon, structured cash withdrawals from various personal and business accounts in amounts of $10,000 or less. They conducted the cash withdrawals in that manner to avoid triggering the bank's obligation to file a currency transaction report with the Internal Revenue Service.
Between early 2009 and approximately March 2011, Ellis structured approximately $163,521.25 in cash transactions. Ellis estimates that almost all of those funds were used to pay cash kickbacks to Runyon, and that he paid approximately $187,000 in cash kickbacks during that time. Between April 1, 2011, and September 30, 2013, Herndon and Ellis, working together, structured approximately $183,853. They estimate that they used almost all of those funds to pay cash kickbacks to Runyon and that they paid approximately $237,000 in cash kickbacks during that period.
Ellis has agreed to forfeit $215,355.85 to the United States, representing a portion of the funds involved in and traceable to structuring.
Today’s sentencing stems from an investigation being conducted by the FBI, IRS Criminal Investigation, United States Postal Inspection Service, and the West Virginia State Police. Assistant United States Attorney Meredith George Thomas is in charge of the prosecution.