As Joe Manchin’s Star Rose, FBI and IRS Probed His Closest Allies

In June 2010, the body of Sen. Robert Byrd lay in repose on the floor of the U.S. Senate, offering his colleagues a final opportunity to pay their respects. For years, Byrd had lorded over West Virginia politics, and he continues to hold the record for longest serving U.S. senator. He was also the most recent member of Congress to have led a chapter of the Ku Klux Klan. Before besting Ted Kennedy for the role of Senate majority whip, Byrd solidified his power by funneling millions of taxpayer dollars to West Virginia as chair of the Senate Appropriations Committee.

Byrd was also the progenitor of the eponymous Byrd rule, which placed expansive limits on what can be included in the budget reconciliation process that President Joe Biden is now attempting to use to pass his critical policy objectives. Joe Manchin, then the governor of West Virginia, was on the cusp of rising to fill Byrd’s seat in the upper chamber, while also staring down the potential collapse of everything he’d built over his decadeslong career in politics. As Manchin launched his Senate campaign, a federal investigation was bearing down on his administration and its inner circle.

“It’s one of those things, you look at the timing, and you question the timing of how all this would have happened,” Manchin told Politico at the time. “But it is what it is, and I think the people know better.

Weeks after Byrd’s death, federal subpoenas were sent to agencies throughout Manchin’s administration. Though the Manchin governor’s office wasn’t directly subpoenaed, investigators were looking into multiple people and agencies with a web of ties to Manchin, including Manchin’s former chief of staff and confidante, Larry Puccio, then the head of the state Democratic party. In 2006, as Manchin’s chief of staff, Puccio had also met with Mon Power lobbyists and advocated for them to petition for a rate increase for West Virginians’ electricity that kept Manchin’s company’s biggest coal customer afloat, the details of which have not been previously reported.

The full purview of the investigation was never made clear. In addition to a subpoena to the Department of Transportation’s Division of Highways investigating land seized through eminent domain, the government sought campaign finance records from the secretary of state’s office on Manchin’s 1996 gubernatorial bid and from the department of administration’s aviation division.

Sam Runyon, a spokesperson for Joe Manchin, told The Intercept, “Senator Manchin has devoted most of his adult life to public service. At every stage he has been compliant with financial and ethical standards. He has never been the subject of a federal investigation.”

West Virginia's coal country — Photo: Andrew Lichtenstein/Corbis via Getty Images

The state government spent $60,000 to hire an independent investigator to respond to the federal subpoenas, which a deputy assistant general said was necessary for maintaining a totally hands-off approach, given the governor’s Senate campaign. Manchin had two connections to the family of the U.S. attorney overseeing the probe. The U.S. attorney for the southern district of West Virginia at the time of the probe was Boothe Goodwin, nephew of Manchin’s Secretary of Culture and Arts Kay Goodwin. Boothe Goodwin was also the cousin of Carte Goodwin, Manchin’s former legal counsel and the man he would appoint as interim senator, before filling the seat himself when Carte declined to run in the special election four months later.

Ultimately, only one person was charged with tax evasion and mail fraud, to the disbelief of the judge hearing the case. Manchin won election to the Senate by over 50,000 votes, narrowly retaining Democratic control of the Senate. Years later, Boothe Goodwin would go on to run a super PAC aiding Manchin’s reelection.

For more than 20 years, Manchin stayed a step ahead of federal investigations as they closed in around his inner circle. A review of statehouse investigation reports, public court records, and sealed documents obtained by The Intercept reveals a decadeslong history of investigations into employees, contractors, and business associates of Manchin. These incidents involve investigations into tax evasion, grand larceny, campaign finance violations, and an investigation by federal agencies including the FBI and IRS into a wide range of alleged criminal activity centered around Manchin’s governor’s office.

“We had to change a lot of things about the way we do business in West Virginia, by making the bidding process more open, transparent, getting financial advisers,” Manchin told Politico in 2010. “So there’s a lot of people’s whose feathers were rubbed wrong, and I think there might be some of that coming back to roost.”

In both the 2010s and the 1990s, federal investigations involving confidential informants petered out, with only low-level players facing prosecution, sentencing, and jail time. The review of Manchin’s career reveals a tangled political and professional journey that has led the senior senator to the summit of global power, making him the man who holds in his hands the fate of the fossil fuel industry, and in turn, the fate of the planet.

2010 Federal Investigation

The 2010 investigation hinged on an FBI informant who had performed no-bid contracting work on the governor’s mansion and had a history of “fraudulent behavior,” according to prosecutors. The investigation seems to have originated in illegal contracts for window treatments but soon extended far beyond that. The Charleston Gazette-Mail reported how extensive the investigation was at the time: “The probe included federal subpoenas issued last summer to the state Division of Highways and reportedly the state Department of Administration, including flight records of state aircraft that are used primarily by the Governor’s Office. Campaign finance records from Manchin’s unsuccessful 1996 run for governor also were subpoenaed by a federal grand jury.”

Earlier in 2010, Manchin had ridden on Massey Energy CEO Don Blankenship’s private jet, days after the Upper Big Branch mine disaster which took the lives of 29 miners in a Massey-owned mine. At the time of the disaster, a spokesperson for Manchin said that a state aircraft wasn’t available and that Blankenship would be reimbursed for the cost of the flight.

Among the schemes that had caught the eye of federal investigators involved a major $150 million highway project running through Manchin country: the governor’s home base of Fairmont, West Virginia. Fairmont is in the heart of Manchin’s coal empire, one town over from Farmington where his father served as mayor. Manchin and his family own considerable property in Fairmont, and his family company Enersystems continues to lease coal reserves outside of the city limits. Wrapped up in the investigation was the real estate firm of Larry Puccio, the longtime Manchin aide and confidante.

Puccio was Manchin’s chief of staff before resigning in 2010 and registering as a lobbyist one week later, prompting state legislators to create a one-year period before former political officials can transfer to lobbying in the private sector. He then went on to become the West Virginia Democratic party boss before abandoning that post last year to support Republican Gov. Jim Justice’s candidacy. In 2017, both Puccio and a spokesperson for Manchin made contradictory statements to the press about their respective connections to a firm named in a $14.6 million hotel bankruptcy suit. Puccio is also a co-owner of the Wonder Bar Steakhouse in Clarksburg, which shares a name with the turreted steakhouse used as a meeting place by Al Capone and his affiliates. Puccio did not respond to multiple requests for comment.

Where highways run, corruption can follow. Both the FBI and IRS were investigating Puccio’s firm for its role in appraising property that would then be seized through eminent domain to make way for the new construction, the Gazette-Mail reported at the time. Puccio’s firm, which he said at the time was in a blind trust, was responsible for appraising the land cut through the 1.3-mile project at $150 million.

Puccio’s firm was also the appraiser for a $22 million armory project in Fairmont, which was another subject of investigation, according to the Gazette-Mail. The main contractor for that project was Omni Associates, an architectural firm previously located in the Manchin Professional Building in Fairmont where Manchin’s family coal company, Enersystems, was also headquartered and where Manchin’s cousin Tim operated a law firm. The two senior principals of Omni have donated thousands to Manchin since 2000.

Puccio had also played a role, which has not been previously reported, in the scheme to charge West Virginians more for electricity in order to keep Enersystems’ biggest customer viable. For years, the main buyer of coal from Enersystems was the Grant Town Power Plant, which then sold energy to Mon Power, a major electric company in West Virginia. The regulated rate it passed on to consumers, $27.25 per megawatt, kept down the price it could pay Manchin’s company and threatened the economic viability of the plant. Rather than switch to a more economically efficient energy source, Manchin simply pushed to force ratepayers to pay more.

In 2006, according to a source familiar with the rate change, Puccio, then serving as Manchin’s chief of staff, was instructed by Manchin to meet with Mon Power lobbyists so that they would petition the public service commission to increase the Grant Town plant’s megawatt rate to $34.25, soliciting an additional $4.5 million dollars per year from ratepayers and bailing out the main buyer of Enersystems coal. As Sludge reported earlier this month, Puccio has been registered as a lobbyist since 2017 for the parent company of Mon Power.

In 2010, the investigation went away.

In 2010, the investigation went away. After the state spent over $60,000 in legal fees responding to subpoenas, only one person was charged with a crime: Clark Diehl, the contractor who had been an informant for federal agencies for over three years. He ultimately pleaded guilty to altering bid contracts to redecorate the governor’s office, Puccio’s office, and other rooms in the governor’s mansion.

Diehl’s sentencing was pushed off until after the special election for the Senate seat that Manchin now holds, with federal prosecutors securing extended time for sentencing under the rationale that Diehl would be cooperating in a broader case. Meanwhile, the state attorney general’s office repeatedly blocked open records requests regarding the case. News media was also shut out from initial hearings. Some local pundits later speculated that the Obama Department of Justice may have intervened to bolster his chances of maintaining a majority in the Senate.

Many of the documents from Diehl’s trial are now sealed, but as the Gazette-Mail reported in 2011, the judge hearing the case couldn’t understand why more charges were not brought against two other employees. Diehl had recorded over 100 conversations with state employees both through the use of a wire and by phone, leveled accusations of public corruption, and served as an informant for years, striking a plea deal to cooperate in a far-reaching dragnet. “You’re not telling me much,” the judge told the prosecution at the time of sentencing. Prosecutors told the judge that ultimately they couldn’t use Diehl’s work for other targets “in light of his extensive fraudulent activity prior to his cooperation” and that only a few of the recordings “proved of limited usefulness, and overall the recordings failed to corroborate Mr. Diehl’s allegations of public corruption.”

Diehl did not respond to multiple phone calls from The Intercept.

In a court filing, Diehl’s lawyer highlighted the lack of broader prosecutions, writing: “Attorneys General changed, United States Attorneys changed, Governors and Senators changed, and the United States’ prosecution of Alaska Senator Ted Stevens imploded.”

2EC1H5E-kennedy1 — Photo: Gibson Moss / Alamy Stock Photo

Manchin’s Kennedy Ambitions

In 1960, West Virginia Republicans were a nonexistent species, followed close behind West Virginian Catholics. In February of that year, Senator John F. Kennedy announced he’d compete in the state’s primary, hoping to bury once and for all the counterargument that the American people would never elect a Catholic president. There was no better place to prove that than West Virginia.

To get him there, he relied on A. James Manchin, who became the Kennedy point man in West Virginia, making introductions around the state. A. James was first elected to the West Virginia House of Delegates at the age of 21 after befriending Arch A. Moore Jr., the descendent of a powerful West Virginian political family, the future governor of West Virginia, and the father of Shelley Moore Capito, current junior U.S. senator for West Virginia. (Moore would be convicted of five felonies including mail fraud, tax fraud, extortion, and obstruction of justice stemming from his time as governor in the mid-1980s.)

James Manchin’s brother and Joe Manchin’s father, who went by John Manchin, served as the mayor of Farmington and dreamed of launching a dynasty like the one the Kennedy family would produce — a dream he passed on to his son.

“My hands were dirty and greasy, but my mother insisted that I wipe them clean and come upstairs to meet a few people,” Joe Manchin III recalled years later. “As I climbed the steps, I smelled my grandmother, Mama Kay’s, spaghetti. Everyone had gathered at the table for dinner and an exciting discussion about the political race ramping up in West Virginia. That was the day I shook hands with the Kennedys.”

Kennedy won the West Virginia primary and locked in the national nomination. His ascension was a victory for Uncle A. James Manchin, who was rewarded with an appointment as state director for the Farmers Home Administration. He then went on to hold the secretary of state’s office and later the state treasurer’s office (where he was subsequently impeached for bad investments that cost West Virginia hundreds of millions, resigning before his trial). Manchin III climbed past him from state senator to secretary of state, governor, then U.S. senator.

But the parables of the Manchins and the Kennedys are not one and the same. The Kennedys — through patriarch Joseph Kennedy — first amassed a fortune through rank corruption and organized crime, then used that fortune to fund a political empire. The Manchins inverted this trajectory: first winning political power and then using it to build a financial fortune. While Manchin continues to serve in the Senate, he has kept one foot in the private sector through his coal empire, and both of his children used their connections not to win office but to grow wildly rich.

Manchin’s daughter Heather Bresch received a $30 million golden parachute after finishing her tenure as CEO of Mylan and overseeing the sale of the pharmaceuticals company to Pfizer — a deal that led to the devastating closure of the company’s Morgantown plant. His wife Gayle Manchin now heads the Appalachian Regional Commission, which was created by JFK in 1963 and signed into law in 1965. Years before heading ARC, Gayle served as the head of the National Association of State Boards of Education, where she used her position to require schools to buy the EpiPens her daughter’s company produced.

And Joe Manchin IV is doing well too, running the multimillion-dollar family coal empire that Manchin the senator reminds voters is kept in a blind trust. Meanwhile, Manchin has objected to a wide swath of the Biden agenda, arguing it could produce an “entitlement mentality” and insisting that any tax credit parents with children get come along with work requirements.

1992 Coal Theft Investigation

Nearly two decades before the 2010 investigation, Manchin’s family company was implicated in another far-reaching federal investigation. In 1992, federal investigators uncovered a scheme at Peabody Coal’s Federal No. 2 mine in West Virginia. Trucks moving coal out of the mine were being deleted from the mine’s daily weight logs by Michael Toth, the mine supervisor, and a security guard, Jeff Isiminger. Over the course of eight months, the federal case alleged, 29,000 tons of coal were smuggled out of the mine, worth more than $600,000. The coal was then sold for profit by James Petitte of J & P Coal and James Frey of Frey Lumber.

When the case went to trial, however, prosecutors left out one critical business. A sealed affidavit obtained by The Intercept describing the IRS investigation reveals that Joe Manchin’s family company, Enersystems, was also investigated for coal theft. The affidavit was signed by a magistrate judge and seeks to establish probable cause for a search warrant. According to the affidavit, Enersystems trucks were also leaving the mine uncounted; a confidential informant told IRS special agent Richard Warner that “he deleted trucks for ‘Petitte’ and for Enersystems from Daily Reports.”

Warner also recommended that a warrant be served on Enersystems, though it is unknown whether a warrant was carried out. “I have probable cause to believe and do believe that Enersystems Inc., Mon River Docks, Jolaco, Rosedale Docks, Petitte and others, both known and unknown to me, have been involved in interstate transportation of stolen property, mail fraud, racketeering and engaging in transactions in such a way as to defraud the United States,” wrote Warner. Petitte and Frey; Isiminger, the security guard; and a loader named Hans Mohr pleaded guilty; Toth, the mine supervisor, was convicted on 18 counts, including conspiracy, wire fraud, mail fraud, interstate transport of stolen property, money laundering, and tampering with a witness. Petitte and Toth are now deceased, and attempts to reach Isiminger and Frey by phone were unsuccessful.

Hans Mohr, when asked why nobody involved with Enersystems was charged, told The Intercept, “Because they had connections and I didn’t” before declining to speak further.

Enersystems, which has been owned by the Manchin family for over three decades — Manchin launched it while serving in the state Senate — purchases low-quality waste coal from mines and resells it to power plants as fuel. In the affidavit, workers also alleged that they had seen an ongoing scheme to crush coal into a size that would be recorded as waste, and could then be hauled for free and sold at a profit by brokers.

During one surveillance period conducted by the West Virginia state police, according to the affidavit, all unreported coal leaving the Peabody mine arrived at Jolaco docks, a company owned by Joseph Laurita Jr. and James L. Laurita. James Laurita currently serves as an officer for LP Minerals LLC, which operates, among others, the Humphrey No. 7 mine site — which is the largest supplier of coal to Manchin’s company Enersystems. Neither Laurita was charged as part of the investigation. In 2018 though, Laurita was indicted on charges of campaign finance violations, after allegedly providing employees of his firm with cash bonuses and directing them and their spouses to donate hundreds of thousands of dollars to Manchin and other West Virginia politicians. The case ended in a mistrial. (Acting U.S. Attorney Randolph J. Bernard told The Intercept that “the most prudent course of action and the most efficient use of government resources was not to seek a retrial.”)

Despite two purchasers of stolen coal being indicted and pleading guilty, Enersystems employees remain absent from news coverage of the investigation. The sealed nature of the case makes the way Enersystems employees entirely avoided prosecution difficult to ascertain, and multiple requests for comment to Enersystems were not returned.

After serving as one of two prosecutors in the stolen coal case, former U.S. Attorney William Wilmoth went on to serve as legal counsel for American Bituminous Power Partners, the owner of the Grant Town Power Plant that became the largest purchaser of Enersystems coal.

The Buffalo Creek flows past Manchin’s childhood home in Farmington before entering Barrackville to the east, where a mine leased by one of Manchin’s companies spews runoff violating EPA clean water standards. It rounds a bend through Fairmont where Manchin first solidified his political base, then mixes with the Monongahela River, where a barge worker fell to his death while moving coal from a mine that supplied Enersystems. Beyond Fairmont, the Monongahela’s tributaries stretch eastward, snaking their way toward Washington, D.C.

The waterways that trace Manchin’s political career and carry the toxic sediment his ascension accrued also threaten to deluge West Virginia — surpassed by no other state in terms of its exposure to flood damage, the New York Times reported earlier this week — as rising temperatures threaten to overwhelm the land that Manchin grew up on, then turned around to poison.

In the nation’s capital, Manchin continues to use his political power to block legislation that could reverse the planet’s warming trend. He has quashed Democrats’ hopes of incentivizing the drawdown of fossil fuels and slashed provisions to empower a green energy transition, all while receiving more donations from the oil, coal, and natural gas industries than any other senator in the last election cycle.

Despite his starry-eyed meeting with the Kennedys as a boy, today Manchin embodies the opposite of the values he most admired in Kennedy. “In a time of indifference,” Manchin wrote of Kennedy’s presidency, “he reawakened this nation to the finest meaning of citizenship — placing public service ahead of private interest.”

Correction: October 25, 2021
Due to a copy editing error, the story misconstrued the creation of the Appalachian Regional Commission. The Appalachian Regional Commission was first created as a presidential commission in 1963 before being signed into law in 1965 by President Lyndon Johnson.

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