Human Capital & Careers

Westmoreland Finance Department Upended

Amid an informal SEC investigation and reported annual losses, the coal company reworks its finance department — and names a new CFO.
Marie LeoneApril 2, 2008

Westmoreland Coal Co. has announced a shake-up in its corporate finance ranks, starting with the departure of its CFO and the appointment of a replacement. The changes come amid a Securities and Exchange Commission investigation into accounting errors, although it is not clear if the events are linked.

A call to Westmoreland was not immediately returned.

Kevin Paprzycki, 36, was promoted to the CFO post, replacing David Blair, 53. Officials did not give a reason for Blair’s departure. Blair’s salary last year was $256,250, and he received more than $110,000 in bonus compensation. Before signing on as finance chief at Westmoreland, Blair was acting CFO at Ondeo Nalco Co.

A certified public accountant, Paprzycki has been the company’s controller and principal accounting officer since June 2006. Before joining the coal company, he was the controller at Applied Films Corp. and CFO at Evans and Sutherland Computer Corp.

In addition to Paprzycki’s appointment, Westmoreland named Douglas Kathol treasurer. On top of his new role, he will retain his current position as vice president of development. He has been with the company since 2003.

Further, Russ Werner was named director of accounting, and Bruno LaCrampe was tapped to be the company’s director of internal controls. Both joined Westmoreland in 2006.

On Monday, Westmoreland, which is based in Colorado Springs, reported a net loss of $23 million for 2007, compared to a net loss of $15 million for the year before. The company also said the SEC had launched an informal investigation into the company’s recent restatement. Officials say they are not aware of any laws that have been violated, and that any penalties or other liabilities tied to the investigation will probably not have a material effect on the company’s financial results. That’s because “in management’s judgment,” no fraud or misconduct was involved in the issues surrounding the restatement.

On March 17, Westmoreland announced it had completed its restatement to correct errors in the amounts recorded for the company’s post-retirement medical benefit obligations and related expenses, its stock-based compensation expense, and its state income taxes. The restatement affected selected financial statements for the years between 2002 and 2006, as well as annual Form 10-Ks for 2004, 2005, and 2006.

Issues related to the post-retirement obligations involved two groups of 198 individuals that were omitted from the census data used by the company’s actuaries to calculate the benefits liabilities. The error was exposed during an internal review. The miscalculation resulted in an understatement of the company’s net losses for 2006, 2005, and 2004. The restatement adjustments had no effect on company cash flows.