“Unbelievable”: federal prosecutors abruptly drop fines 99% at PG&E trial

From the San Jose Mercury

PG&E trial: Prosecution unexpectedly drops maximum potential penalty to $6 million
By George Avalos, gavalos@bayareanewsgroup.com
August 3, 2016

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PG&E will no longer face more than $500 million in fines if it is convicted on all charges in the criminal case linked to the fatal San Bruno explosion after prosecutors Tuesday abruptly proposed dropping 99 percent of the fines the embattled utility faced.

The most PG&E could be fined if convicted on all charges would be $6 million — far less than the $562 million prosecutors had been seeking in connection with the September 2010 explosion that killed eight people. The fatal explosion was one of the worst utility disasters in American history.

Prosecutors from the U.S. attorney’s office declined to comment on the reason for the request. U.S. District Court Judge Thelton Henderson approved the request late Tuesday, after jurors finished their fourth day of deliberations.

The PG&E pipeline blast hole on Glenview Dr. is photographed days after the blast which occurred on Sept. 9, 2010. Photo was copied on Feb. 23, 2012. (Photo courtesy of the Hensel family) (Gary Reyes/ Staff) ( Gary Reyes )

“This is unbelievable,” said state Sen. Jerry Hill, whose San Mateo County district includes San Bruno. “There is no way to justify this move when weighed against the loss of eight lives.”

San Bruno Mayor James Ruane, who like Hill has attended the trial, said, “That is a surprise, but I’m sure the prosecutors had their reasons for doing what they did. “The big thing is for PG&E to be convicted of the crimes they committed. A conviction puts a very dark stain on the corporate seal.”

San Francisco-based PG&E faces 12 criminal counts, including 11 charges that it violated federal pipeline safety regulations and one charge that it obstructed an official National Transportation Safety Board probe into the fatal blast. The company has pleaded not guilty.

The request by the U.S. attorney’s office to reduce the potential fines was outlined in a brief filing with the court. The document said that PG&E would be fined no more than $500,000 for each conviction, a maximum of $6 million.

PG&E would face fines only if jurors find the company guilty on any of the 12 charges. At that point, the case would move to a second phase during which penalties would be determined.

In April 2015, the state Public Utilities Commission imposed a $1.6 billion penalty against PG&E for causing the San Bruno explosion, the largest regulatory penalty ever levied on a U.S. utility.

PG&E spokesman Gregory Snapper issued a statement Tuesday in response to the prosecution’s request. “Regardless of this action or the next legal steps, we want our customers and their families to know that we are committed to re-earning their trust by acting with integrity and working around the clock to provide them with energy that is safe, reliable, affordable and clean,” the statement said.

Initially, prosecutors sought a fine that would have been double what they allege the utility saved by evading pipeline safety rules. Under that calculation, prosecutors initially sought a $562 million penalty.

Although prosecutors declined to comment on their request to dramatically reduce the fines, a court filing from PG&E provided some insight into arguments that the defense team may have used with federal prosecutors.

Defense attorneys argued that if the company were to be convicted on any charges, PG&E would then be forced in the penalty phase of the trial to present an extensive and complex defense in a proceeding that might have been heard by another jury.

PG&E warned in documents filed July 30 that the penalty phase would become “unduly complicated.”

If PG&E were to be convicted of violating federal pipeline safety standards, jurors would be required under a specific federal fines act to determine the amount of financial gain PG&E received from cutting corners in pipeline safety.

“For regulated utilities, assessing gains or losses accurately is a complex, nonintuitive endeavor that takes legions of regulatory experts,” PG&E attorneys stated in the July 30 filing.

San Bruno officials said a conviction, in their view, should be the primary focus, rather than penalties.

“For PG&E, all these fines are the cost of doing business,” Mayor Ruane said. “But a conviction sends a message that the lives of the eight people who died should not just be the cost of doing business.”

Contact George Avalos at 408-859-5167. Follow him at Twitter.com/georgeavalos.

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