x
Breaking News
More () »

Investigation: Newsom’s PG&E bailout law written by firm that had represented PG&E

California spent $9.6 million on private attorneys who wrote a law protecting PG&E’s profits. State records reveal the law firm had represented PG&E for years.

SACRAMENTO, Calif. — A state law advanced by Gov. Gavin Newsom in response to PG&E’s crimes was drafted by a law firm that previously represented the power monopoly for decades.

The firm O’Melveny & Myers was listed on documents PG&E filed with the state as recently as five months before the November 2018 Camp Fire, ABC10’s investigation reveals.

PG&E later pleaded guilty to 85 felonies for recklessly sparking the fire, which destroyed Paradise, California in the largest mass homicide committed by a corporation in the United States.

“PG&E’s lawyers wrote the law that allowed them to get away with murder,” said Steve Bradley, whose grandmother Colleen Riggs was one of PG&E’s 84 manslaughter victims. “That's absolutely horrifying.”

Law experts told ABC10 they did not see anything inherently illegal about the fact that the firm represented Newsom’s office in PG&E’s bankruptcy after previously working for PG&E.

As a political and governmental ethics issue, however, multiple fire survivors say the arrangement doesn’t pass the smell test.

“The corruption is rampant,” said Paradise town Councilman Woody Culleton, whose house burned down in the Camp Fire.

“It's completely a farce,” Bradley said after viewing the documents. “It's almost like the bank robbers’ union designing the bank safes.”

The 2019 law, known as AB-1054, was critical in enabling PG&E to exit Chapter 11 bankruptcy, offering the utility financial protection from the cost of wildfire damage.

ABC10 previously reported that O’Melveny & Myers drafted the legislation under a $9.6 million contract with Newsom’s office that began in February 2019, three months after the Camp Fire.

Investment bankers from financial firm Guggenheim and officials from PG&E’s ostensibly-independent state regulator, the California Public Utilities Commission, worked with O’Melveny lawyers to write AB-1054 before it was revealed to state lawmakers.

The CPUC was the recipient of the documents reviewed by ABC10 for this story, in which PG&E lists O’Melveny as one of its outside law firms.

CPUC filings show O’Melveny performed legal services as recently as 2017 for the corporation’s electric and gas businesses.

PG&E’s bankruptcy deal settled damages claims for wildfires that killed 131 people in 2015, 2017, and 2018.

The filings show the law firm billed PG&E nearly $250,000 of legal work from 2012-2017, but O’Melveny told ABC10 it previously did “major work” for PG&E that dates back at least two decades.

Neither Newsom’s office, PG&E, nor O’Melveny agreed to be interviewed for this story.

In email exchanges, all three disputed the idea that the firm’s work crafting AB-1054 presented any sort of conflict.

Newsom spokesperson Alex Stack wrote, “The firm you’re referring to did not represent PG&E when it worked for the State of California on this matter.”

Bradley said, “It still looks bad. They still have a law firm that previously represented PG&E now representing the state. They're treating PG&E like another office of the governor.”

“The way that decisions are being made on our energy system… would be appalling to any third grader who's trying to figure out how a bill becomes a law,” said Pete Woiwode with Reclaim Our Power, a left-leaning group pushing for PG&E’s power grid to be converted to a non-profit public utility.

By email, PG&E spokesperson Lynsey Paulo asserted, “there was no conflict of interest or even the appearance of a conflict of interest.”

“It sure appears to me,” Bradley said. “I don't think any reasonable person would think that this was a good idea at all.”

“Conflict of interest is the most benign explanation for this,” said Phil Binstock, the son of PG&E manslaughter victim Julian Binstock. “The most malignant is that they’re corrupt.”

Culleton, the Paradise town councilmember, gave a one-word response to PG&E’s statement: “Bull****.”

RENEWED FOCUS ON PG&E’S POLITICAL DONATIONS, MEETINGS

In interviews for this story, multiple fire survivors pointed to the fact that Newsom’s campaign and a supermajority of state lawmakers benefitted PG&E political donations and that the company gave money to a nonprofit founded by Newsom’s wife.

“If the suggestion is somehow I’m influenced by that, you’re wrong,” Newsom previously said.

The donations were made while the corporation was serving time on probation for six federal felonies tied to the deadly San Bruno Gas explosion. Newsom called it a “strange question” to ask whether it was right to accept PG&E funds during that time.

PG&E continued making political donations while it was under Chapter 11 bankruptcy protection, forcing negotiation of a settlement that left its fire victims short on funds and still waiting for payment.

Bill sponsor Asm. Chris Holden (D-Pasadena,) who previously declined to comment on the $8,800 PG&E donated to his 2018 campaign, scheduled an interview for this story.

His office then canceled with no explanation and did not respond to a request to reschedule.

In a brief unscheduled interview inside the state Capitol, Holden said he was unaware O’Melveny had previously represented PG&E, but he pushed back on the view from fire survivors that the arrangement was improper.

“I don’t agree with that,” Holden said. “They have every right to view it in the way that they are. But this was not something that PG&E designed.”

AB-1054’s opponents beg to differ.

“The governor was holding a series of secret meetings, some of which included O'Melveny and Myers, with PG&E,” said former prosecutor Mike Aguirre, who represents PG&E customers in a lawsuit challenging AB-1054.

As part of his work on the suit, Aguirre and his colleagues obtained calendar entries from the governor’s office.

One meeting stands out: On June 18, 2019, the documents show six representatives of PG&E met behind-closed-doors with a group of Newsom’s staff and Nancy Mitchell, the lead O’Melveny attorney working for Newsom.

Mitchell was included on emails sharing and revising draft versions of AB-1054 five days before the meeting.

Nearly two weeks after the meeting, the bill would be unveiled to state lawmakers at the Capitol.

Mitchell no longer works for O’Melveny. She did not respond to a voicemail left on her cell phone.

Notably, the meeting also included Newsom staffer Alice Reynolds, who was since appointed to take over as President of the CPUC at the end of 2021.

Newsom’s previous appointee to the job, Marybel Batjer, resigned without a confirmation hearing after running the agency while it was accused by prosecutors of hampering the Camp Fire investigation, waived a $200 million fine for the company’s safety violations and misled the public about it, then refused to provide her communications with Reynolds and other Newsom staffers under state transparency laws.

ABC10 sued the agency for the release of those records in a case that’s still pending.

“I think they knew exactly what they were doing,” Aguirre said. “To do what PG&E was asking them to do, which is to relieve PG&E from any legal responsibility for past and future fires.”

WAS THE PAST WORK FOR PG&E DISCLOSED?

Neither the governor’s office, O’Melveny, nor PG&E answered when asked whether the firm’s past work for the utility was disclosed before Newsom hired the firm.

Newsom spokesperson Alex Stack said, “the lawyers involved [in the work for the Governor] had nothing to do with any prior representation of the company,” but PG&E declined to provide a list of O’Melveny attorneys who previously represented the utility.

Without saying whether it did disclose its past work for PG&E, O’Melveny said doing so would have been unnecessary.

“There was no… disclosure obligation,” O’Melveny spokesperson Chris Reick wrote. “There has never been a conflict arising from our old work for PG&E.”

Reick suggested that ABC10 “reconsider your story.” 

His email characterized the work O’Melveny did in the years leading up to the Camp Fire as less “major” than the work it did for PG&E two decades ago, adding, “there has never been a conflict arising from our old work for PG&E.”

Ehsan Zaffar, a legal ethics expert at Arizona State University’s school of law, told ABC10 he’d need more specifics to gauge whether the disclosure was necessary.

In general, from outside a firm, it’s “difficult to assess potential conflicts, which is why most firms have in-house conflict check systems and staff,” Zaffar said.

O’Melveny did not answer whether it took steps to “wall off” any of its attorneys who had previously represented PG&E from the work the firm did from the state.

Aguirre, the attorney fighting AB-1054, says you can picture the conflict by imagining what would have happened if O’Melveny had helped the state create a plan that cracked down harshly on PG&E instead of helping it to emerge from bankruptcy.

“You think PG&E wouldn't raise the issue,” Aguirre asked rhetorically. “That there was prior representation?”

“You don’t hire a pro-corporate law firm when you need a pro-victim solution,” Aguirre said. “That’s really what it boils down to.”

VICTIMS LEFT SHORT, PG&E GETS ‘LICENSE TO BURN’

One of the intended effects of AB-1054 was to help shore up the value of PG&E stock shares, a quarter of which were transferred to a trust to pay 68,000 victims of PG&E’s 2015-2018 wildfires for the loss of their homes, jobs, and loved ones.

It hasn’t worked out. PG&E’s stock price has never attained the value victims were told when they were shown the bankruptcy deal, leaving victims billions short on funds and waiting years for payment.

“All of that was just wishful thinking,” Aguirre said. “You don't need to go to O’Melveny & Myers, [Newsom] could have gone to Disneyland, and gotten that type of advice.”

“The story of the stock isn’t a very good one,” victim trustee John Trotter told fire victims. “Where do we get the money in order to pay you?”

Trotter has since told PG&E’s fire victims that they were “left out” by AB-1054.

Even so, the legislation enabled PG&E to keep going.

PG&E has annually been certified as a safe utility by the state under AB-1054, which critics call a “license to burn.”

The certificate entitles PG&E to a presumption that it acted reasonably in connection with fires sparked by its equipment, even when state arson investigators find probable cause to believe the utility committed a crime.

If a utility was deemed reasonable, its shareholders are protected from having to pay for fire damage out of the money they would otherwise be able to take a profit.

PG&E already budgeted $150 million in protection from AB-1054’s utility insurance fund to cover damage caused by last year’s massive Dixie Fire.

Ratepayers across California will pay into that fund for 20 years under AB-1054, providing half of its $21 billion.

“AB-1054 has not served the people of California,” said Woiwode, the energy activist. “It's only served to keep PG&E in power and that's been more dangerous for people across the state.”

The Dixie Fire is the most recent to be blamed on PG&E by state investigators.

PG&E faces four counts of felony involuntary manslaughter in Shasta County for the 2020 Zogg Fire.

Preliminary hearings began earlier this year for 33 criminal charges against PG&E for the Kincade Fire, sparked by a PG&E transmission line in 2019. PG&E is attempting to reach a settlement with Sonoma County prosecutors.

Under AB-1054, PG&E was awarded a safety certificate after each of those fires.

When asked how that amounted to the stated purpose of the bill he sponsored, to hold utilities accountable and promote safety, Holden couldn’t say.

“Well, I mean, I can't explain,” Holden said. “I'm not part of doing the investigations and issuing the [safety] certificates.”

“It has to be corruption,” said Bradley, whose grandmother was killed. “If they were bumbling politicians that didn't understand what they were fully doing, they wouldn't be able to do what they're doing.”

Watch: California preparing for an earlier, more explosive fire season