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Newsom’s office crafted law protecting PG&E after company’s crimes killed 84 people | FIRE - POWER - MONEY Investigation

Documents reveal how California Gov. Gavin Newsom protected PG&E after the company caused deadly fires and pleaded guilty to the felony killing of 84 people.

SACRAMENTO, Calif. — Three days after Gov. Gavin Newsom celebrated his 2018 election victory, one of his major corporate campaign donors caused a mass killing.

The Pacific Gas and Electric Company pleaded guilty in June 2020 to felony involuntary manslaughter for killing 84 Californians in the 2018 Camp Fire.

PG&E’s officials walked out of court to go back to work on turning a profit, aided by state policies Newsom crafted to help the company.

“Just the depth of it, it's shocking,” said Steve Bradley, a retired Cal Fire dispatcher whose grandmother was killed by PG&E. “Even when they are held criminally responsible, nobody actually takes that responsibility. So what's to stop them?”

Bradley’s grandmother Ethel Colleen Riggs was among PG&E’s 84 felony manslaughter victims.

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In the months after the crime, Newsom not only signed new financial protections for PG&E into law, his office hired private lawyers in New York who wrote the legislative language.

Confidential emails and documents obtained by ABC10 reveal the New York law offices of law firm O’Melvany and Myers drafted AB 1054 in the Spring of 2019, before it was introduced in the state legislature.

Credit: ABC10 / KXTV
An email from private attorneys working for Gov. Gavin Newsom with a draft version of AB 1054 attached.

The documents were obtained as part of ABC10’s news series FIRE - POWER - MONEY: How Governor Gavin Newsom Protected PG&E, which investigated how California gave financial protections to PG&E by the state government in the wake of crimes.  

AB 1054 resulted in PG&E obtaining official state safety certificates for two fire seasons since the Camp Fire.

The law was written by the lawyers under a contract to represent Newsom’s office in PG&E’s bankruptcy, state records show.

After AB 1054 was already signed into law, drafting of legislation was added to an amended version of O’Melvany’s contract.

Payment records obtained through state transparency laws show O’Melvany billed California taxpayers $3 million during the time when the law took shape.

Investment bank Guggenheim also participated in crafting AB 1054 and charged $3.7 million during that time.

Adding to concerns about a lack of independence of PG&E’s state regulators, the emails reveal that the California Public Utilities Commission (CPUC) was assigned to write sections of AB 1054 by Newsom’s hired attorneys. 

The CPUC, which prosecutors say harmed the Camp Fire criminal investigations, did not respond to a list of written questions for this report.

The agency is refusing to hand over its communications with key Newsom staffers around the time it waived a $200 million fine to help PG&E exit bankruptcy, prompting ABC10 to file suit under state transparency laws.

Newsom benefited from $208,400 in political contributions from PG&E to help him win his 2018 run for governor.

“If the suggestion is somehow I’m influenced by that, you’re wrong. Absolutely unequivocally wrong,” Newsom said at a 2019 news conference when ABC10 asked whether he could be a neutral broker of PG&E’s bankruptcy. “And there’s not one thing you can point to during my tenure as governor that would suggest otherwise.”

“I just think that that's naive,” said Alice Stebbins, who served as the CPUC’s executive director at the time. “Of course it has an influence.” 

  RELATED: ‘Blood money' | California politicians and campaigns received $2.1 million from bankrupt, guilty PG&E

Newsom’s staff declined or ignored at least ten interview requests on the PG&E crisis from ABC10, dating back nearly three years to his time as governor-elect.

Staffers for Newsom pointed us to others for comment, including a lobbying group called “Up From the Ashes,” which was founded by attorneys for wildfire victims.

“The intent of AB 1054 was to keep utilities solvent if there was a fire,” wrote Steve Campora, a fire victims attorney who is listed as CEO of Up From the Ashes on the group’s government filings.

Campora wrote ABC10 to express concern about PG&E’s stock price falling due to the company’s suspected involvement in sparking the massive Dixie Fire, which has become the state’s single largest wildfire at nearly 500,000 acres and continues to grow.

“People need to understand that as a result of AB 1054, PG&E’s financial picture will not be damaged by the Dixie fire,” Campora wrote. “The stock price hurts the prior victims because it lessens the money in the Trust, but [there] is no real financial danger to PG&E.”

Newsom’s office sent a written statement which did not directly answer any of the 18 specific questions ABC10 submitted by email.

“No governor in California history has done more to hold PG&E accountable and force the company to make fundamental change,” said the statement emailed by Newsom spokesperson Amelia Matier, which appears in its entirety at the bottom of this article.

Comparisons to other governors are of minimal use.

PG&E was convicted of its first six felonies in 2016 during Gov. Brown’s administration when a federal jury found PG&E guilty of obstruction and breaking federal gas pipeline laws in the deadly 2010 San Bruno Gas explosion.

But the Camp Fire was PG&E’s first homicide conviction.

More than a month before Gov. Newsom’s office finished drafting AB 1054, Butte County prosecutors announced that PG&E was responsible for sparking the Camp Fire and under investigation for criminal manslaughter charges.

‘BEYOND A BAILOUT’

To victims’ families, Newsom’s policy response goes well beyond bailing PG&E out. They see PG&E being rewarded for crimes.

“If it were me, I would have been in jail a long, long, long time ago. But PG&E gets a pass. Because they’re a corporation,” Steve Bradley said.

On Nov. 8, 2018 Bradley drove from the Sacramento area toward the town of Paradise, where he used to serve as a volunteer firefighter, hoping to rescue his 96-year-old Grandma Colleen.

“I'm pretty sure she knew the house was on fire, and she wasn't going to make it out,” Bradley said. “I don't talk about it enough, but that really keeps me up at night. You know, was she expecting me? Was she expecting me to be able to get there at the last second?”

Steve’s grandmother, Ethel Colleen Riggs, was cremated alive in her laundry room.

“Nobody’s taking these things seriously enough,” said Meriel Wisotsky, Colleen’s daughter. ”We are not holding these people accountable. And we do have mechanisms to hold them accountable.”

The PG&E corporation pleaded guilty to recklessly sparking the Camp Fire through criminal negligence and to the felony manslaughter of 84 people in the deadliest wildfire in California history.

Some burned to death in their cars trying to run for their lives. Even more never escaped their own homes.

Though the law treats corporations as people, PG&E couldn’t be sentenced to the 90 years in prison the judge said its crimes deserved.

PG&E instead paid the maximum fine of $10,000 for each manslaughter victim, an amount of money PG&E earns every 17 seconds from its vast state-licensed monopoly over the power supply to four out of every ten Californians.

Prosecutors managed to convict PG&E of 84 felony counts of involuntary manslaughter within two years of the killings.

“You are a killer corporation,” said Butte County District Attorney Mike Ramsey. “You’re tagged a killer. That means something… with regulatory agencies, with governors offices, with legislatures.”

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‘I DID NOT WANT TO SIGN THIS’

Gov. Gavin Newsom’s administration responded to the Camp Fire even more quickly than law enforcement could: to write and pass a law protecting PG&E’s profitability and solvency from its own wildfire problem by giving the company a piece of paper from the state.

PG&E now has an official state safety certificate.

It’s the second certificate the state has given PG&E since the Camp Fire, despite that the company has been charged with more crimes and is under a new homicide investigation for the 2020 Zogg Fire.

“I did not want to sign this,” said former California Public Utilities Commission director Alice Stebbins, the state official who signed PG&E’s first safety certificate in 2019. “The bottom line is I was told to sign it. You will sign this. Period.”

Stebbins says she signed it because AB 1054 made PG&E’s certificate automatic, not because she believed the company had actually become safe.

“I trusted my Governor. I trusted my commissioners. And that was a mistake,” Stebbins said in an extensive interview with ABC10.

Stebbins is pursuing a wrongful termination suit against the state government. She claims to have been fired over her actions to investigate why $200 million was missing in the CPUC’s books.

CPUC President Marybel Batjer said there was no missing $200 million and that Stebbins had damaged the agency’s reputation, but a ProPublica investigation “found that Stebbins was right about the missing money.”

RELATED: 'I don't think we held PG&E accountable,' says state whistleblower

The safety certificate gave PG&E and the state’s two other major for-profit power monopolies access to a $21 billion state insurance fund, which will partly be paid for by customers through surcharges on their power bills for the next 20 years.

The fund is designed to cover the cost of damages when utility-caused wildfires burn homes or kill people, the very expenses PG&E blamed when it filed for Chapter 11 bankruptcy protection.

“I think that’s obscene,” Wisotsky said. “Their response was how can we deal with this in such a way as to still make a lot of money for our shareholders?

“When you've just killed a whole bunch of people, I really don't think that should be your number one consideration. And it obviously is.”

‘SAFETY AND ACCOUNTABILITY’ OR ‘UTILITY STABILITY?’

When Newsom signed AB 1054, his office touted it as a “wildfire safety and accountability” bill.

In private, emails show legislative staffers referring to it more bluntly: “the governor’s bill on utility stability.”

AB 1054 said the CPUC “shall issue a safety certification” if it received the necessary paperwork from PG&E.

The law did not make a power company’s actual safety performance a factor, which is why PG&E has been able to obtain safety certificates for two fire seasons in a row despite the fact that its power lines have been blamed for causing large wildfires every year since 2017.

ABC10: What did PG&E have to do to earn this [safety] certificate?

STEBBINS: Nothing.

ABC10: Did it have to trim trees?

STEBBINS: Well, they should have,

ABC10: But no?

STEBBINS: No.

ABC10: Did they have to go out and inspect their hooks and replace old equipment to get the certificate?

STEBBINS: (Indicates not.) They should have.

The ease with which PG&E has obtained two safety certificates in the face of new wildfires is alarming to safety advocates, including the CPUC’s own Public Advocates Office.

“For the extensive benefits that a company gets from having a safety certificate, it should come with the accountability,” said Nat Skinner, the head of safety for the Public Advocates Office. “[The safety certificate] makes it harder to hold the utility accountable.”

Beyond access to the $21 billion insurance fund, the benefits PG&E receives for its safety certificate are twofold.

First, if PG&E’s power lines spark a fire while it has a certificate, the company is presumed to have acted “reasonably,” which means it is entitled to bill customers for the cost of wildfire damage unless a challenger proves the company acted unreasonably.

Second, even if a challenger is successful in proving the utility acted unreasonably, the certificate caps the amount of wildfire damage that can be taken out of shareholders’ profits.

“If this had been in place during the 2017, 2018 and 2019 fires, PG&E shareholders would have been on the hook for about $4 billion dollars, not for the tens of billions that they've ultimately ended up paying out,” Skinner said.

ABC10: They could cause another Camp Fire potentially and not have to go bankrupt this time?

STEBBINS: Yes.

ABC10: Why on earth would we want to cap how much the utilities would have to pay back to the wildfire fund if they were wrong in causing the fire?

STEBBINS: To protect the utility. That's the only reason why.

The lawyers working for Newsom crossed the word “cap” out of an early draft of AB 1054 and replaced it with “limit” instead.

'CERTIFICATION REQUIRED PAPERWORK, NOT SAFETY PERFORMANCE'

To earn the safety certificate, AB 1054 only required PG&E to show four things on paper: a wildfire plan, an agreement to work on company safety culture, a company safety committee, and board-level reporting to the CPUC on safety issues.

Weeks before it was introduced in the legislature on June 27, 2019, a draft version of AB 1054 from June 12 also would have created a fifth requirement: that PG&E receive a positive safety “determination” from regulators.

Two days later, Newsom’s hired attorneys watered that down in a rewrite: the safety “determination” became a mere “staff recommendation.”

By the time lawmakers saw the bill, the requirement for a review of safety “compliance” was gone from the safety certificate section requirements in the bill.

The emailed statement from Newsom’s office pointed to several of AB 1054’s other provisions, including a one-time requirement for PG&E to spend money at shareholder expense on safety projects.

PG&E, Southern California Edison, and San Diego Gas and Electric were collectively required to spend $5 billion of shareholder money on safety projects, a fraction of the amount of money AB 1054 allocated to the safety certificate program.

U.S. District Court Judge William Alsup, who supervises PG&E’s federal probation, says the company should have already been spending that money over the past years instead of “robbing” safety budgets to pay bigger dividends to shareholders.

The statement from Newsom’s office also pointed to a separate bill, SB 350, which provides an outline for a state takeover of PG&E tied to a six-step process of “enhanced” oversight from the CPUC.

A takeover is nowhere close to being triggered and so far, this policy has resulted in PG&E being required to file more paperwork with the CPUC.

‘WHO’S GOING TO STOP IT?’

PG&E’s wildfire victims watched in dismay as the company continued to spark big wildfires.

Every year since the 2018 Camp Fire, the company’s power lines have been named as the cause of major fires that burned homes.

One, the 2020 Zogg Fire, killed four people. The victims included an eight-year-old girl, Feyla McLeod, and her mother Alaina.

They burned to death trying to escape the fire in a pickup truck.

“They should not have had to go through that. No one should have to go through that,” said father and husband Zach McLeod. “They had so many hopes and dreams and we have so many plans and we don't get to do that now.”

Shasta County prosecutors launched a homicide investigation and say criminal charges will be filed against PG&E and possibly people who work there by late September.

PG&E continues to engage in criminal thinking, says former CPUC commissioner Catherine Sandoval, who teaches utilities law at Santa Clara University.

“When you've got a person who's an addict they gotta admit first that they have a problem. So PG&E needs to first admit that it has a problem. Instead their instinct is to say 'no, no we got it, '” Sandoval said. “They need an intervention.”

ABC10: Have they gotten an intervention?

STEBBINS: No.

Instead of intervening, victims see the state government playing the role of enabler: The state government has done the same thing PG&E has: prioritized profits over safety.

“The thing is that PG&E's attitude makes us all suffer, whether we're aware of it or not,” Meriel Wistotsky said. “If you don't think it's affecting you, it's only because it hasn't slapped you right in the face the way it does when it's somebody that you love who's lost.”

 Meriel points out the crisis causes harm beyond PG&E’s killing of her mom and all the others.

It’s blackouts on windy days.

It’s higher power bills, even in Southern California. 

It’s toxic compounds in our air that did harm scientists may never fully understand.

Wisotsky urges Californians to “hold our governments responsible… and not accept these easy answers, not accept this idea of letting people get away with[out] taking responsibility.”

“If the politicians aren't going to listen to me or the other survivors, who are they gonna listen to,” Steve Bradley asked. “Who's going to stop it?”

********************************************

Below is the entirety of a written statement sent in reply to our reporting by the Governor’s Office, sent via email July 30 by deputy press secretary Amelia Matier:

“No governor in California history has done more to hold PG&E accountable and force the company to make fundamental change. Governor Newsom has used every tool at his disposal – passing strict new safety requirements, tying PG&E executives’ compensation to the utility’s safety record, creating new protections for PG&E customers, demanding a public utilities commission investigation into the company, forcing PG&E’s investors to pay billions for safety improvements, and establishing a mechanism to hold PG&E ultimately accountable by authorizing its dissolution and takeover if it fails to adhere to the strict new safety requirements and follow through on its commitment to compensate victims. The state’s actions have resulted in sweeping governance and operational reforms at PG&E, including a newly constituted board of directors, and billions of additional benefits to ratepayers, victims and the people of California, ensuring the company emerged from bankruptcy in a position to make massive upgrades necessary to deliver safe, reliable, clean electricity, and to swiftly compensate victims.”

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WATCH MORE FIRE - POWER - MONEY:
As California’s wildfires continue to break records due to overgrown forests and climate change, the state faces another crisis. The biggest power company is a convicted felon with a tendency to spark new fires. PG&E is guilty of America’s largest corporate manslaughter case. Experts say PG&E has avoided accountability for its crimes and worried the power company will kill again. But how did we get here? Can anyone force PG&E to be safer?