United States

PG&E Won't Fight $3 Million Criminal Fine, Independent Safety Monitor or Appeal Pipeline Safety Counts

Pacific Gas and Electric Co. lawyers told the judge slated to sentence the utility for six federal criminal counts later this month that the company will not appeal five pipeline safety-related convictions and will agree to submit to independent oversight by a monitor, according to court filings.

PG&E also told U.S. Judge Thelton Henderson – who is set to decide the company's punishment at a hearing on Jan. 23 – that it will not agree to a five-year term of probation, the $3 million maximum allowable fine and a federal safety monitor.

Previously, PG&E’s lawyers had signaled the utility would fight the verdicts a jury handed down in August of last year.

PG&E was found guilty of five pipeline safety counts as well as a lone count of obstructing the federal probe into the September 2010 San Bruno pipeline explosion, which triggered a fire that left eight dead and destroyed a neighborhood.

It remains unclear whether PG&E will press an appeal on the obstruction count, a charge the company insists was unwarranted.

In its sentencing memorandum filed on Monday, the utility’s defense asked Henderson to take into account the company’s “unilateral” public vow that it would not contest the five pipeline safety-related convictions. In addition, the firm’s lawyers told the judge that “should the court impose it, PG&E will pay the maximum statutory fine in this case ($3 million) promptly.”

“These actions, we submit, demonstrate PG&E’s desire to focus its efforts on the safety of its customers and its community, without distraction or diversion,” the company told the judge.

Henderson will consider that testimony as well as a federal probation department report outlining sentencing recommendations, including a term of five years’ probation, the maximum $3 million fine, 10,000 hours community service by managers and a yearlong advertising campaign emphasizing PG&E’s guilt.

The federal probation report calls on the company to revise its bonus system to better emphasize safety and for the court to impose an independent safety monitor – a measure that PG&E has repeatedly resisted in the past.

Federal prosecutors urged Henderson to at minimum accept or exceed the probation department recommendations.

“PG&E’s pattern of deliberate and methodical violations of safety regulations, motivated by profit and resulting in mass death and destruction, warrants the most serious sentence this court can impose,” prosecutors told Henderson in a court filing Monday.

“Such a sentence is not only appropriate, it is the minimum necessary to reflect the seriousness of PG&E’s conduct, promote respect for the law, provide just punishment, protect the public from further crimes by this recidivist defendant, and adequately deter other natural gas operators across the country.”

A key component of the sentence, prosecutors told Henderson, is the independent monitor.

“PG&E’s history of noncompliance with its regulatory obligations demonstrates that it cannot be trusted to prevent criminal conduct on its own,” the prosecutors stressed. “Instead, this Court should impose a corporate monitor on PG&E to achieve some measure of confidence that PG&E will comply with Pipeline Safety Act regulations to prevent future tragedies, such as the deadly pipeline explosion in San Bruno.”

For its part, PG&E assured Henderson that it is hashing out the details of such a monitoring agreement.

“PG&E and the government are currently working towards agreement on the scope and terms of a monitorship designed to support and ensure a strong safety culture without compromising the role of PG&E’s state and federal regulators,” the company said in its filing with the court.

“PG&E hopes that agreement on the monitorship can be reached and a proposal submitted to the Court ahead of sentencing.”

While the company said it would accept the monitor, the five-year probation term as well as the fine, the utility signaled it will fight other proposed measures as “inappropriate and contrary to federal law.”

Altering the bonus system could “unintentionally encourage employees to underreport safety incidents,” the company told the judge. And while not opposed to community service, the current 10,000 hours proposal is unworkable in light of the extensive level of such service already performed by the company executives.

PG&E also bristled at the suggestion that it devote a quarter of its advertising budget for a year on a campaign to discuss its criminal conviction as well as its record of compliance. Its cost, the company argues, would be so massive that it “runs the risk” of exceeding the maximum $3 million fine.

“No further publicity is required to alert the public to the circumstances of this case,” the company concluded, given the extent of international reporting on the case.

But federal prosecutors want Henderson to go further, creating a hotline for whistleblowers and requirements that the company target the same audience who had been saturated by company ads before the trial.

“The government supports the condition requiring PG&E to notify the public of its criminal and neglectful behavior, what it was convicted of, and the changes made within the organization to reduce the likelihood of future criminal conduct and negligence,” prosecutors told Henderson.

“PG&E’s crimes compel a serious sentence that will alter its culture for good,” prosecutors concluded, noting that victims' families and officials from San Bruno are expected to attend the hearing later this month.

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