United States Trustee Program Director Twomey - Remedy Financial Inequities to Victims of the PGE Fire Victim Trust

The PGE 2020 Bankruptcy and PGE Fire Victim Trust

PGE's bankruptcy workout plan to pay for victims' losses from the 2015, 2017 and 2018 Northern California wildfires was approved by California Gov. Gavin Newsom and U.S. Bankruptcy Judge Dennis Montali and is being implemented by PGE Fire Victim Trust Trustee John Trotter who suddenly retired this week. He leaves his leadership at the Trust at the end of June 2022.

This petition requests that Gov. Newsom correct the inequities in the PGE wildfire victims' settlement awards that are being adjudicated by the PGE Fire Victim Trust and fully compensate the victims of the 2015, 2017 and 2018 Northern California wildfires as required by California's "inverse condemnation" law which says "if you broke it, you fix it" (which applies to public utilities) and, more importantly, by doing what's morally right.

Gov. Gavin Newsom,

Please “Fix the Biggest Victim Economy You Approved” by providing equitable compensation to the 2015, 2017 and 2018 wildfire victims. Governor, we are one of 68,870 families and businesses (250,000 Californians) waiting for full relief for our PGE-caused losses. We are part of a significant group of voters. We are looking for a Governor to vote for that can help us get "fair" compensation as promised by PGE bankruptcy Judge Dennis Montali. As you know, you approved Judge Montali's settlement plan which does not compensate us fairly. 

With another 2022 California State budget surplus of $97 billion dollars, please propose allocating $1.5 to $3.5 billion to fully compensate the the wildfire losses of 68,870 wildfire victim families (250,000 citizens/voters) of Northern California.

Governor Newsom. Fix the Biggest Victim Economy created and approved by you and Judge Montali.

Petition Background Information

The PGE Fire Victim Trust was created by Judge Dennis Montali to manage the adjudication and distribution of the wildfire victims' $13.5 billion settlement from PGE that was awarded to the victims' by the U.S. Bankruptcy Court. Gov. Newsom, you approved this bankruptcy plan and you have the authority and resources at your disposal to correct the inequities to victims created by this plan. Please fix it. (14)

The PGE Bankruptcy Court settlement, which Governor Newsom approved, favors and fully compensates everyone except the wildfire victims. All local city and county governments, large financial Hedge Funds that were investors in PGE, PGE and its attorneys, and the victims’ lawyers are and have been paid in full and “quickly” from the PGE bankruptcy $55 billion dollar settlement. None of these entities were required by the U.S. Bankruptcy Court to take one-half of their settlements in PGE stock.  However, the 68,870 wildfire victims (approximately 250,000 people) have been short-changed and slow-paid pennies on the dollar and were required to take one half of their settlement in PGE stock. Still today, tens of thousands of these wildfire victims have received no settlement payments whatsoever. And one-half (i.e., $6.75 billion) of the victims’ settlement languishes in PGE’s underperforming stock.(1,2,3,4,5,6,13)

Furthermore, Gov. Newsom and the California State Legislature enacted Senate Bill AB 1054 which provides full (100%) compensation for future wildfire victims after July 2019, but does not cover the 2015, 2017, and 2018 wildfire victims whose plight spawned the legislation and who are currently being paid about 60% of their bona fide claims losses and Trustee John Trotter is only paying 45% of the 60%. Why? Because unlike all the other bankruptcy claimants, the victims received one-half of their $13.5 billion dollar settlement in PGE stock. PGE stock is currently trading around $12 per share (currently a $1 billion loss to the victims' PGE shares) and it must trade at about $14.50-plus per share for the victims' stock value to equal $6.75 billion.

And Trustee Trotter, in his not-so-infinite wisdom, has already sold 100 million shares of the victims’ PGE stock at $12.04 per share for a $212 million loss. If he or Ms. Yanni (his replacement appointed solely by Trustee Trotter) sells the remaining 377 million of the victims’ shares for the same loss, victims stand to lose over $1.1 billion of their $13.5 billion settlement, perhaps much more. Apparently, no one can stop Trustee Trotter from selling victims’ shares at a loss. He (and now Ms. Yanni) has complete discretion over when and how much to sell the victims’ PGE shares.(1,2,5,13)

The Sting - The PG&E U.S. Bankruptcy and “PG&E Fire Victim Trust”

This petition addresses how the unbridled power of the U.S. Bankruptcy system and its Judge (Dennis Montali), Wall Street’s Hedge Fund Managers, Pacific Gas & Electric corporation (the largest U.S. public utility) and its lawyers, insurance companies and governments and victims’ lawyers worked together and/or independently to financially dominate and become the largest beneficiaries of the $55 billion PG&E wildfire bankruptcy payouts.(1) Moreover, Gov. Newsom put his imprimatur on this deal and soon thereafter gave PG&E a “safety regulation” pass so they could exit the bankruptcy process and continue to operate with business as usual, that is, with little ongoing responsibility for making major wildfire mitigation efforts to their electric service lines and a backstop of California tax payers funds to payoff their next victims at 100% of their losses. Each of these government and financial entities have benefited over the best interests of the wildfire victims, and Trust funds that were meant to go to wildfire victims have first gone to these groups and continue to go to these groups first, as well as to the managers and consultants of the PG&E Fire Victim Trust. (2)

This petition also addresses the actions that embellished and continue to embellish these legal, financial, and government entities and politicians who benefited and continue to benefit from wildfire victims’ disaster recovery. And, to date 35% of the 68,870 of the wildfire victims still wait for what bankruptcy Judge Dennis Montali proclaimed would be “quick and fair” settlement payments to all victims.(1,2)  Instead, the facts show that payments to victims have been pro rata at 45% of victims' losses, and again, this is 45% of a 60% average settlement offer (and 33%-plus of this goes to the victims’ attorneys’ fees and costs). And these payments have been neither “quickly nor fairly” paid to victims contrary to Judge Montali’s promise to victims. (8)

In fact, the funds earmarked for wildfire disaster victims have first, quickly and more than fairly gone to the unwieldy and ineffectively operated PG&E Fire Victim Trust bureaucracy, (with excessive fees paid to the Trust managers and consultants); to the insurance companies that received full reimbursement of their homeowner insurance subrogation claim payments, and; complete payouts and large stock bonuses to the Hedge Funds for accepting the bad (half-stock) deal they all agreed to offer to the wildfire victims. Victims, however, have been waiting 4, 5 and 6 years for their compensation which, when it comes to the lucky few, is pennies on the dollar. (4,5,6,7,8)

A Wildfire Victim Case Study

This petition originates from one family’s continued trials and tribulations with “The Biggest Victim Economy Ever Created: The 2020 PG&E Fire Victim Trust”, which was setup to fail the victims by bankruptcy Judge Dennis Montali and continues to treat them unfairly, despite Montali’s promise to pay the victims “quickly and fairly”.

The Beginning – Pacific Gas & Electric - Wildfires are Us!

Large and damaging wildfires were started by PGE’s negligence that began with the 2015 Lake County wildfire and continued with the 2017, 2018, 2019, 2020, and 2021 wildfires that scorched Northern California, destroying the homes and property of 68,870 families and businesses. This petition focuses on the victims of the Northern California wildfires between 2015 and 2018, including all wildfires in this period for which PGE was held legally responsible for victims’ losses in their 2019 U.S. Bankruptcy filing and proceedings and codified in their exit from their bankruptcy process, resulting in the creation of the “PGE Fire Victim Trust”.

The Un-Trustworthy PG&E “Fire Victim Trust” (PVT)

Bankruptcy Judge Robert Montali, a 23-year veteran of the U.S. Bankruptcy system (now 81 years of age) was chosen by the system to preside over the largest bankruptcy in U.S. legal history which concluded in July 2020. He approved the deal crafted largely favoring the interests of PG&E, Wall Street Hedge Fund investors that owned approximately 10% of PG&E’s stock, and a small group of victims’ law firms that represented large groups of wildfire victims. Gov. Newsom approved Montali’s bankruptcy plan for PGE.

The victims’ approval of the bankruptcy deal ($13.5 half in cash and half in PG&E stock) which by itself was unprecedented, that is, that victims would have to take a stock from its defendant for half of their settlement. (9) The deal was forged by this cast of players, i.e., Judge Montali, the Hedge Fund managers, the PG&E and Victims’ attorneys, and other large creditors and received the stamp-of-approval by Gov. Newsom. The victims had minimal input into this process. The PGE Trust Oversight Committee is comprised of nine attorneys. No victims are on the committee. (15)

A vote for “Yes” or “No” was essentially all the victims received – no substantial input. And all of the victim attorneys (with just a couple of exceptions) said at the time that this was the best deal the victims could probably get, and if we rejected it, PG&E could file for Chapter 7 and we could lose almost everything and it could take years for that to happen. Here we are devastated by our losses, wondering how we could ever recover, and our attorneys are saying this settlement offer is our only hope. So, 85% of the wildfire victims voted to accept the “only” deal offered.

And, again, our deal was crafted by these players such that victims would receive a $13.5 billion dollar settlement, but half of that amount (i.e., $6.75 billion) was to be paid to the victims in PG&E stock, only to find out that when PG&E exited bankruptcy the victims’ stock was already over $1.5 billion underwater. So, out of the gate our settlement went from $13.5 billion to $12 billion, and today the stock is about $1.1 billion underwater and victims’ have experienced a $212 million dollar loss in their Trust funds because Trustee Trotter chose to sell 100 million of victims' shares at $12.04 per share. (12) The victims' owned about 24% of the stock in PGE. After this sale, we now own about 21%. With such financial leverage, certainly Trustee Trotter could (and still could) have found a way to leverage our position by borrowing against our stock and preserving our position rather than squandering it away. Instead he chose to take a huge loss for us. What's wrong with this picture? 

Judge Montali’s Promise to Victims!

At the closing of the PG&E bankruptcy trial in July 2020, Judge Dennis Montali (the judge and only judge presiding over the PG&E bankruptcy proceeding) proclaimed and I paraphrase and quote him: This PG&E $13.5 billion dollar wildfire victim settlement will allow for victims of the wildfires to be compensated for their losses “quickly and fairly.” That finally sounded good to the 68,870 families who lost homes and personal property in 2015, 2017, and 2018 Northern California wildfires for which PG&E was accused of and admitted to in court their negligence for our losses and was now officially named responsible for our losses.

“Quick and fair” compensation rang through the courtroom and, at last, us victims felt financial retribution was finally on the way after waiting now 5, 3 and 2 years after our respective fires. At the time, before the vote of approval by the victims, several the victims’ lawyers concurred that it was a good deal and victims would be paid right away.(16) Nonetheless, over 35% of wildfire victims are still waiting years later for their settlements and the vast majority have asked for reconsiderations, challenging the Trust’s settlements as “unfair” and their claims as woefully under paid. (17)

Again, the majority of wildfire victims had been waiting 3 to 6 years (in our case 3 years) and his words “fair settlement in a reasonable amount of time” washed over us like a long-awaited shower after being stranded in the wildfire jungle for years. Turns out we’re still getting soaked while the lawyers, insurance companies, cities and counties, Hedge Funds and Trust fund managers were and continue to be paid in full.

Many, if not all the victims’ lawyers, surely wanted the clock to start as soon as possible. Their millions upon millions of dollars from their 33% contingency fees from hundreds/thousands of wildfire victim clients they represent (plus costs) were in the balance and the sooner PG&E came out of bankruptcy, the sooner they’d start to get paid as the PG&E Fire Victim Trust excruciatingly slowly started to make pro rata (that is, partial) payments to some of their clients. By our calculations, our attorneys for our PG&E Fire Victim Trust settlement were fairly compensated for the time they spent on our claims processing with the Trust. And our family of five did much of the heavy lifting gathering, researching lost items costs, and spreadsheeting in detail our real and personal property claims which in most cases was to no avail, as the Trust ended up not paying over 40% of our bona fide claims. It certainly appears that the lawyers, either working for the Trust or victims, were and are being paid well and in full for their services.

”PGE Fire Victim Trust” (Well-Paid) Bureaucracy

At the top of the fee food-chain heap is, of course, the Fire Victim Trust managers (i.e., the Trustee (John Trotter), the Manager (Cindy Yanni), and the Special Master (Ellen Sickle James) who are reported to earn make $125,000, $200,000 and $176,000 per month, respectively. That’s between $800 and $1,250 per hour. What lawyers earn that kind of money – perhaps a handful of patent attorneys? And their fees are paid directly from PGE Fire Victim Trust – funds designated primarily for the victims’ loss compensation from the PG&E settlement. Sound rich to you? Well, when the Trust’s oversight committee is a group of nine of the victims’ attorneys, who, as mentioned, promoted the PGE bankruptcy settlement and were eager to get their fees paid, why not turn a blind eye toward the excessive fees and salaries for the Trustee and his managers and consultants. (4)

And the legions of lawyers and consultants from the Greenberg law firm in North Carolina (who Trustee Trotter hired) are surely making handsome consulting fees, though the Trustee keeps these fees close to his chest – wonder why? And, Trustee Trotter, 86 when he was appointed by Judge Montali is now 88 draws a salary of $125,000 per month as the Trustee. It is surprising to me that the enormous task managing a $13.5 billion trust would go to an octogenarian in the twilight years of his life, let alone his professional career, addressing the adjudication of settlements for 68,870 victim families and businesses. So far, he has lost over $212 million dollars selling the victims stock and pays everyone on his Trust team exorbitant salaries and fees. When recently challenged by a letter from the Butte County Board of Supervisor's who presented legitimate questions about the pace and process of the Trust's claims processing, the thin-skinned Trustee refused to respond to the Supervisors and called them "you people" "politicians" with "uninformed, slanderous conclusions". They were just asking legitimate questions on behalf of their constituents. In retrospect, perhaps Judge Montali might have selected a Trustee in the prime of his career and less stubborn about getting his way or the highway and less sensitive to constructive public criticism. (12,19)

To the supervisors' points, it is clear that the excruciatingly slow processing of claims that we victims have suffered through for years demonstrates that the deal that Judge Montali helped craft and approve, and his long-term colleague and fellow octogenarian, Trustee Trotter, is overseeing, and which Gov. Newsom approved, is and continues to be a tragic outcome for the PG&E wildfire victims. As noted, Judge Montali is also an octogenarian at 81 years of age and was recently appointed again for another 14-year term as a U.S. bankruptcy judge in April of 2021, meaning he’ll be 95 when this term of service expires. It appears there are no age or competency requirements for retirement in the U.S. Bankruptcy Court system. 

PGE is Fine and Raising Electric Rates on Customers Again

But all is fine with PGE now and their business and profits are growing again (though their stock is still trading at about $12 per share – still under water for the victims’ stock). And Gov. Newsom arbitrarily approved their safety rating while they continue to start fires and the California Public Utilities Commission (CPUC), also appointed by Gov. Newson, just approved two new rate hikes to PG&E customers (including all PG&E victim customers) totaling a 23% increase to rate payers effective March 2022.  

And the Hedge Fund investors have been paid in full over nine months ago with huge stock incentives in PG&E stock bonuses for accepting the Fire Victim Trust’s deal, and as soon as they received the PG&E stock at full market price and their stock bonuses for accepting the victim’s deal, they sold all their PG&E stock with hundreds of millions dollars in profits, paid from the $55 billion PGE bankruptcy settlement. (1)

The insurance companies and city and county governments also were paid in full over nine months ago for claims they paid to victims (subrogation reimbursements $11 billion and government claims of $2 billion, respectively), and the victims’ lawyers started reaping their full fees and costs as victims’ settlement determinations started trickling in nine months ago. As to the victims’ payouts, to date (May 27, 2022), about 65% of the victims have received pennies on the dollars for their losses with 35% of the victims still waiting for a first pro rata payment, with most victims challenging their settlement determinations as “unfair” and underpaid as determined by the hundreds of Trust managers and staff, who incidentally are paid much more than “fairly” on time each and every month.(18)

Governor Newsom. Fix the Biggest Victim Economy created and approved by you and Judge Montali.

Sources:

(1)  Jamali, L. J. (2021, October 11). Hedge Funds Cash Out Billions in PG&E Stock. Fire Survivors Suffer and Wait. KQED. Retrieved June 5, 2022, from https://www.kqed.org/news/11891626/hedge-funds-cash-out-billions-in-pge-stock-fire-survivors-suffer-and-wait

(2) Trust Distributed $1.69B to PG&E California Fire Victims in 2021. (2022, May 6). Insurance Journal. Retrieved June 5, 2022, from https://www.insurancejournal.com/news/west/2022/05/06/666497.htm

(3) Allyn, J. A. (2022, May 25). After Getting Burned By Wall Street, California Fire Victims Fight To Reclaim Their Power. Https://Inthesetimes.Com/Article/California-Fire-Victims-Awaiting-Payment-from-Utility-Company Retrieved June 5, 2022, from https://inthesetimes.com/article/california-fire-victims-awaiting-payment-from-utility-company

(4) Jamali, L. J. (2021a, May 17). A Cascade of Outrage Follows Investigation Into PG&E Fire Victim Trust Expenses. Capradio. Retrieved June 5, 2022, from https://www.capradio.org/articles/2021/05/17/a-cascade-of-outrage-follows-investigation-into-pge-fire-victim-trust-expenses/

(5) California Legislative Information. (2019, July 12). Assembly Bill No. 1054 CHAPTER 79. Https://Leginfo.Legislature.ca.Gov/Faces/billTextClient.Xhtml?bill_id=201920200AB1054 Retrieved June 5, 2022, from https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB1054

(6) Woodrow, M. W. (2022, February 23). PGE’s trust to pay wildfire victims is millions short; bill proposed would bail them out, but how? ABC7News. Retrieved June 5, 2022, from https://abc7news.com/pg-e-fire-victims-victim-trust-fund-ca-wildfire-not-paid-taxpayer/11593929/

(7) Jamali, L. J. (2020, December 19). PG&E Bankruptcy Yields $700 Million Fee Bonanza. KQED. Retrieved June 5, 2022, from https://www.kqed.org/news/11851347/pge-bankruptcy-yields-700-million-legal-fee-bonanza-for-wall-street-firms

(8) PBS. (2021, June 25). Most fire victims are still waiting to be paid by PG&E’s Fire Victim Fund, investigation finds. Https://Www.Pbs.Org/Newshour/Show/Most-Fire-Victims-Are-Still-Waiting-to-Be-Paid-by-Pges-Fire-Victim-Fund-Investigation-Finds Retrieved June 5, 2022, from https://www.pbs.org/newshour/show/most-fire-victims-are-still-waiting-to-be-paid-by-pges-fire-victim-fund-investigation-finds

(9) Trust Distributed $1.69B to PG&E California Fire Victims in 2021. (2022, May 6). Insurance Journal. Retrieved June 5, 2022, from https://www.insurancejournal.com/news/west/2022/05/06/666497.htm

(10) ALLYN, J. A. (2022, May 25). After Getting Burned By Wall Street, California Fire Victims Fight To Reclaim Their Power. Https://Inthesetimes.Com/Article/California-Fire-Victims-Awaiting-Payment-from-Utility-Company Retrieved June 5, 2022, from https://inthesetimes.com/article/california-fire-victims-awaiting-payment-from-utility-company

(11) Morris, J. M. (2021, August 23). ‘They need help now:’ In Gold Country, PG&E fire victims have waited 6 years for payment. San Francisco Chronicle. Retrieved June 5, 2022, from https://www.sfchronicle.com/bayarea/article/They-need-help-now-In-Gold-Country-PG-E-16407001.php

(12) Andrew Graham. Santa Rosa Press Democrat. https://santarosapressdemocrat-ca.newsmemory.com/?token=CRID_john.stalcup@sbcglobal.net_26654&message_id=22606q2IXHqZd6krXsywJL3uC1IEx3QU&utm_source=emailMarketing&utm_medium=email&utm_campaign=email+stats

(13) https://www.firevictimtrust.com/

(14) https://www.counties.org/sites/main/files/file-attachments/inverse_condemnation_fact_sheet_league__csac.pdf

(15) https://www.firevictimtrust.com/Docs/FAQs.pdf

(16) https://www.sfchronicle.com/business/article/PG-E-victims-lawyer-scrutinized-over-Wall-15241511.php#:~:text=San%20Antonio%20lawyer%20Mikal%20Watts,that%20became%20public%20days%20earlier

(17) https://krcrtv.com/north-coast-news/eureka-local-news/judge-refuses-to-approve-fire-victims-letter-attacking-pge-04-09-2020

(18) https://www.reinsurancene.ws/pge-pays-11bn-settlement-to-re-insurers-joins-wildfire-fund/

(19) https://www.firevictimtrust.com/Docs/Trustee_Response_to_5-28-22_Editorial.pdf