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Regional Interests

Survivors Stuck in Limbo as PG&E Fire Victim Trust Pays Out $50 Million in Fees

Retired U.S. Foreign Service Officer Bill Cook lost his home in Paradise during the Camp Fire, the 2018 blaze sparked by Pacific Gas & Electric Co. equipment that ranks as the deadliest and most destructive fire in California history.

More than two years later, Cook, 70, and his family are barely scraping by. Like Cook, the vast majority of the 67,000 PG&E fire victims included in a December 2019 settlement with the company have yet to see a dime. That’s as lawyers and administrators have been paid millions, with the money coming directly from funds set aside to help survivors like Cook.

A KQED investigation found that while they waited, a special Fire Victim Trust in charge of compensating survivors racked up $51 million in overhead costs last year. During that same period, the Trust disbursed just $7 million to fire victims – less than 0.1% of the $13.5 billion promised – according to an analysis of federal bankruptcy court filings, court transcripts and correspondence between staff of the Fire Victim Trust and the victims themselves.

During its first year of operation, the Trust spent nearly 90% of its funds on overhead, while fire victims waited for help, KQED found.

Today, Cook lives 100 miles away from Paradise in Davis, where he shares a three-bedroom rental with his 68-year-old wife, Leslie, their four adult children and three grandchildren. He’s eaten into his savings to pay rent, which costs triple what he paid for his mortgage in Paradise.

“You’re stuck,” Cook said. “You can’t go anywhere. You can’t get anything. You can’t move forward.”

Bill Cook sits at a table in the three-bedroom rental home in Davis where he now lives with his wife, Leslie, their four adult children including Evan (left) and their three grandchildren. The family used paper dividers in the den to create another bedroom. (Courtesy Bill Cook)

Representatives for the Fire Victim Trust declined to be interviewed. An annual report filed in federal bankruptcy court last week by its trustee, John Trotter, reported $38.7 million spent on financial professionals, claims administrators, consultants and other operating expenses between July 1 and the end of 2020. Documents reviewed by KQED show the Trust took in an additional $12.7 million in funding provided by PG&E last Spring – cash spent to set up the claims process.

Trotter, a retired California Appeals Court judge, charges $1,500 an hour, according to another court filing, while claims administrator Cathy Yanni bills $1,250 an hour. Both work at Irvine-based JAMS, previously known as Judicial Arbitration and Mediation Services, Inc, one of the nation’s largest private dispute resolution provider firms.

“They’re paying themselves very well. They have these enormous legal costs and there’s not much to show for it,” Cook said. “It’s like everything is a black hole and nothing moves, and there’s nothing you can do about it.”

In November, Yanni told KQED she expected it would take two years to pay all victims with claims. Some fire survivors fear it will take much longer. The longer it takes, the higher the cost of overhead will be. Trotter wrote in April, in a letter addressed to fire victims, that past claims processes he’s overseen ended up costing between 2% and 4% of overall funds, on average.

“My goal is to keep the cost of administration below or as close to 1% as possible,” Trotter wrote of the Fire Victim Trust.

PG&E announced its plans to enter Chapter 11 bankruptcy protection in January 2019, 10 weeks after its equipment sparked the Camp Fire, which killed at least 85 people and destroyed almost 19,000 homes and businesses in and around Paradise. The settlement with tens of thousands of fire victims resulted from those proceedings.

There were concerns about overhead expenses as early as last Spring, when U.S. bankruptcy judge Dennis Montali mulled whether to approve startup costs for the Fire Victim Trust.

“Tell me why I shouldn’t think this is just a risk to have a very large amount of money be paid out without any kind of control over what happens,” Montali said at a hearing last April. Attorneys representing fire victims pleaded with Montali to approve Trotter’s appointment. Minutes later, Montali relented.

Montali was encouraged to greenlight the overhead by some of the fire victims’ own attorneys.

Gerald Singleton, an attorney who represents 6,500 fire victims and sits on the Fire Victim Trust Oversight Committee’s budget subcommittee, said he’s not concerned about the Trust’s overhead. “When you’re talking about what they have to do, I certainly think the money is reasonable,” he said.

“The amounts they make are phenomenal. They’re just incredible amounts,” Singleton said. “But that’s what people at their level make.”

Singleton agreed that the payments to victims have trickled out slowly, but he said the pace is picking up.

But Scott McNutt, a former California State Bar governor and veteran bankruptcy attorney told KQED the amounts are excessive for the meager results obtained so far and that the Trust “has been completely non-transparent about what it’s doing for this money.”

“One of the hallmarks of the bankruptcy process is transparency,” he said. “One of the hallmarks of trust administration is transparency. That’s why they’re called trusts.”

The process has been complicated by the terms of PG&E’s settlement with fire victims, which was funded half with cash and half with PG&E stock. The complicated arrangement, which has few precedents, made the fire victims major shareholders in the utility and made administering the Trust far more complicated.

On Tuesday, a spokesperson for the Fire Victims Trust told KQED the Trust had increased its payments to families this year and had now put $195.2 million into the hands of those who lost loved ones, homes and businesses lost to fires caused by PG&E.

That figure still comes to less than 2% of the amount promised to families when they voted on the settlement last year. The spokesman also said the Trust had begun to make partial payments to a small percentage of families. Those partial payments, which average approximately $13,000, have gone to 9,532 of the 67,170 eligible families, a spokesperson for the Trust said.

Only 334 families have had their claims fully processed. Those families are getting 30% of what they’re owed, the Trust said, while the Trust collects its own fees in full.

The exterior of Bill Cook’s family home in Paradise before it was destroyed by the Camp Fire in 2018. Two and a half years later, Cook and his family are barely scraping by, and haven’t seen a dime from the Fire Victim Trust. (Courtesy Bill Cook)

Who’s Getting Paid

The Trust’s annual report is short on details about who got paid, and how much. It reports operating expenses solely by category – $16.3 million “claims processor fees and expenses,” for example, and $6.8 million for “insurance, data and other expenses.”

The Trust declined to provide KQED with a list of companies it is working with and what it has paid them. But KQED’s review of documents identified more than half a dozen law firms and financial institutions that have profited off the Fire Victim Trust.

For example, the Trust told fire victims in an April letter that it had retained Richmond, Virginia-based BrownGreer for claims processing. John Trotter, the trustee, wrote that the firm, which specializes in resolving complex legal settlements, had 300 staff members “committed to this project, including attorneys, project managers, analysts, claim reviewers, and software developers,” and was adding staff.

The Trust also tallied $6.2 million in legal fees during the period. Again, the Trust refused to provide an accounting of this work. Last year, Trotter retained the firm Brown Rudnick to represent him in bankruptcy court, and Morgan Lewis to represent him at the CPUC.

Financial advisers have been paid $3 million. The Trust has retained the services of Morgan Stanley and Houlihan Lokey to monetize its vast holdings of PG&E stock, according to a January letter Trotter wrote to fire victims.

The Trust also listed $303,706 in unspecified consulting fees. The Trust’s public relations firm, Zumado, would not elaborate on what those fees entailed. Zumado also refused to comment on how much it has been paid by the Fire Victim Trust.

The accounting firm BDO prepared the Trust’s annual report. Again, no one was willing to share any records about how much they were paid for that work.

KQED contacted all the firms, seeking confirmation that they received money from the Trust, and asking how much. BDO was the only one to respond but declined to answer questions.

Falling Short by Design?

As PG&E approached the end of its bankruptcy last year, Singleton and several other mass tort attorneys were busy persuading their fire victim clients to vote in favor of the complicated part-stock settlement. Some fire survivors wrote to Judge Montali expressing outrage at the idea of accepting stock in the company that harmed them.

Because of the stock component, the value of the Trust fluctuates every day. So far, the Fire Victim Trust’s financial advisers haven’t liquidated any shares as the stock price has languished. Today, the Trust holds almost a quarter of all PG&E shares.

Camp Fire survivor Mary Wallace was among a group of fire survivors who fought against the stock component last year. At the time, she argued in court it would slow down the process of compensating victims. To her, those concerns have come home to roost.

“We’re still living in squalor,” said Wallace, who lives in a shed with no insulation on her property in Paradise. “We still don’t have anything. It’s beyond belief. I am thoroughly disappointed.”

Wallace said she grew so disillusioned with the process, she abandoned her claim altogether.

Copyright 2021 KQED