Cascade of Outrage Follows Investigation Into PG&E Fire Victim Trust Expenses

Fire victims and public officials are calling for increased oversight of the Fire Victim Trust set up to distribute billions of dollars in compensation to families displaced by fires sparked by Pacific Gas and Electric Co. equipment. That’s following a KQED investigation, which found the Trust spent $51 million on overhead last year, while the vast majority of fire victims haven’t received a dime.

On Wednesday, Kirk Trostle – a retired police chief who lost his home when the PG&E-sparked Camp Fire destroyed Paradise in 2018 – petitioned a federal judge to intervene.

“The administrative expenses are out of control,” Trostle wrote to Bankruptcy Judge Dennis Montali, who has been overseeing PG&E’s bankruptcy proceedings, which led to the promise of $13.5 billion to be paid to 67,000 fire victims.

“Families are still living in cars, travel trailers, and FEMA trailers,” Trostle wrote Montali.

The multi-billion dollar settlement was announced in December 2019. At the end of the following year, KQED found, the Trust had paid out just $7 million.

“Stating fire victims are languishing is an understatement,” Trostle added. “I request you speed up the process to a sprint-like manner and direct the [Fire Victim Trust] to provide transparency and accountability in the administration of the fire victims money.”

Judge Montali did not respond to KQED’s request for an interview. His assistant said his consistent practice is to decline such requests in an active pending case. The administrator of the Trust, John Trotter, whom KQED found billed $1,500 an hour while victims waited, has declined repeated requests to comment. The top claims administrator, Cathy Yanni, makes $1,250 an hour, records show, and the Trust has spent millions more on a host of legal and financial advisers.

Trostle’s petition comes amid a cascade of outrage following KQED’s investigation — from lawmakers, legal experts and fire survivors themselves.

Kirk Trostle, a retired police chief who lost his home when the PG&E-sparked Camp Fire destroyed Paradise in 2018, with his wife, Patty. (Courtesy Kirk Trostle)

U.S. Rep. Mike Thompson, a Democrat who represents Napa County and parts of Sonoma County, where thousands of fire survivors are also waiting for benefits, said the disparity uncovered by KQED “has a real and negative impact on people in our district who survived the fires and are still working to rebuild their lives.”

“Fire survivors have already been through so much and all parties involved must do everything they can to make survivors whole as fast as possible,” he said. A spokesperson for Sen. Dianne Feinstein said the senator is tracking the issue closely.

Rep. Doug LaMalfa, a Republican who represents Paradise, also expressed outrage.

“No victims’ compensation fund should see $1,500-an-hour lawyers, $1,250-an-hour administrators, and government taxes delaying disbursements or taking the lion’s share,” LaMalfa said.

“The victims of the fire are our priority. The settlement has been made and agreed to. Two years and $50 million is way too much time and overhead. This trustee-led process needs the trust put back in as it seems to have lost the focus on the victims who quickly need these funds.”

Meantime, in the state Legislature, Assemblyman James Gallagher, a Republican who represents Paradise, went on Facebook, posting that KQED’s story “raises a lot of questions and concerns that need answers, both from the trustee and the bankruptcy court.”

“I think it’s really the bankruptcy court that needs to take action,” Gallagher told KQED. He also said it was time for Gov. Gavin Newsom to get involved.

“Seeing victims are not getting compensated in a timely fashion — that should rise to the top level,” Gallagher said. “[Newsom] is certainly commenting about a lot of things here lately. I would hope that this would be a top priority as well.”

Newsom’s office declined to comment. “We do not have any information to provide at this time,” said Amelia Matier, a spokesperson for Newsom.

The structure of the Trust has been controversial from the outset.

“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,” Judge Montali said at a hearing last April.

But attorneys representing fire victims pleaded with Montali to approve Trotter’s appointment. Minutes later, Montali relented.

A major complicating factor in distributing claims is the fact that so much of the compensation to victims came in the form of PG&E stock, the value of which fluctuates daily. Once touted as worth $13.5 billion, today the amount available to pay victims is substantially less, thanks to the company’s flagging fortunes.

The fund is currently worth around $11 billion, with a final infusion of $700 million in cash from PG&E expected after the coming/current fire season — in January.

“No one is slacking,” said Amy Bach, a consumer advocate on the Trust Oversight Committee. Other than Bach, the committee is exclusively comprised of mass tort attorneys despite calls for fire survivors to have a seat as well.

Last week, a spokesperson for the Fire Victim Trust said the Trust has increased its payments, and has so far distributed a total of $195.2 million to people who lost loved ones, homes and businesses to fires caused by PG&E. The spokesperson also said the Trust had made preliminary payments averaging about $13,000 to 9,532 of the 67,170 eligible families.

Still, that comes to less than 2% of the $13.5 billion promised.

“The problem is there are just a lot of claims and there’s a lot going down,” Bach said. “It’s hard for me to think there couldn’t have been some things to streamline but with all the constraints that are on the team issuing payments and determinations, they seem to be extremely hamstrung by working in orders and legal agreements that were made a long time ago.”

Trostle had a front-row seat to discussions that led to a controversial settlement deal struck between PG&E and lawyers for fire victims in December 2019. At the time, he served on an 11-person committee representing fire survivors in PG&E’s most recent bankruptcy. But as it came time for fire victims to vote on the settlement last year, Trostle took the extraordinary step of resigning from the committee.

“PG&E’s reorganization plan is deeply flawed and very risky for all fire victims,” he wrote in his resignation letter.

He explained he had been advised by lawyers for the committee that speaking out would conflict with his duty to his fellow fire survivors. So he quit. He has since relocated to Tennessee.

Copyright 2021 KQED