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Regional Interests

A Year After PG&E Left Bankruptcy, Spending by Fire Victim Trust Remains a Mystery

It’s been a year since Pacific Gas and Electric Company left Chapter 11 bankruptcy protection. That exit deal included a promised $13.5 billion settlement to pay victims of wildfires that were caused by the company’s equipment.

The deal represented the culmination of a promise to fire survivors, PG&E interim CEO Bill Smith declared on July 1, 2020. “Today’s announcement is significant for PG&E and for the many wildfire victims who are now one step closer to getting paid,” he said. “Compensating these victims fairly and quickly has been our primary goal throughout these proceedings, and I am glad to say that today we funded the Fire Victim Trust for their benefit.”

But a year later, public records show that a special Fire Victim Trust created to distribute the settlement has been slow to pay out victims — and quick to wrack up big bills for lawyers and consultants.

In May, KQED and NPR’s California Newsroom published an investigation into spending by the Fire Victim Trust charged with compensating survivors. We found that in its first year, the trust had racked up $51 million in overhead, and distributed only $7 million to fire victims. Ninety percent of outgoing funds paid lawyers and consultants in 2020 while the vast majority of fire victims waited for help.

The pace of payments has picked up this year, but as of mid-June, fewer than 2% of fire victims — 1,327 out of approximately 70,000 total — have had their claims fully processed. For now, they are getting 30% of what they were due while the Fire Victim Trust collects its fees in full. Approximately $373 million in compensation has been delivered.

But there is still much we don’t know.

To date, the Trust has refused to share its budget, a quarterly breakdown of expenses or a detailed reporting of firms and individuals the Trust has paid.

The Trust also refuses to make public other details we’ve requested, like the terms of its retention deal with attorneys suing former PG&E directors and officers on the Trust’s behalf. The attorney leading that lawsuit, Frank Pitre, happens to sit on the Fire Victim Trust’s court-appointed Trust Oversight Committee, as do representatives from three other law firms involved. KQED has been asking to review the Trust’s retention agreement with these attorneys since February.

Leading experts told us the amount of secrecy surrounding the Trust was unusual. “One of the hallmarks of the bankruptcy process is transparency,” Scott McNutt, a former California State Bar Board of Governors member and veteran bankruptcy attorney, told KQED in May. “One of the hallmarks of trust administration is transparency. That’s why they’re called trusts.”

After we published our May investigation, a bipartisan group of state lawmakers asked California Attorney General Rob Bonta to probe the spending and administration of the PG&E Fire Victim Trust.

“This is outrageous,” the lawmakers wrote to Bonta, “especially in light of the fact that thousands of fire victims are struggling to rebuild their lives.”

Bonta’s office said it is unable to comment on, even to confirm or deny, a potential or ongoing investigation.

The Trust Says Our Reporting Is ‘Inaccurate and Uninformed.’ They Are Wrong.

After the lawmakers demanded an investigation, both the Fire Victim Trust and the Trust Oversight Committee, made up primarily of mass tort attorneys, wrote to the attorney general and disputed our reporting.

The Fire Victim Trust is led by retired California Appeals Court Justice John Trotter, who KQED revealed billed $1,500 an hour. In a video released in response to our story, he said he had reduced his compensation to a “very adequate” salary of $150,000 a month.

In his letter to the attorney general, Trotter said he was “appalled by the carelessness with which it [the legislators’ letter] was written.” Without naming KQED or NPR’s California Newsroom, Trotter continued: “It appears to be influenced by a recent, inaccurate and uninformed news report with no attempt to understand the Trust’s operation or function.”

In its letter, the Trust Oversight Committee said the figures reported by KQED were “out-of-date or .. out of context.”

Both statements couldn’t be further from the truth, as the lengthy trail of emails between KQED and the Fire Victim Trust makes clear. We have made extensive efforts to understand the Trust’s operations and function, and have consistently brought our findings to them — through their spokespeople — so that they have the opportunity to comment and explain themselves.

Despite their public attacks on our journalism, we have yet to see any legitimate examples of inaccuracies in our reporting on the Trust’s finances.

As spelled out below, we have done our best to provide this accounting with the limited information in the public record. We welcome any and all additional transparency by the Trust into its spending and administration.

Trustee’s Claim: No attempt was made to understand the Trust’s operation or function.

KQED’S Response: We have gone to great lengths to familiarize ourselves with the Trust’s inner workings. We have combed through past bankruptcy court filings, hearing transcripts and correspondence from the Trust to fire victims.

We’ve had dozens of contacts via email and by phone with the Trust’s PR firm asking detailed questions about our findings. We’ve also asked to interview the trustee, John Trotter, and the Trust’s claims administrator numerous times since our last interview with both in November.

We also contacted all seven of the firms we identified as having been paid by the Trust. Just one responded to our inquiry. None answered questions about how much money they had received.

Again, we would welcome greater transparency into how the Trust does its work and spends its money.

Trust Oversight Committee’s Claim: Stating that the Trust spent almost 90% of the funds on overhead during the first year is “untrue and misleading as stated. Ninety percent of the funds in the Trust would be over $10 billion.”

KQED’s Response: KQED has been clear from the first story published on the Trust’s finances that overhead comprised almost 90% of funds spent in its first year. We have never suggested that the Trust has spent $10 billion — or anything near that amount — on overhead.

Trust Oversight Committee’s Claim: The statement that the Fire Victim Trust accumulated over $51 million in overhead costs but allocated just $7 million to fire survivors is “based on 2020 year end data, which is now five months old, even though the Trust has released more recent data regarding payments to survivors, which demonstrated a much different picture.”

KQED’s Response: That 2020 year-end data on overhead costs is the only information the Trust chose to share in its annual report, which was published four months after the end of the reporting period it chose. Since then, the Trust has continued to incur overhead expenses without reporting updated figures to the public. The Trust has regularly released updated information on payments to fire survivors, however, and KQED has used the most up-to-date figures in all of our reports. We see that the Fire Victim Trust has begun posting this information publicly to its website since we published our investigation.

In its recent letter responding to state lawmakers, the Trust Oversight Committee decided to come forward with the information we sought ahead of our story. Operating expenses through April of this year — pending an audit of April expenses — now top $84.5 million.

Survivors of the 2018 Camp Fire gather in Paradise, California, on May 22, 2021 to protest runaway overhead expenses by the PG&E Fire Victim Trust. (Lily Jamali/KQED)

Trust Oversight Committee’s Claim: “Many people worked between January 1, 2020, and July 1, 2020 to get the Trust off the ground but until July 1 it had no funds, save an advance of $15M made by PG&E in April 2020 to cover expenses incurred from January 1 forward.”

KQED’s Response: We are clear in our story — and in fact, were first to report — about this “advance,” which amounts to millions of dollars paid toward startup costs in the first half of last year, which the Trust left out of its 2020 Annual Report. Most of PG&E’s advance was ultimately credited back to the company, with fire victims footing the rest of the bill. It remains unclear why these costs were not included in the Fire Victim Trust’s annual report, despite KQED’s efforts to get answers ahead of publication of our first story. By our calculation, the Trust spent at least $12.7 million during the first half of last year. The Trust refuses to engage with us to confirm this calculation. PG&E has confirmed it for us.

Trust Oversight Committee’s Claim: The Trust needed to build a robust staff to develop a claims resolution process and root out fraud.

KQED’s Response: This and other explanations for the initially slow pace of payments have been clearly laid out in all of our stories. Despite the Fire Victim Trust’s decision to limit transparency, we have made every effort to be fair and include voices explaining why the process is taking time — even when the Trust would not provide this voice itself.

We note that an important reason for delay stems from the fact that a significant portion of compensation for fire victims came in the form of stock in PG&E itself. This rare outcome was actively supported by most members of the Trust Oversight Committee last year, as we reported then. More importantly, fire victims themselves voiced these concerns as we reported here and here. Today, the tiny fraction of fire victims who have had their claims processed and paid are getting just 30% of their claim for now. In the words of the trustee himself: “We don’t know how much money we have because a substantial portion of the assets that are going to be used to pay you are in the form of common stock of Pacific Gas and Electric.”

Every dollar spent on overhead is a dollar not distributed to fire victims who need it. No one expects the Trust to execute the complicated task of fairly distributing billions of dollars without incurring costs. But the Fire Victim Trust has not been transparent about those costs. Fire survivors want and deserve timely, honest and clear explanations of where their settlement money is going, if not to them.

Copyright 2021 KQED