PG&E's Bankruptcy Trial Opens With Attacks on Wildfire Settlement Voting Process

An effort to block PG&E's path out of bankruptcy kicked off Wednesday's trial on the plan in bankruptcy court as critics of the utility questioned whether the overwhelming vote in favor of the plan by wildfire victims was tainted by conflicts of interest and shoddy counting.

PG&E's plan won support last week in a landslide, with victims overwhelmingly backing PG&E's $58 billion proposal to emerge from bankruptcy after a year-and-half.

But a challenge mounted by two critics of the plan launched the first day of a trial before U.S. Bankruptcy Judge Dennis Montali, who must approve the plan for PG&E to exit bankruptcy.

Will Abrams, a survivor of the deadly 2017 Tubbs Fire, and Francis Scarpulla, a lawyer representing a Northern California hospital destroyed in a 2018 fire, launched their attacks while questioning an executive for the firm that oversaw the voting.

They primarily focused on how the firm, Prime Clerk, mailed ballots to 87,000 claimants for losses suffered in wildfires caused by PG&E and whether the utility improperly influenced the process.

Nearly 45,000 ballots submitted by wildfire victims supported PG&E's plan while roughly 6,100 voted to reject it, according to Christina Pullo, a Prime Clerk vice president who testified during the trial conducted online because of the coronavirus pandemic.

Another 8,100 ballots from victims did not express a preference and nearly 2,000 other ballots weren't counted because they were received after a May 15 deadline or were disqualified for other reasons, Pullo testified.

Montali has previously said his decision on whether to approve or reject PG&E's plan will be heavily swayed by the wildfire victims whose lives were devastated by the utility's neglect.

California wildfires that erupted in 2017 and 2018 killed more than 100 people, resulting in PG&E agreeing to plead guilty to 84 felony counts of involuntary manslaughter. More than 27,000 homes and other buildings were also destroyed and the town of Paradise was wiped out.

PG&E's plan includes a $13.5 billion trust set up to pay the victims, though critics call that amount illusory since it includes $6.75 billion in PG&E stock that may be worth substantially less.

Abrams pointed out that Prime Clerk is owned by a credit rating firm that has previously owned large amounts of PG&E shares. He also noted that its CEO previously worked at one of the law firms representing PG&E. He said Wednesday's hearing didn't provide much in the way of clarity.

"What the hearing provided was more questions than answers regarding the integrity of the vote, regarding the implications for PG&E, victims and the general public," Abrams said.

PG&E's chief financial officer, Jason Wells, is expected to face questions Thursday about the company's plan to nearly double its debt to almost $40 billion to finance its payments to wildfire victims, insurers and government agencies.

The heavy debt load is raising concerns about the utility's ability to raise additional money to cover an estimated $40 billion in badly needed improvements to its electrical grid.

Separately, California power regulators will also vote on the plan Thursday, from whom the company needs approval before June 30 to qualify for coverage from a state wildfire insurance fund.

This story includes reporting from KQED's Lily Jamali.