Jones Day Law Firm Under Scrutiny for Helping Trump — Played Critical Role in Outcome of PG&E Bankruptcy

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The pavement of Montgomery Street, in front of the offices of the law firm Jones Day. The firm has served as outside counsel to President Donald Trump's reelection campaign. (Beth LaBerge/KQED)

President Trump's refusal to concede defeat in last week's election has cast a harsh spotlight on the law firm Jones Day, which is representing the Pennsylvania GOP in a fight over mail-in ballots.

The unwelcome attention has been fueled in large part by the social media-savvy band of 'never Trump' Republicans known as the Lincoln Project. The group launched a campaign against Jones Day this week, and also plans to target some of the firm's clients.

"Given the nature of these firms’ on behalf of Donald Trump and his allies, specifically that they know these suits to be frivolous and damaging to our democratic system, folks should be made aware of the people they’re in business with," Lincoln Project co-founder Reed Galen told KQED.

But UC Hastings Law Professor David Levine said shaming law firms for the clients they represent can be a slippery slope. Unpopular — even notorious — clients have the right to access the nation's justice system, he said, citing a concept that's commonly applied to criminal cases.

"In the long run, that’s bad for the legal system. That’s bad for much less powerful lawyers," Levine said. "It’s much less powerful clients that will be hurt down the line.”

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Still, critics of PG&E hope the scrutiny will extend to Jones Day's involvement in the company's recent bankruptcy case, in which the firm played a quieter but critical role. When PG&E filed for Chapter 11 bankruptcy protection last year, it cited mounting liabilities from wildfires caused by its equipment. Jones Day represented Wall Street hedge funds who had amassed significant holdings of PG&E stock in the run-up to the filing.

"The shareholders, in my view, were instrumental in cheating fire victims," said Tom Tosdal, who represents more than a thousand PG&E fire survivors, one of whom resigned from a key bankruptcy committee in March so he could speak out against PG&E's multibillion dollar deal with fire victims.

Jones Day's hedge fund clients used their collective stake to influence company leadership and board picks while in court, Jones Day lawyers also downplayed wildfire claims on their behalf. But even while taking PG&E's side against fire victims, court filings show some of the shareholders were also buying up claims against the company, notably insurance claims. In theory, those shareholders would have been at the back of the line — behind fire victims — in the bankruptcy pecking order. Instead, critics charge, they ended up shaping the outcome of the case.

Critics say the $11 billion cash settlement between PG&E and insurance claims holders left far less cash in the pot for fire victims. Ultimately, in a deal fire survivors agreed to, PG&E funded a victims trust initially billed as worth $13.5 billion, half in cash and half in PG&E stock. Fluctuations in PG&E stock have left the currently value of the trust at about $2 billion less.

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"For law firms playing in that world of bankruptcy, that's how they play: make a deal that pretends that the company will come out healthy. It doesn't matter who profits, who loses," Tosdal said. "Fairness to the fire victims and all the human suffering is so secondary, it's almost irrelevant."

Jones Day had no comment on questions about its role in the bankruptcy, and the outcome for fire survivors. Throughout the case, the firm filed publicly-available reports of its clients' equity and claims holdings with the bankruptcy court.

For its part, PG&E has touted the multibillion dollar settlement with fire victims as fair.

So far, the Lincoln Project's pressure campaign appears to be working. On Friday, according to the New York Times, a top Jones Day lawyer told colleagues on an internal call that the firm would not get involved in further election-related lawsuits.

Editor's Note: Jones Day is a KQED financial supporter.