Will PG&E’s Fire Victims Ever Be Made Whole? 'Never,' Says Trustee Overseeing Compensation

PG&E equipment may be responsible for igniting at least two California wildfires this summer, including the massive Dixie Fire, which has burned more than 569,000 acres, or about 889 square miles, as of Monday.

Last week, the Federal Aviation Administration said it was working closely with the FBI to investigate a drone flight that interfered with Cal Fire aircraft during the first hours of the agency’s fight to control the Dixie Fire. As KQED reported last week, the Butte County district attorney launched an investigation into whether the drone was operated by PG&E or one of its contractors. PG&E said no drones authorized to do work for the company were operating in Butte and Plumas counties at the time of the incursion.

These developments, as well as PG&E’s announcement of a costly undergrounding initiative, have left the company’s stock price in flux, which affects the 70,000 survivors of fires that the utility’s equipment caused between 2015 and 2018. Those survivors’ claims were folded into a controversial bankruptcy settlement that was marketed to them as being worth $13.5 billion — half of it in PG&E stock itself. But it’s currently worth closer to $10 billion, according to John Trotter, the trustee in charge of distributing compensation to PG&E’s past fire victims.

Trotter, who oversees the Fire Victim Trust, says this volatility has complicated his ability to distribute the funds. As of July 30, the trust had distributed about $600 million to fire victims.

Trotter spoke with The California Report’s Lily Jamali about the pace of payments to fire victims, about why survivors who have learned their due payout amount are only getting 30% of that money, about KQED’s previous reporting on the trust’s overhead costs, and about issues of budgetary transparency, among other things.

This interview, conducted on Aug. 5, has been edited for length and clarity.

Lily Jamali: What is your assessment of the pace of payments right now going out to people?

John Trotter: I think it’s increasing dramatically, which we knew it would once we created the structure. Every pay period, there’s a greater number of claims and an increase in volume. This will continue. There’s been an increase in staffing to accommodate that. As more claims become ripe for determination, we have hired more claims reviewers to meet that need, so it’s a continuing upward swing.

What is your sense of whether fire victims will ever be made whole from what you can tell right now?

They never will.

They will never be made whole?

That’s what bankruptcy means. It means we don’t have enough money to make everybody whole. There was no expectation going into bankruptcy that they would ever be made whole. They would get a percentage like everybody else in bankruptcy. The problem is, we don’t know yet what that percentage will be because a lot of the bigger claims have yet to be finalized or proven. I don’t know with any [definiteness] what the amount of the claims will ultimately be. And I don’t know the amount of money I have to pay those claims because the stock changes daily. That’s why we’re only paying 30%.

PG&E still owes the trust $700 million, which isn’t due to be paid until next year. I have no guarantee, but I assume PG&E will honor that. And then we have the stock price. The total value of the holdings of the trust are probably — give or take — $10 billion. If PG&E pays the $700 million, and the stock price rebounds, that value goes up. But even if it were to get to $13.5 [billion], which God willing will happen, we would still be short.

We keep seeing more fires being tied to PG&E equipment, including this year. Do you have a sense of what the final percentage [recovery for fire victims] might be if things kind of stay in their current state?

At the current state, $10 [billion] is 60% of $17 [billion]. We hope with all of our hearts that’s not going to be the final number though.

Do you ever wonder why the stock component was funded at $9 per share and not at a value that would have equaled $6.75 billion, which is what fire survivors were told?

It’s a publicly traded stock. What they had agreed on was the number of shares. The value of the stock on the day that the Trust became effective and became the owner of those stocks was $9, so it was the public market that caused that.

I think that a lot of [fire survivors] feel really blindsided. One fire survivor I just talked to told me his wife was crying about this. They feel they got tricked. $6.75 billion in stock is what they were told by their lawyers. PG&E said it was “approximately $6.75 billion.” People feel emotionally destroyed by seeing what’s happening to the stock.

I can certainly understand their feelings.

And do you think that anybody should be held responsible for that?

I’m not here to be a critic of the way the deal was put together. It went through a federal judge and representations were made, some of which have not turned out to be true. But it isn’t my role to be a critic. It’s my role to get this situation as righted as I can and get the money out as quickly as I can.

Do you feel comfortable assessing this deal in terms of the stock component? I talked to Ken Feinberg [the administrator of the September 11th Victim Compensation Fund and more than a dozen other high-profile trusts] about this last year. He said he’d never seen a trust set up with stock.

That really isn’t for me to say. I agree with Ken. I’ve worked with Ken on a couple of cases, and I respect him greatly. It isn’t really for me to criticize or not criticize the deal. My job is to deal with what I have. I have never seen a settlement with stock in it either. It just creates such an indeterminate value. It’s such quicksand. If it goes up, it’s terrific. If it goes down, it’s terrible. If it goes up, can you sell it right at that moment? It puts such an extra burden on the people, namely me, running the trust. It’s just unbearable. This is the kind of stuff that keeps me up at night. It’s just very difficult to know when to sell.

In addition, and I don’t mean this as criticism, it’s just factual: We took the stock at $9. There was no consideration given to the fact that — suppose we were lucky enough to have it go to $15 — they didn’t think about the taxes that the trust would have to pay on the gain. I have spent virtually the last six months with my lawyers striking a deal with PG&E, the IRS and the Securities and Exchange Commission to take away that burden. We’re almost there. But then again, these poor victims are so snakebitten after we strike that deal, then the stock plummets. At least now, if and when we sell the stock, there will be no tax.

Is it your belief that the TCC [the Tort Claimants Committee, officially representing fire survivors in the bankruptcy] attorneys should have secured those provisions before this went through, or even before fire victims voted on this deal?

Well, again, it’s easy to be critical, but it’s not my role. I just don’t want to get into that.

Do you have any thoughts on whether future trusts should be restricted from including stock, based on your own experience trying to administer this? Should there be provisions to make sure it doesn’t happen like this again?

Well, I think it’s sui generis — unto itself. I think that each bankruptcy judge will deal with it as they see fit. You know, most bankruptcies don’t involve a company that comes out in a viable situation, or at least most resolution trusts don’t. Usually the resolution trust is when the company is going out of business. PG&E is unique in that it can’t go out of business. And so they have to bring it back. So that’s not going to happen very often because there just aren’t many of these circumstances.

You have talked about a bottleneck. What do you think is behind that bottleneck — such that two out of three fire victim claims are currently incomplete?

There’s a whole bunch of reasons, but it’s the gathering of data. In this unfortunate situation, most of their documents were burned up in the fires because people usually keep those documents in their house. They have to go get those documents. It’s hard and the pandemic made it even harder. The larger the claim, the more documentation is needed and so it takes a longer period of time.

I recently learned that people who have lawyers are not allowed into their own portal [on the Fire Victim Trust website] to view what documentation is missing. They’re not even allowed to see the documentation their lawyers have submitted. Would you consider allowing them to view their own accounts?

There are lots of rules of ethics that prevent us from talking to people who are represented by lawyers. We can’t talk to them directly if they have a lawyer. We have to — according to the rules of professional conduct — go through their lawyer.

Even in terms of providing a checklist [of missing documents]? That’s not possible?

I don’t know if it’s possible. But we need to talk to their lawyers. That’s who their representative is and that’s the way it goes in every case. If you come into court, if you have a lawyer, the judge doesn’t speak to you. You have to go through the lawyer. That’s why the lawyer is there.

Let’s talk about the last couple of months and our story [about trust overhead costs] from May. I know you had a meeting with California Attorney General [Rob Bonta] in the last couple of days regarding that. First of all, we welcome your thoughts on those stories.

Well, I think we probably should just leave the past in the past. Let me address it this way. Meeting with the attorney general and all of the legislators was a very good thing to do. They did not understand, as maybe some reporters didn’t understand, the way that this process was intended to unfold. Once they were made more aware of that, they were much more forgiving of what’s been going on. The attorney general fully understood that there were startup costs. He fully understood there were no claims to be paid in the early part of the trust’s life because they hadn’t been filed yet, and that the great majority of claims and their supporting documents weren’t filed until this year. Once that was explained, they understood why there were startup costs but no payments. The [$7 million] paid in benefits to the victims [in 2020] weren’t payments on value. There were no payments made that reflected the value of claims until March because the infrastructure wasn’t complete until then to allow us to do that. Those payments were humanitarian payments that were made on a special application basis.

In the spirit of constructiveness, one of the things that we talked about in that first story was that the reporting period in the annual report started in July [2020], even though [it was ]retroactive to January, [and] Judge Dennis Montali had approved $12.5 million or more in fees. I just wonder why that was not included. And is there an opportunity to be maybe more specific with details of which firms are getting how much, and what the individuals at those firms are doing, similar to the kind of reporting that we saw last year before [PG&E’s bankruptcy] confirmation?

I’m the wrong one to ask about that because I wasn’t involved in any of that. I became trustee on July 1 [2020]. I was a consultant to the TCC early on in 2020. And I was working for [arbitration firm] JAMS at that time and they hired me as a consultant to help figure this out. I would go up to San Francisco and meet with the lawyers and I billed them accordingly for that. When I became trustee, my whole relationship with them changed. I became a salaried employee of the trust. I was no longer billing by the hour. I have a contract with the trust. That happened in July.

The period of time between January or February [2020] and the end of June [2020], there were fees incurred because JAMS billed them for my time at my usual rate, which at that time was $1,500 an hour, an amount that I charged for many years. And how the Trust ended up paying that was something I didn’t know anything about. I was not involved in their negotiations with PG&E because I wasn’t the trustee yet. But when I became trustee, you reported that I was charging $1,500 an hour, which wasn’t true.

I did ask. What is the amount?

It’s $125,000. If you do the math that turns out to be somewhere less than $800 an hour. And that’s how we arrived at my fee. It’s been constant from the first day until this month. And I have to tell you that I work far more than 40 hours a week. In addition, just so that victims know, there’s nobody here that’s getting an outrageous [fee]. They may think that it’s outrageous. I understand that. But I don’t have a secretary. I don’t have an assistant. I don’t have a dedicated aide. I run everything out of my home. I don’t have an office. I don’t charge the trust for any of the costs that I incur in doing that from my home. So I’ve done everything I can reasonably do to be as fair in my pricing as I can, and I am not embarrassed to say that.

Editor’s note: KQED’s story reporting Trotter’s hourly rate was based on this document filed in federal court on April 14, which lists Trotter’s hourly rate as $1,500.

Have you thought about being more transparent about your budget?

Yeah. The problem with — as you see, we have 380 people. These are unaudited numbers and some bills are still lingering but in the first six months [of 2021], we spent $46.6 million on overhead. Of that, $35 million was for claims processing. That’s a little bit below what our budget was, and going forward, we hope we won’t spend quite as much. But one reason we spent as much as we did was there were a lot of attorneys fees because of the stock [tax] issue. That is now resolved. But in the second half, we have more claims reviewers that we didn’t have in the first half because we didn’t need them then. I don’t know whether those two balance each other out. We look forward to the second half being a little bit less. So if we come out of the year in the low $90 million range, that’s less than 1% of the [trust’s] value, even with the very depressed stock price. I’m very comfortable saying to the fire victims that we are really watching every dollar as carefully as we can. To be able to run this trust, with its multiple problems and issues for under 1%, I think, is pretty good.

One percent overall, or per year? 

One percent a year. I mean, it’s an ongoing trust.

Can you respond to concerns that the trust may be devaluing determinations because the stock is not performing?

That’s not true. We are giving them our best valuation. It’s a cross between what would that person get in a jury case and a private settlement. We give a blend of that. We’re not discounting it in any way because of the ability to pay. The victims are entitled to know what their claim was worth. It’s painful to find out that a claim was worth $1 million but they’ll only get $450,000. But at least they’re entitled to know what the value of their claim was.

Fire survivor William Abrams has filed a motion with the bankruptcy court asking that members of the Trust Oversight Committee [TOC] issue financial disclosures. We at KQED have [revealed that] at least one major wildfire attorney [Mikal Watts] has taken funding from parties whose interests are at odds with fire victims. Are you aware of this motion?

I am aware of the motion but it really doesn’t concern me. This is a Judge Montali issue that I don’t have any jurisdiction over. If the Judge feels that Mr. Abrams has made a showing, he’ll act accordingly. He has denied this motion a couple of times already. We’ll see what he does this time.

Should they sign a disclosure saying they do not have interests that are adverse to their clients’?

I don’t have any authority over the TOC. I must consult with them. But I didn’t appoint them. I’d never met some of them before. They were appointed by Judge Montali. That’s why the motion is to Judge Montali. The motion isn’t to me. If they have any conflicts, I don’t have any way to know that. So they have to themselves determine whether they have a conflict and respond if Judge Montali asks them to.

As we reported last year, one of the people who sits on the committee [Doug Boxer] is affiliated with Mikal Watts, whom we have shown did take money from a major hedge fund in this case. That’s in the public domain.

I assume, if it’s in the public domain, Judge Montali knows that.

And that’s not troubling to you, it sounds like.

It’s not whether it’s troubling or not. It doesn’t involve me. I’m not here to pass judgment on whether they have a conflict. That’s Judge Montali’s job. I have lots of other things to do.

How involved is the Trust Oversight Committee in how claims are being determined? 

Not at all.

Not at all? 

No. There’s a bright line — because they all have claims.

Would it be valuable to have members of the TCC who resigned be allowed to speak freely about what happened from their perspective? Do you have any thoughts on that?

I don’t, because I wasn’t there. I wasn’t part of the machinations that went on so I don’t know. I think anybody can speak freely now.

Would they face any legal liability if they spoke about what they witnessed that might be disturbing to the public?

I don’t have any idea or any comment on that. I don’t know. Again, I wasn’t a part of that. I know that there was a lot of heated discussions in those months before the trust became viable.