Lawsuit alleges PG&E put profits ahead of safety

September 23, 2013 8:43:04 PM PDT
A Pacific Gas and Electric shareholder has filed a lawsuit in San Mateo County Superior Court alleging that PG&E executives damaged the company by diverting funds intended for pipeline assessment and safety to improve the company's bottom line and their own standing.

The lawsuit, filed by shareholder Hind Bou-Salman, names numerous past and present PG&E executives and board members, including former Chairman of the Board and CEO Peter Darbee as well as his predecessor Thomas King and current PG&E President Christopher Johns. It claims that hundreds of millions of dollars that were to be used for pipeline assessment, maintenance and record keeping was instead used to buy back stock, improving PG&E's bottom line and giving bonuses and stock options to the executives. Bou-Salman, a Millbrae resident and PG&E stockholder for 23 years, wants PG&E executives to be held accountable for the millions of dollars the company has spent settling lawsuits and paying fines stemming from the 2010 natural gas pipeline explosion in San Bruno. She filed the suit on behalf of other shareholders.

Bou-Salman's attorney says it is not just about the money.

"More importantly, with this type of case, a derivative lawsuit, we can seek them to change their ways, corporate governance-type changes, reforms, to change the ways they're doing business going forward," Mark Molumphy said.

The lawsuit says, "...PG&E had diverted more than $100 million in gas safety and operations money collected from customers over a 15-year period and spent it for other purposes, including bonuses for executives." It also says they "...created a situation in which a catastrophic incident was not only possible, but a likely and foreseeable outcome."

"This lawsuit alleges that they consciously blew it," Molumphy said.

On Sept. 9, 2010, a 30-inch PG&E gas pipeline ruptured in the Crestmoor neighborhood of San Bruno. The explosion and fire killed eight people and destroyed 38 homes. PG&E said earlier this month it says it expects to pay a total of $565 million in legal settlements and other claims from the explosion. It includes $455 million that PG&E has already agreed to pay and $110 million it expects to pay in connection with recent settlements and claims.

San Bruno Mayor Jim Ruane and State Sen. Jerry Hill, D-San Mateo, both believe that individuals should be held criminally liable.

"We have always felt that there was culpability here, from the top all the way down" Ruane said.

In 2012, an independent audit from the California Public Utilities Commission found that $100 million in gas safety funds was spent on other purposes.

PG&E says it is reviewing the lawsuit.

The Associated Press contributed to this report.


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