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Fraudster Of The Week -- Pacific Gas & Electric Co.

Posted  January 27, 2017

By the C|C Whistleblower Lawyer Team

More than six years ago, a PG&E pipeline exploded in San Bruno, California, killing eight people, injuring 58 more, and destroying 38 homes.  On Monday, U.S. District Judge Thelton Henderson announced that he would fine PG&E $3 million and place the company under a court-appointed monitor for its criminal violations of pipeline safety laws.

Judge Henderson’s decision follows PG&E’s August 2016 conviction by a San Francisco jury of five counts of violating federal pipeline regulations and one count of obstructing the National Highway Transportation Safety Board’s investigation into the San Bruno explosion.  Although the $3 million fine represents the maximum criminal penalty, prosecutors initially had sought a fine of up to $562 million—roughly twice the amount PG&E allegedly saved by cutting safety programs that could have prevented the fatal blast.  The California Public Utilities Commission already has fined PG&E a record $1.6 billion for its wrongdoing.

At trial, prosecutors argued that the standard used by PG&E to identify high-risk pipelines violated safety regulations; as a result, the company failed to classify the San Bruno pipeline and others as high risk and to assess them accordingly.  Even worse, prosecutors said that the company intentionally misclassified pipelines to avoid subjecting them to appropriate—but costly—testing.  Although PG&E argued the blast was “unforeseeable,” several employees testified at trial that the company intentionally selected the cheapest inspection method for its pipelines, knowing that it would miss certain internal flaws.  In other words, PG&E put its profits ahead of the lives of its customers.

To read more about PG&E’s sentence and the underlying charges, click here or here.  To read the superseding indictment, click here.

Tagged in: Contract Non-Compliance,