HomeBUSINESSWhy fire victims in California feel sorry for Wall Street

Why fire victims in California feel sorry for Wall Street

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Thousands of victims of wildfires in California, which began in 2015, are eligible to make payments based on a $ 13.5 billion settlement with the state’s largest utility, the amount they will eventually pay to Wall Street whims. they are learning to obey.

That’s according to a trust fund set up last year as part of PG&E’s bankruptcy reorganization, as well as a retired California appeals judge who oversees court documents and other documents reviewed by Acesparks’s “American Greed”.

“We don’t know how much money we have because a large portion of the assets we spend to pay you are in the form of ordinary reserves of Pacific gas and electricity,” court spokesman John K. Trotter said. The Believing in a fire victim, a video message sent to more than 70,000 fire victims who filed lawsuits last month.

The fund is set to pay compensation to 24 fire victims in the horrific Camp Fire that killed at least 84 people in 2018 and destroyed much of Paradise City. The largest and most devastating fire in California history, an investigation has identified the fire was caused by a malfunction of equipment called a C-hook at the century-old PG&E transmission tower.

“It’s a smoking weapon. It’s a weapon that has taken the lives, hopes, dreams and hearts of about 84 of our citizens,” said Butte County Attorney Mike Ramsey.

The goal is moving

Alameda County Sheriff Coroner staff are searching for human remains after a camp fire engulfed an area in Paradise, California on November 12, 2018.

Josh Edelson | AFP | Getty Images

It is common to fund part of the trust with stocks, experts say. The trust acquired 478 million shares in the reorganized company, making it the largest shareholder in the utility.

Trotter points out the potential tax effect of cashing in shares to pay victims. Trotter said the stock was valued at $ 9 per share once confidence was established. Anything higher than that, he said, could be taxed on large capital. The stock recently traded around $ 10, which could be taxed at about $ 478 million on paper.

“45 percent of that goes to the government,” Trotter said.

He said the trust recently made a decision by the Internal Revenue Service to avoid a tax bite. But waiting for that decision, as well as the complicated process of monetizing shares without tax consequences, delayed payments to victims.

There is also concern: although the value of the stock has risen since PG&E went bankrupt last year, it has not risen as some of the town’s architects had expected.

“Shares have fallen 17 percent this year, and that’s in front of a very strong stock market. So it’s not doing well,” Trotter said. He noted that at current prices, the stock would be worth about $ 4.8 billion.

“Your account required you to own $ 6.75 billion worth of stock,” he said. “It didn’t happen.”

The specified address

A Cal Fire firefighter is watching a burning house as Camp Fire moves through the area on November 9, 2018 in Magalia, California.

Justin Sullivan | Getty Images

The June 20, 2020 statement said the valuation of the shares at $ 6.75 billion was “based on an agreed-upon formula” and that “the final value of the shares could be higher or lower.”

What worried the victims was the speed of payments on the bill. Trust Claims Administrator Kathy Yanni said it could take at least two years to pay for all claims.

The process started slowly.

According to the trust’s first annual report submitted to the bankruptcy court by Trotter in April – covering the period from July 1, 2020 to the end of the year – the fund paid only $ 7.2 million in claims to 499 victims. tray, while covering operating costs of $ 38.7 million. An An investigation by the KQED in San Francisco the trust spent an additional $ 12.7 million provided by PG&E, a total of $ 51.4 million – 7 times more than the trust paid – to organize the litigation process.

Payments to victims have risen sharply this year. This week, the trust reported it had paid more than $ 436 million to more than 13,000 claimants as of June 30. More than half of the money was paid through a special procedure, which allows victims to make initial payments of up to $ 25,000 with limited documentation. to experience initial difficulties.

In addition, trust can increase the amount of money available to victims by suing many third parties, including former PG&E employees and directors, as well as external contractors.

The trust did not provide updated figures on its operating expenses.

In a previous video message for the victims Posted on May 17th, Trotter defended the large amount of money previously demanded because he said it was necessary because of the complex task of reviewing all claims – in most cases multiple claims to the victim – not to mention setting up the entire claim system from scratch.

“We have more than 250,000 separate claims,” Trotter said. “So the sheer size of this work also makes it different.”

“We are building the process of paying your salaries,” he said. “I thought it would worry you if we didn’t spend the money. If we didn’t hire 300 people to help resolve your claims, then you should be worried.”

Trotter said he hopes to eventually keep costs up to 1 percent of the payout. He said the typical cost ratio in such cases is about 4%.

“One percent is too low,” he said. “I don’t know if I can hold it or not. But I’ll try.”

Fresh leaves

What complicates the situation, on the contrary, is the price of the stock. Trotter stressed that the victims must be the foundation for the success of the reorganized company.

Aerial view of Paradise, California from Clark Rude, November 15, 2018. Camp Fire Fire burned more than 7,000 buildings in paradise.

Caroline Cole | Los Angeles Times | Getty Images

“You’re 25 or 24 percent, PG&E owners, and that’s why it’s important that you want PG&E to work well,” he said. “The old PG&E, I must tell you, was certainly less than a typical corporate citizen. The new PG&E, which now regularly appears before the California Utilities Commission, is very challenging and doing a very good job.”

After filing for Chapter 11 bankruptcy protection in 2019, the “old” PG&E pleaded guilty to 84 counts of involuntary manslaughter related to Camp Fire. The judge ordered the company to pay a $ 3.5 million fine.

In a statement to American Greed, the company denied that it benefited more from security.

“Even if we can’t change the past, we can learn from it,” the company said. “We can never strive for safety and do the right thing.”

But thousands of fire victims are still in a terrible dream, waiting to be healed.

See how PG&E went from a typical utility to a convicted murderer. Watch the ALL NEW episode “American Greed” ET / PT on Acesparks Monday, July 5 at 10:00 p.m.

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