PG&E Required to Run 12,500 TV Ads Admitting Lax Safety Standards

By Joel Rosenblatt | February 16, 2017

PG&E Corp. was ordered take out television and newspaper advertisements announcing that the company was found guilty of violating safety standards in the wake of a 2010 natural gas pipeline explosion that killed eight people.

Last month, a San Francisco federal judge also directed “high-level personnel” at the utility to do 2,000 hours of community service and sentenced the company to a maximum-allowed fine of $3 million, saying the its crimes were “very serious and pose great risk to the public safety.” During a trial last year, prosecutors backed off a proposal to seek a penalty of as much as $562 million.

In an unusual punishment for a corporate crime, the company was told to place full-page ads in the San Francisco Chronicle and the Wall Street Journal explaining its offenses and what it’s doing to prevent future wrongdoing. In addition, it will spend almost $3 million to advertise on TV, which the company said amounts to about 12,500 60-second spots.

U.S. District Judge Thelton Henderson said on top of the community service requirement for high-level employees, which he said will be monitored by a probation officer, the company as a whole must perform another 8,000 hours of service.

‘Giving Back’

The judge said the utility should focus its efforts on “giving back” to the community of San Bruno, California, a city about 12 miles south (19.3 kilometers) of San Francisco. A 30-inch wide PG&E pipeline that was at least 54 years old and located under a street intersection in a residential area blew up, sending a 28-foot, 3,000-pound section of the pipe skyward and leaving a crater the size of a house. The blast destroyed 38 homes and damaged 70 others. Sixty-six people were injured.

The company said in a statement that it has “invested billions of shareholder dollars in gas safety improvements.”

“We want San Bruno and all of the communities we serve to know that we at PG&E have committed ourselves to a goal of transforming this company into the safest and most reliable energy provider in America and to re-earning their trust through our actions,” PG&E said in an e-mailed statement.

Since the explosion, PG&E tapped Tony Earley to replace its previous chief executive officer and froze its dividend for six years. It also separated its gas division from its electricity business, provided safety training to managers and tested and replaced pipelines. The company was fined about $1.6 billion by state regulators and paid more than $550 million to settle personal injury and property damage claims stemming from the blast.

‘Unusual Order’

The 2,000 hours of service to be done by senior-level employees is “an unusual order, and would be difficult to enforce,” said William Portanova, a former federal prosecutor. “Who decides who’s senior? This gets right to the question, the craziness, of prosecuting a corporation,” he said.

“It’s ironic in that the people who will be doing the work may not be the people who created the problems, because they’re the replacements,” Portanova said. “But at least it’s an attempt to underline the need for higher levels of corporate responsibility.”

Cris Arguedas, a criminal defense lawyer who last year defeated a federal criminal prosecution of FedEx Corp. in the same courthouse, agreed that the community service requirement seems “wide of the mark.”

“To personalize community service obligations of people who were not convicted or responsible for whatever happened seems inappropriate,” said Arguedas, who wasn’t involved in the PG&E case.

‘I Bite’

Portanova called the advertising requirement unusual, “akin to having a thief be forced to wear a sandwich sign outside the store he victimized” or a “having a Kindergartner wearing a sign taped to his shirt saying ‘I bite’ as a punishment for biting.”

“It just doesn’t happen very often where a defendant is ordered to publish the details of his or her crimes of conviction,” Portanova said. The order “falls into the category of public shaming,” which may be a good thing because it deters future crimes, he said.

“It’s almost pointless to punish crimes if no one hears about it.”

The case is U.S. v. Pacific Gas and Electric Co., 14-cr-00175, U.S. District Court, Northern District of California (San Francisco).

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