PG&E 2015 Annual Report Download - page 41

33
PART I
ITEM 3.LEGAL PROCEEDINGS
projects in future proceedings to ensure that the full
$850million is spent. The CPUC is expected to issue a
final decision in the Utility’s 2015 GT&S rate case in 2016
to identify safety-related projects and programs that will
be subject to the disallowance. It is uncertain how much
of the Utility’s costs to perform the safety-related projects
and programs the CPUC will identify as counting toward
the $850 million shareholder-funded obligation. If the
Utility’s actual costs exceed costs that the CPUC counts
towards the $850 million maximum, the Utility would
record additional charges if such costs are not otherwise
authorized by the CPUC. As a result, the total shareholder-
funded obligation could exceed $850 million. For more
information, see “Enforcement and Litigation Matters” in
Note 13: Contingencies and Commitments of the Notes
to the Consolidated Financial Statements in Item 8.
Federal Criminal Indictment
On July 29, 2014, a federal grand jury for the Northern
District of California returned a 28-count superseding
criminal indictment against the Utility in federal district
court that superseded the original indictment that was
returned on April 1, 2014. The superseding indictment
charges 27 felony counts alleging that the Utility knowingly
and willfully violated minimum safety standards under
the Natural Gas Pipeline Safety Act relating to record-
keeping, pipeline integrity management, and identification
of pipeline threats. The superseding indictment also
includes one felony count charging that the Utility illegally
obstructed the NTSB’s investigation into the cause of the
San Bruno accident. On December 23, 2015, the court
presiding over the federal criminal proceeding dismissed
15 of the Pipeline Safety Act counts, leaving 13remaining
counts. The maximum statutory fine for each felony count
is $500,000 for total potential fines of $6.5 million. On
December 8, 2015, the court also issued an order granting,
in part, the Utility’s request to dismiss the government’s
allegations seeking an alternative fine under the Alternative
Fines Act. (The Alternative Fines Act states, in part: “If
any person derives pecuniary gain from the oense, or
if the oense results in pecuniary loss to a person other
than the defendant, the defendant may be fined not more
than the greater of twice the gross gain or twice the gross
loss.”) The court dismissed the government’s allegations
regarding the amount of losses, but concluded that it
required additional information about how the government
would prove its allegations about the amount of the gross
gain prior to deciding whether to dismiss those allegations.
(Based on the superseding indictment’s allegation that
the Utility derived gross gains of approximately $281
million, the potential maximum alternative fine would
be approximately $562 million.) After considering the
additional information submitted by the government,
on February 2, 2016, the court issued an order holding
that if the government’s allegations about the Utility’s
gross gains are considered, they would be considered in
a second trial phase that would take place after the trial
on the criminal charges. The trial on the criminal charges
currently is scheduled to begin March 22, 2016.
The Utility entered a plea of not guilty. The Utility believes
that criminal charges and the alternative fine allegations
are not merited and that it did not knowingly and willfully
violate minimum safety standards under the Natural Gas
Pipeline Safety Act or obstruct the NTSB’s investigation, as
alleged in the superseding indictment. PG&E Corporation
and the Utility have not accrued any charges for criminal
fines in their Consolidated Financial Statements as such
amounts are not considered to be probable.
Litigation Related to the San Bruno Accident and Natural Gas Spending
As of December 31, 2015, there were six purported derivative
lawsuits seeking recovery on behalf of PG&E Corporation
and the Utility for alleged breaches of fiduciary duty by
ocers and directors, among other claims.
Four of the complaints were consolidated as the San Bruno
Fire Derivative Cases and are pending in the Superior
Court of California, County of San Mateo. On August 28,
2015, the Superior Court overruled the demurrers filed by
PG&E Corporation, the Utility and the individual director
and ocer defendants seeking to dismiss the San Bruno
Fire Derivative Cases, based upon the plaintis’ failure to
demand action by the Boards of PG&E Corporation and
the Utility prior to filing the complaint. After the ruling, and
pursuant to co-petitions for writ of mandate previously
filed by PG&E Corporation, the Utility, and the individual
defendants, on September 3, 2015, the California Court
of Appeal issued an order staying the San Bruno Fire
Derivative Cases pending the court’s final determination
whether to stay the matter altogether until the resolution
of federal criminal proceedings against the Utility. On
September 30, 2015, PG&E Corporation, the Utility, and
the individual defendants filed an additional petition for
writ of mandate asking the Court of Appeal to review the
lower court’s August 28 decision overruling their demurrers.
On October 22, 2015, the Court of Appeal issued a ruling
declining to review the August 28 decision. On December
8, 2015, the Court of Appeal issued a writ of mandate to
the Superior Court, ordering the Superior Court to stay all
proceedings in the San Bruno Fire Derivative Cases “pending
conclusion of the federal criminal proceedings” against
the Utility. The other two derivative actions are entitled
Tellardin v. PG&E Corp. et. al., pending in the Superior
Court of California, San Mateo County, and Iron Workers
Mid-South Pension Fund v. Johns, et. al., pending in the
United States District Court for the Northern District of
California. PG&E Corporation, and the other defendants
have not answered or otherwise responded to the
complaints in these actions. In the Tellardin action, the
defendants must answer or respond to the complaint