Shareholder sues PG&E alleging culture of ‘profits over safety’ 

click to enlarge San Bruno blast
  • AP Photo/Mike Adaskaveg
  • PG&E must spend $2.25 million in shareholder money to boost safety after a 2010 San Bruno blast killed eight in San Bruno.
PG&E has been hit with yet another lawsuit linked to the deadly San Bruno pipeline explosion, but this one is a little different.

A shareholder is alleging that the utility company has fostered a culture of “profits over safety.”

Filed Monday by Millbrae resident Hind Bou-Salman, a shareholder for more than 23 years, the suit seeks to hold 22 PG&E directors and officers — including President Christopher Johns and former Chairman and CEO Peter Darbee, both of whom were with PG&E at the time of the 2010 San Bruno incident — accountable for diverting funds intended for safety measures to boost the utility’s bottom line.

Profit over safety “has been the internal mantra of PG&E for nearly a decade,” the complaint states. “PG&E’s corporate leadership has mismanaged the Company for years, allowing critically needed monies set aside for safety and operational purposes to be diverted for other purposes and, at the same time, approving lavish bonuses to PG&E’s management.”

Since the Sept. 9, 2010, pipeline explosion that killed eight people and destroyed dozens of homes, PG&E has paid a $70 million settlement to San Bruno and paid or committed to pay $565 million in legal settlements for other claims.

The utility also has been ordered to spend $2.25 billion in shareholder money on pipeline replacements, strength testing, automating valves and other improvements to the natural gas system, according to spokeswoman Brittany Chord.

PG&E still faces a proposed $4 billion penalty from the California Public Utilities Commission.

By filing her case as a “derivative” action, Bou-Salman sued in the name of the company and its shareholders for the company’s losses. The shareholders who had no role in the decisions should not have to bear the debt, said Frank Pitre, an attorney for Bou-Salman and co-lead counsel for many victims’ families.

“This lawsuit says, ‘You people who made those decisions, you officers and directors, you’re the ones whose bank accounts, whose executive bonuses should be seized to put back into the company so the shareholders aren’t stuck with the cost,’” Pitre said.

Damages would be determined through a settlement or if the case reaches trial at the California Superior Court.

Asked where this lawsuit ranks in the list of PG&E’s concerns, Chord said the company is carefully reviewing the allegations and, “It’s just too soon to speculate.”

“What we’re focused on is making our system safer,” she said. “We’ll certainly review the allegations put forward in this document, but that hasn’t stopped us from going out and doing the important work to make our system safe.”

State Sen. Jerry Hill, whose district includes San Bruno, said Bou-Salman has a good case.

“Much of the money will come from the shareholders,” Hill said. “So I think the shareholders have a very valid claim that they have been duped by a corporate board and executives to believe that the culture the utility had was one that promoted safety and responsible actions when in fact it was clearly a culture of cutting corners and padding pockets.”

The derivative lawsuit comes in light of PG&E documents released July 4 revealing that line 147 in San Carlos had been operating at pressures not up to regulatory standards, Pitre said.

“You decide, as this shareholder has, that enough is enough,” he said. “They have not changed the corporate culture; it’s business as usual. So you decide to take matters into your own hands.”

About The Author

Jessica Kwong

Jessica Kwong

Jessica Kwong covers transportation, housing, and ethnic communities, among other topics, for the San Francisco Examiner. She covered City Hall as a fellow for the San Francisco Chronicle, night cops and courts for the San Antonio Express-News, general news for Spanish-language newspapers La Opinión and El Mensajero,... more
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