Trustee for PG&E wildfire victims resigns as stock price slump threatens payouts
The retired judge overseeing the payment of billions in dollars to victims of PG&E Corp.'s wildfires is resigning as a slump in PG&E's stock price continues to endanger full payouts to victims.
John Trotter, a retired California appellate court justice, announced his resignation Tuesday as head of the PG&E Fire Victim Trust. Trotter said he always planned on leaving in mid-2022, two years after the trust began operations.
The trust has come under some criticism about its expenses, and Trotter's announcement came a month after Will Abrams, a Santa Rosa man whose home was destroyed in the 2017 winecountry fires, filed papers in U.S. Bankruptcy Court demanding access to financial records and other documents regarding the trust's “management, administration and oversight.”
Lawyers for Trotter filed objections to the victim's demand Tuesday, saying the disclosures would jeopardize the trust's ability to manage its PG&E stock holdings and negotiate a better deal with the Legislature for victims.
In an interview Wednesday, Trotter said he had submitted his resignation before Abrams filed his demand with the court. He added that turning over the records to Abrams would be “detrimental to the operations of the trust.”
The announcement also comes two months after the trust ousted its lobbyist, Patrick McCallum, who had been hired to try to persuade the Legislature and Gov. Gavin Newsom to come to the trust's financial rescue.
McCallum was let go amid disclosures that the California State University system paid $600,000 to a former Sonoma State University official over claims that McCallum had sexually harassed several women. The official said she was the victim of retaliation after she reported the harassment allegations. McCallum's wife, Judy Sakaki, was president of Sonoma State until her recent resignation.
“As soon as we found out the news about him, we let him go,” Trotter said. McCallum has been replaced by a Sacramento lobbyist named Darby Kernan.
The trust has floated the idea of the state loaning the trust about $1.5 billion, allowing it to delay having to sell more of its PG&E stock while continuing to pay claims. The trust believes that PG&E's sluggish stock price — which is at the heart of the trust's problems — will improve once the company is allowed to resume paying shareholder dividends next year.
So far the trust hasn't been able to persuade top state officials to go along with the plan.
“We have a new messenger so maybe that will change some minds,” Trotter said. “We think our cause is righteous. The victims have been victimized again.”
The utility was driven into bankruptcy following the 2017 wine-country fires and the 2018 Camp Fire, which left PG&E with billions in wildfire claims.
The company emerged from bankruptcy promising to pay victims $13.5 billion for damages not covered by insurance. PG&E gave the trust, which is run independently of the company, $6.75 billion in cash and 477 million shares of PG&E stock; the deal was approved by an overwhelming vote of the estimated 70,000 fire victims (The victims themselves don't get any stock. The shares are sold and they're paid in cash).
The problem was, the shares of stock were trading at around $9 when the trust opened for business in 2020. That was well below the $14-a-share price needed to achieve a total payout of $13.5 billion. Trotter sold 100 million shares earlier this year at around $12 a share.
PG&E stock was trading at $9.90 a share Wednesday. Coupled with its cash holdings, the trust is nearly $2 billion short of what it needs to pay the claims in full.
A story by KQED radio last year criticized the trust for spending $50 million on legal fees and other costs at a time when payments to victims totaled just $7 million.
Trotter called the report “misleading,” saying the expenditures were necessary to get the trust set up. “We started with not a scrap of paper,” he said. “Once we've gotten it together, I think we've done a very good job of paying claims.”
He acknowledged that some fire victims are frustrated with the pace of payments. “We walked into a situation where we could not meet the unrealistic expectations.”
As of a week ago, the trustee had paid $4.05 billion to more than 46,000 victims. In a court filing Tuesday, the trust said its operating expenses for last year totaled $93 million for lawyers, accountants and claims processors.
Trotter will be replaced July 1 by Cathy Yanni, who has been the trust's claims administrator since its inception.
“Claims processing will proceed without interruption and fire victims and their counsel can count on the transition being seamless,” he wrote in his letter to victims.