In December, a giant hedge fund known as the Baupost Group told a federal bankruptcy court judge that it could be entitled to additional compensation from Pacific Gas & Electric Co. because false company statements inflated its stock value ahead of its 2019 bankruptcy.
But wildfire victims who tried the same gambit were denied by the same judge on Friday and were told PG&E will not be required to add money to the underfunded Fire Victim Trust.
“Victims have been taken advantage of throughout this bankruptcy case,” Tubbs Fire victim and advocate Will Abrams said. “This (was) a way to maybe get a little more justice and a little more money going to victims who have suffered enough from these fires.”
Lawyers for thousands of fire victims joined Abrams in asking Judge Dennis Montali for time to compose a plan for PG&E to bolster its payments to fire victims, based on the impact its alleged misrepresentations had on stock prices.
But, Montali ruled that allowing victims to amend their claims went against legal precedent and could undo the bankruptcy agreement.
“I find that Mr. Abrams’ motion, though well intended perhaps, is absolutely without any foundation in the law and facts,” Montali said.
For disheartened fire victims who penned letters to the judge in recent weeks supporting Abrams’ motion, the ruling is likely to stand as one more example of how they received less consideration than larger corporate interests in front of the court.
Montali’s decision followed an hour long hearing in which an attorney for the Fire Victim Trust again said it was extremely unlikely that people who lost homes, livelihoods and loved ones to fires sparked by PG&E equipment from 2015 to 2018 would ever be fully paid.
To emerge from bankruptcy, PG&E gave victims a $13.5 billion trust fund composed half in cash and half in utility stock. The stock price has remained depressed, however, leading to insufficient funds for victim claims. To date, most have received just 60% of what the trust has evaluated their losses to be. The amount in claims approved by the trust sits at $15.9 billion, nearly $2.5 billion more than the bankruptcy court awarded the trust.
In late December, the Baupost Group, a $25 billion hedge fund that played a significant role in the PG&E bankruptcy and reportedly made $3 billion in profit through financial maneuvering during the proceedings, filed its new motion with Montali.
Citing an investigative report from the Butte County district attorney — who prosecuted PG&E for manslaughter over its role in the Camp Fire — and Baupost’s own research, the hedge fund said PG&E’s “material misstatements and non-disclosures” hid the full extent of the company’s safety issues.
Baupost purchased large amounts of PG&E shares in 2018, according to its court filing, during a time when utility executives continued making public assurances the company was in compliance with safety regulations. The stock price tumbled after it became clear that PG&E was responsible for the November 2018 Camp Fire.
Abrams and lawyers for fire victims argued those same statements buoyed the stock price even through the bankruptcy and as fire victims considered whether to accept the half-cash, half stock deal. Instead of rebounding when the company emerged from bankruptcy in July 2020, share prices dropped further and remained depressed.
Abrams said victims never had a chance to evaluate how the Butte County report would have affected the stock price before they voted to accept the bankruptcy plan.
“It holds the stock down,” Abrams said of reports like the Butte County report and others that documented PG&E’s failure to take the necessary safety and fire prevention measures.
“Baupost is leveraging (such reports) to advance the financial interest of Baupost,” Abrams said, “they are able to leverage that to the financial interest of their clients and investors, but victims apparently are not.”
Baupost’s attorney asked Montali to issue an order preserving its right to seek undetermined further compensation, as it continues to negotiate its own claim from PG&E. Baupost withdrew its motion a month after Abrams began to make his own filings. It remains unclear to what extent Baupost is using the allegations to try and increase its own bankruptcy claim on the utility. Baupost’s attorney did not respond to repeated requests for comment over weeks.
Because Baupost’s claims date to actions taken before PG&E petitioned for bankruptcy, they are being addressed under a different court process than the fire victim claims, PG&E said in a statement to The Press Democrat.
