City, State Allowed to Pursue Restitution of $4.6 Billion for Ratepayers That Then-Bankrupt Utility Sought to Shield in ‘Elaborate Corporate Shell Game’
SAN FRANCISCO (Oct. 2, 2006) — City Attorney Dennis Herrera today applauded an order by the U.S. Supreme Court denying review in the matter of PG&E Corp., et al. v. California, a last ditch attempt by lawyers for the corporate parent of the once-bankrupt utility to bar restitution claims by the State of California and City and County of San Francisco under federal bankruptcy law. Today’s order lets stand a Jan. 10 ruling by the Ninth Circuit U.S. Court of Appeals allowing the City and state to pursue restitution on ratepayers’ behalf for approximately $4.6 billion that the company allegedly “upstreamed” to its parent, PG&E Corporation, during the 2000-01 energy crisis.
In February 2002, San Francisco City Attorney Herrera filed a civil action — which paralleled a similar suit that had just been filed by California Attorney General Bill Lockyer — against PG&E’s corporate parent in San Francisco Superior Court, charging that PG&E Corp. illegally transferred billions of ratepayer dollars from the utility to itself prior to filing for Chapter 11 bankruptcy protection in April 2001. Alleging that the siphoning of cash from the ailing utility violates the California Business and Professions Code, both government plaintiffs sought injunctive relief, civil penalties, and restitution as remedies for the parent corporation’s unlawful actions. Within months, a ruling by the U.S. Bankruptcy Court began complex series of appeals by both sides through the United States District Court for the Northern District of California and the Ninth Circuit U.S. Court of Appeals. Today’s denial of certiorari by the U.S. Supreme Court finally exhausts all of PG&E’s federal appeals, and enables the state and city to pursue their claims on ratepayers’ behalf in the California trial court.
“The evidence is clear that in the months before PG&E declared bankruptcy, it reorganized subsidiaries and moved cash in an elaborate corporate shell game to send ratepayers’ dollars into shareholders’ pockets,” Herrera said. “We are delighted that the U.S. high court has finally ended years of legal wrangling, and that we now have the opportunity to join with the Attorney General in aggressively pursuing restitution on behalf of PG&E’s customers. This is a major victory for ratepayers.”
The case is PG&E Corp., et al. v. California, ex rel. Lockyer, U.S. Supreme Court No. 06-33.