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Investment bankers charged California taxpayers $180,000 in travel while crafting PG&E bailout | Fire - Power - Money

A team of investment bankers from financial firm Guggenheim charged California taxpayers without receipts of what they spent.
Credit: ABC10/KXTV

SACRAMENTO, Calif. — Four months after PG&E’s crimes sparked the deadliest and most destructive wildfire in California history, three New York-based investment bankers boarded flights to help California Gov. Gavin Newsom prop up PG&E’s credit ratings.

California taxpayers paid for their plane tickets.

The bankers worked for Guggenheim Securities, which charged $37,002.17 of expenses to taxpayers during the first 10 days of its 2019 contract with Gov. Newsom’s office. A single Guggenheim employee spent $9,779.75 on airfare in those first 10 days alone, according to state payment records obtained under California transparency laws.

This article is part of ABC10’s FIRE - POWER - MONEY reporting project, which examines the connection between wildfires, PG&E and its influence on California politics. If you have a tip, email reporter Brandon Rittiman at brittiman@abc10.com

The governor’s office did not answer our questions asking what class of airfare Guggenheim’s employees flew or whether the firm was expected to adhere to state travel reimbursement policies.

Likewise, Guggenheim did not respond to questions sent by ABC10.

The state Department of Finance confirmed to ABC10 that it has no receipts, invoices, bookings or other records to substantiate any of the travel expenses Guggenheim billed to the state.

Guggenheim billed $12,994.98 of expenses on Feb. 19, 2019, the same day it signed its contract with Gov. Newsom’s office, according to the records.

The contract also paid the firm a flat $600,000 monthly fee. 

Records show taxpayers paid a total of $187,002.17 of Guggenheim’s expenses during the seven months of the contract, a time when the firm participated in the crafting of a new state law to shield PG&E’s finances (and those of other for-profit power monopolies) from the cost of damage done when power lines spark more wildfires in the future.

RELATED: Newsom’s office crafted law protecting PG&E after company’s crimes killed 84 people | FIRE - POWER - MONEY Investigation

Credit: ABC10 / KXTV

PG&E would later plead guilty to 85 felonies, including the involuntary manslaughter of 84 people, and sparking the November 2018 Camp Fire through reckless, criminally negligent behavior. PG&E allowed metal parts on its power grid to grow so old and worn that a metal hook broke, dropping the power line it held, which sparked the fire.

In January 2019, PG&E filed for Chapter 11 bankruptcy protection. The company said it was unable to pay the $30 billion in fire damages it had caused in the Camp Fire, along with several others that burned homes and killed people in 2017 and 2015.

The next month, in February 2019, Gov. Newsom’s office hired the investment bank Guggenheim to develop “potential strategies to facilitate an orderly restructuring of PG&E’s liabilities,” according to the contract.

Emails obtained by ABC10 reveal that Guggenheim’s staff was involved in shaping the new state law, AB 1054, which was primarily written by private attorneys hired by Newsom’s office and the California Public Utilities Commission, the state regulator for power companies which is supposed to operate independently.

Credit: ABC10 / KXTV
An email from private attorneys working for Gov. Gavin Newsom with a draft version of AB 1054 attached.

RELATED: INVESTIGATION: Governor Gavin Newsom’s office ‘micromanaged’ PG&E’s independent state regulators

Under that law, the state awarded PG&E with official safety certificates for the last two fire seasons despite the fact that the company’s power lines have been named as the official cause of the 2019 Kincade Fire and 2020 Zogg Fire, which killed four people.

PG&E faces multiple felony and misdemeanor charges in Sonoma County for sparking the Kincade Fire. Prosecutors in Shasta County announced criminal charges will be filed before the end of September in the four deaths caused by the Zogg Fire.

The certificates do two main things: they limit the power companies’ liability for the damage caused if and when their power lines spark more wildfires, and they allow the companies to access a $21 billion state wildfire fund designed to pay those damages out.

“I don't understand why this is allowed,” said retired firefighter and dispatcher Steve Bradley, whose grandmother Ethel Colleen Riggs was among PG&E’s 2018 manslaughter victims. “Why they get the safety certificate, they get to self-insure and they get to set up the rules that don't benefit anybody but themselves.”

The bankruptcy plan enabled by AB 1054 has resulted in delays in payments to PG&E fire victims, none of whom have been paid in full. Partial payments have begun being made to some of the 70,000 people with claims against the company.

RELATED: PG&E, Gavin Newsom, and the French Laundry connection | FIRE - POWER - MONEY Investigation

In the months before the 2019 Kincade Fire, the bulk of Guggenheim’s reported expenses paid for flights, hotel rooms, and meals for Guggenheim employees. On the June 1, 2019, invoice, Guggenheim billed $4,113.74 for the previous month’s meals, which was $1,200 more than the amount it reported spending on hotel rooms.

However, the Department of Finance confirmed that the state paid $50,000 of the firm’s expenses without any itemization at all to explain what the money was for. The governor’s office did not answer questions asking what specific expenses were included in this amount.

The governor’s office did explain that the $50,000 amount came after “negotiations with the administration” to settle more than $118,000 in expenses racked up after Guggenheim repeatedly spent more than the $25,000 monthly expense allowance in its February 2019 state contract.

“Guggenheim absorbed $68,000 in expenses and did not bill the state for any travel expense after the first 7 months of the agreement,” the unsigned statement from the Governor’s office continued.

A July 31, 2019, renewal contract with Guggenheim specified that the state would not be required to reimburse expenses going forward. By then, Gov. Newsom had already signed AB 1054’s safety certificate program into law.

In an unsigned statement from the governor’s general press office email address, Newsom’s office defended the decision to hire the financial firm and the law its employees worked on, casting it as a challenge to PG&E.

“The Governor was absolutely correct in ensuring that California had the best possible representation to take on PG&E’s $232 million legal and financial team,” the governor’s office wrote. “By comparison, Guggenheim charged the state a total of $3.7 million.”

In private, Newsom’s staff characterized the bill as an effort to prop up PG&E’s credit ratings, not to “take on” the company.

“We're very happy,” one Newsom administration official wrote in reply to a congratulatory email from a financial analyst. “Now we wait for the rating agencies to weigh in.”

Click HERE to read a copy of the report.

►HAVE A TIP?  Send it to Brandon

WATCH MORE FIRE - POWER - MONEY:
As California’s wildfires continue to break records due to overgrown forests and climate change, the state faces another crisis. The biggest power company is a convicted felon with a tendency to spark new fires. PG&E is guilty of America’s largest corporate manslaughter case. Experts say PG&E has avoided accountability for its crimes and worried the power company will kill again. But how did we get here? Can anyone force PG&E to be safer?