SAN FRANCISCO (CN) – A Federal Emergency Management Agency official on Monday blamed wildfire victims' lawyers for the potential clawback of $200 million from fire survivors who received emergency federal assistance.
Bob Fenton, Region 9 director for FEMA, said fire victims' lawyers made an "active tactical decision" to shut the agency out of settlement talks with Pacific Gas and Electric, despite knowing FEMA had filed a $3.9 billion claim.
"It boggles my mind why the tort claimants' lawyers would appear to want to relieve PG&E of its responsibility and make California and FEMA the enemy here," Fenton said during a press call Monday.
Some victims received emergency funds from FEMA to cover things like medical costs. If victims also get money for medical costs from a $13.5 billion PG&E settlement fund, FEMA could seek to claw that money back. Just under $200 million could be clawed back from individual fire victims, according to Fenton.
The regional FEMA director said going after fire victims for reimbursement of emergency aid is "the last thing in the world" he wants to do, but he also has a legal obligation "to ensure there is no duplication of benefits."
Because lawyers take a percentage of the $13.5 billion settlement, Fenton said FEMA could claw back more from fire victims than they receive from the trust fund.
"They only get 70 cents on the dollar," Fenton said. "Then we have to come after them and get the whole dollar. We want to avoid that."
Fenton placed blame squarely on the shoulders of PG&E and the Tort Claimants Committee (TCC), which represents fire victims in the utility’s bankruptcy case.
"This could be prevented by PG&E paying what it's responsible for and the TCC including us in the negotiations," Fenton said.
The regional FEMA director recalled being surprised when the TCC objected to FEMA's $3.9 billion claim in December. The reason behind that objection later "became clear" when Fenton learned the committee was secretly negotiating a $13.5 billion deal with PG&E.
Lawyers for fire victims say FEMA lacks legal justification to seek $3.9 billion from PG&E. They contend federal law only allows FEMA to seek reimbursement from an entity that deliberately causes a major disaster.
"FEMA does not allege that the debtors intended to cause the fires at issue," the TCC wrote in its Dec. 2 objection, adding that California's public nuisance and unjust enrichment laws are also inapplicable to FEMA's claims for reimbursement.
Citing FEMA’s recovery of $81.4 million from two settlements with utility Southern California Edison for the 2017 Thomas Fire and 2018 Woolsey Fire, Fenton insisted FEMA is on solid ground in seeking to recover emergency response costs from a “responsible third party.”
The TCC has also criticized FEMA's debris removal contracting process, arguing fire victims should not see their compensation reduced due to inflated and unnecessary costs resulting from the agency's poor management decisions.
Last week, 38 federal lawmakers from California sent a letter urging FEMA to abandon its quest to take a nearly $4 billion slice out of the limited $13.5 billion settlement fund for fire victims.
According to Fenton, the $3.9 billion FEMA seeks includes costs for firefighting, public infrastructure repairs, debris removal, mitigation, direct housing, rental assistance and crisis counseling.
PG&E spokesman Paul Moreno said the company agrees with the TCC that FEMA "does not have a valid legal claim against the company."
In December, U.S. Bankruptcy Judge Dennis Montali approved two settlements worth $24.5 billion, including an $11 billion deal with insurers who covered wildfire losses and a $13.5 billion settlement for all other wildfire claims. The judge previously approved another $1 billion settlement with 18 local and regional government entities in California.
On Dec. 31, a group of powerful hedge funds seeking to seize control of PG&E asked Judge Montali to reconsider his approval of the $11 billion and $13.5 billion settlements. The bondholders say because they are now offering $13.5 billion in cash to fire victims, as opposed to a mix of cash and stock in PG&E's plan, reconsideration of the settlement is warranted. A hearing on the motion for reconsideration is scheduled for Jan. 21.
A hearing on objections to FEMA's $3.9 billion claim and $2.3 billion sought by the California Office of Emergency Services is scheduled for Feb. 11.
Tort Claimants Committee lawyers Robert Julian and Cecily Dumas, of Baker Hostetler in Los Angeles, did not immediately respond to email requests for comment Friday afternoon.
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