SAN FRANCISCO (CN) — Pacific Gas and Electric will pay $90 million to settle a shareholder class action claiming “gross mismanagement” by corporate leaders contributed to the San Bruno pipeline disaster that cost the company more than $2.2 billion in fines and settlements.
Under terms of the settlement proposed Tuesday, PG&E’s insurance company will pay $90 million to shareholders, and the company will spend another $32 million on safety reforms. The deal requires PG&E to establish independent safety and nuclear oversight committees, invest in laser-based leak detection technology, and strengthen anti-retaliation protections for employees who report safety violations, among other conditions.
Lead plaintiff Andrew Bushkin sued PG&E’s board of directors and top executives in February 2016 after the company was fined $1.6 billion by the California Public Utilities Commission and paid another $620 million in compensation to victims of the San Bruno pipeline disaster.
On Sept. 9, 2010, Line 132 ruptured in a residential neighborhood of the San Francisco suburb, causing an explosion and fires that killed eight people, injured 58 and destroyed 38 homes.
In August 2016, a jury convicted PG&E of five counts of Pipeline Safety Act violations and one count of obstructing an investigation into the cause of the blast. Prosecutors said the company prioritized profits over safety, neglected to keep accurate pipeline records and failed to adequately inspect lines with manufacturing flaws that experienced over-pressurizations. PG&E was ordered to pay the maximum $3 million fine and spend another $3 million advertising its conviction.
Bushkin claimed the board of directors and former CEO Anthony Early Jr., who still chairs PG&E’s board, caused the company to violate laws and obstruct justice, ruined the company’s reputation, and refused to reform its corporate culture and governance until it was forced to do so by public pressure and the criminal indictment.
Under the settlement proposed Tuesday, PG&E and its directors and executives would be released from liability for claims of mismanagement alleged in Bushkin’s complaint and at least three other shareholder class actions.
The deal requires PG&E to establish two safety and nuclear oversight committees for both of its companies: PG&E Corp. and Pacific Gas and Electric Co. The committees are to comprise independent directors that will publish semiannual transparency reports.
The company also pledged to spend $32 million for third-party assessments of its pipeline safety program, new certification requirements for contracted pipeline inspectors, enhanced training for employees and first responders, data tracking improvements, laser-based leak detection technology, and verifications of pipeline data through physical line inspections.
Additionally, the company says its chief safety officer and chief ethics compliance officer will regularly attend board meetings and have access to information from employees and senior management.
PG&E has also vowed to hold in-person or telephone meetings at least once a year with its 10 largest shareholders.
Attorneys for the shareholder class agreed not to seek more than $25 million in attorney’s fees and $500,000 in costs, according to the proposed settlement.
The deal must be approved by U.S. District Judge Susan Illston before it can take effect.
In a statement, PG&E spokesman Greg Snapper said settling the case was appropriate.
“Just as our decision not to appeal the verdict in the criminal trial has allowed us to move forward, we believe settling this case is another step in the right direction,” Snapper said in an emailed statement Wednesday morning. “It’s also important to recognize our tremendous progress as a company since 2010 and that we’ve embraced an all-in commitment to continuous improvement.”
Class attorney Francis Bottini Jr. did not immediately return phone calls seeking comment Tuesday afternoon.
(National Transportation Safety Board photo shows the San Bruno pipeline explosion of Sept. 9, 2010.)