PG&E challenges criminal convictions linked to probe of blast

Pacific Gas and Electric Co. wants a federal judge to throw out its convictions for safety violations uncovered during an investigation that followed the deadly San Bruno pipeline explosion, arguing that there was no evidence the company or any of its employees knowingly broke any laws.

Prosecutors in the 5½-week trial failed to show that “anyone at PG&E had any evil intent or subjective belief that they were violating a clear legal duty,” as required for criminal convictions under the safety laws, the company’s lawyers contended in papers filed late Tuesday.

They also argued that PG&E was wrongly convicted of failing to properly inspect and test its pipelines for signs of danger because the law it was charged with violating does not require pipeline operators to choose the best methods of assessing those threats, but merely mandates that they document the methods they actually chose.

A U.S. District Court jury in San Francisco found California’s largest utility company guilty Aug. 9 of six felony charges: five for failing to gather information on past pipeline leaks, assess ongoing dangers and give priority to hazardous pipe segments, and a sixth count of obstructing the federal investigation of the September 2010 San Bruno explosion, which killed eight people and destroyed 38 homes.

Jurors acquitted PG&E of six charges of knowingly failing to keep accurate records. But the convictions on the pipeline charges supported federal prosecutors’ argument that the company had placed profits above safety.

Prosecutors had sought fines of up to $562 million, based on PG&E’s alleged profits from illegal conduct, but dropped that request during jury deliberation, apparently because of rulings by U.S. District Judge Thelton Henderson limiting the evidence they could use to link cost savings to specific acts of lawbreaking. The maximum fine is now $3 million, but officials in San Bruno also want the judge to consider appointing a monitor to oversee the company’s compliance with the law.

Henderson has scheduled a sentencing hearing for Jan. 23. First, however, he will hold a hearing Oct. 11 on PG&E’s request to overturn the convictions and dismiss the charges, based on its claim that the case was so flimsy that it never should have gone to the jury.

The obstruction charge involved a company official’s April 2011 letter to federal regulators denying that PG&E had a policy of propelling gas through its older pipelines, including the San Bruno line, at pressures up to 10 percent above the federal limits. Prosecutors presented testimony from company employees about allowing a 10 percent leeway, but defense lawyers argued Tuesday that such a policy — if it existed — was not enough to support a conviction.

PG&E “did its best to cooperate” with the National Transportation Safety Board investigation, and its engineers truthfully discussed the 10 percent pressure issue with both federal and state investigators around the same time the letter was written, the company’s lawyers said.

They said prosecutors never identified any employee who knowingly lied to the federal agency or tried to interfere with the investigation, so they resorted instead to a “first-ever collective corrupt intent theory” that they said Henderson should have excluded from the case.

Regarding the safety charges, defense lawyers said the evidence showed that “PG&E meticulously identified and evaluated every potential threat on its pipelines.”

During the trial, prosecutors presented evidence that the company, looking to save money, inspected pipelines externally for signs of corrosion, using methods that were far less expensive than internal technology probes or high-pressure water testing and were incapable of detecting welding defects like the one that caused the San Bruno explosion.

But PG&E’s lawyers argued that the regulations it was charged with violating do not require a pipeline operator to choose the “best” assessment method, or set clear standards for giving priority to the most serious hazards.

The company’s engineers were “struggling to understand and implement a completely ambiguous and open-ended regulatory mandate,” the lawyers said. “A defendant cannot be convicted of willfully violating a statute with no objectively clear requirements.”