SAN FRANCISCO – The surprising decision by federal prosecutors in San Francisco to drop pursuit of a potential $562 million fine against one of the nation’s largest utilities after a deadly pipeline blast marked the second time in recent months that the office has backed down in a high-profile criminal case against a major corporation.
The move Tuesday involving Pacific Gas & Electric Co. came weeks after the U.S. attorney’s office abruptly abandoned drug trafficking allegations against shipping giant FedEx.
The decisions were made after trials had started and raised questions about why the office would spend years building cases only to change course at the eleventh hour.
“It is so unbelievable that the U.S. attorney doesn’t have either the confidence or the faith in their work to be able to defend the charges that they originally made,” state Sen. Jerry Hill said about the decision to pursue only $6 million in potential damages against PG&E. Hill’s district includes San Bruno, the scene of the pipeline blast.
Brandon Garrett, a professor at the University of Virginia School of Law who studies corporate crime, said the moves indicate “the office is not adequately planning and investigating its corporate cases before trial.”
U.S. Attorney Brian Stretch has not provided explanations for the handling of either case, though he has said his office will investigate the FedEx prosecution for any lessons that can be applied to future cases.
The U.S. Attorney’s Office said Wednesday it could not comment on the PG&E decision during ongoing jury deliberations. It declined comment on its handling of corporate prosecutions.
Criminal prosecutions of corporations rarely go to trial and are more often settled through plea deals or agreements.
Laurie Levenson, a former federal prosecutor who now teaches at Loyola Law School in Los Angeles, said such prosecutions are difficult to win in part because of the legal resources corporations have. She thinks the late changes by prosecutors should be reviewed internally, but believes the office deserves credit for bringing the prosecutions in the first place.
“They were aggressive,” she said. “They sincerely believed they needed to do these cases to have a bigger impact on the corporate world.”
Prosecutors spent two years building a case against FedEx, accusing it of shipping prescription drugs that it knew were illegal and that some people died because of it.
FedEx said the decision to drop charges proved there was no basis for them.
In the PG&E case, the utility faces 11 criminal charges related to a 2010 blast that killed eight people and destroyed 38 homes. Deliberations were in their fifth day Wednesday following a monthlong trial.
The decision to seek lower penalties will only come into play if jurors return a guilty verdict.
Assemblyman Kevin Mullin, whose district also includes San Bruno, said he was shocked by the decision to dramatically reduce the possible penalty.
“Until we know the rationale, the victims’ families, residents of San Bruno and current PG&E customers everywhere are likely to feel that their concerns are being ignored,” Mullin said.
The original potential $562 million fine was double the amount prosecutors said PG&E saved by skirting pipeline safety requirements. The utility argued in a court filing that the complicated process of determining any savings the company saw would greatly prolong the penalty phase.
Hill speculated that the U.S. Department of Justice may have seen PG&E’s filing and decided it didn’t want to spend more money for a lengthy penalty phases.
California regulators previously fined the utility $1.6 billion. Robert Weisberg, a criminal law professor at Stanford University, said it’s possible prosecutors felt jurors might see the federal penalty as piling on and be upset at having to spend substantially more time hearing testimony. That could lead them to side with the utility.
“It seems like the government either hadn’t thought it through very well or its motivation shifted during the trial,” he said.