FEMA wants billions for helping after California wildfires. Victims plead with judge to stop them

Feb. 26--SAN FRANCISCO -- PG&E Corp. and lawyers for wildfire victims Wednesday urged a bankruptcy judge Wednesday to reject FEMA's demand for a $3.9 billion reimbursement from the troubled utility, saying the government's claim could undermine a carefully crafted plan to compensate victims and exit bankruptcy.

"There's no question this is a cloud over the entire case," said Eric Goodman, a lawyer representing victims of the 2017 wine country fires and 2018 Camp Fire.

The Federal Emergency Management Agency filed a $3.9 billion claim in PG&E's bankruptcy, saying taxpayers deserve to be reimbursed for the assistance the government provided after a succession of fires caused by PG&E's faulty equipment. California's Office of Emergency Services has a claim of its own, for $290 million it spent coordinating cleanup and other activities after the wildfires.

But with hundreds of wildfire victims already expressing displeasure with PG&E's compensation plan, lawyers for PG&E and fire victims said the government claims could blow a major hole in the $13.5 billion settlement the utility has agreed to pay.

Goodman told U.S. Bankruptcy Judge Dennis Montali that the claims must be disallowed, largely because federal law prohibits FEMA from seeking reimbursement unless it can show PG&E deliberately set the Camp Fire and other disasters.

"We didn't intend to cause the fire," said PG&E lawyer Paul Zumbro.

But FEMA's lawyer Michael Tye said PG&E's repeated inability to maintain its power equipment gives the federal government the right to recoup its costs. PG&E "knew a wildfire wass likely to result, as a result of their conduct," Tye told Montali.

The judge said he would rule quickly on the issue.

The question could prove critical to PG&E's efforts to leave bankruptcy by June 30, the deadline set by the Legislature when it created an insurance fund to help buffer utilities against claims from future wildfires.

Under bankruptcy law, PG&E's $13.5 billion payment plan will come up for a vote of the estimated 80,000 wildfire victims. Carving out more than $4 billion for the government agencies could tilt the vote against the proposed settlement, lawyers for the victims said.

"If you're a victim and you believe you're going to receive less money ... I would assume logically that would affect your thinking," Goodman said after the hearing.

Lawmakers outraged at FEMA claim

FEMA's pursuit of money has created friction among elected officials. After the agency said it might go after fire victims directly to recover "duplicated benefits" -- money paid to them already by insurance companies or other sources -- FEMA was hit with complaints of outrage.

On Tuesday, a bipartisan group of California members of Congress introduced legislation that would forbid FEMA from going after fire victims who mistakenly got duplicated benefits. Among the sponsors are Republican Doug LaMalfa, whose district includes the Camp Fire burn zone, and Democrat Jared Huffman, whose district includes parts of the wine country.

As it is, wildfire victims have begun protesting the payment plan, partly because half of the $13.5 billion would come in the form of PG&E stock deposited in a trust fund. The trust would sell the shares over time to raise cash to pay the victims.

"Wildfire victims should not be forced to settle for compensation contingent on future stock value given all this volatility (of the share price)," says a petition signed by more than 1,600 wildfire victims and submitted to the court recently. The petition was circulated online by the activist group Change.org.

One of the signatories, Will Abrams, who lost his Santa Rosa home in the 2017 wine country fires, has emerged as an unofficial spokesman for dissatisfied victims.

Abrams grilled PG&E Chief Executive Bill Johnson for nearly two hours Tuesday at a Public Utilities Commission hearing on PG&E's reorganization proposal.

In one remarkable exchange, Abrams asked Johnson about making sure victims' rights are in the forefront of PG&E's plan. Johnson recalled visiting Paradise last spring with other company executives and said they "listened to 911 tapes and watched video and looked at remains. If you think I'm unaffected by this...you are wrong. This has affected me deeply. I'm going to do everything I can to make this right."

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