FEMA seeking billions in PG&E settlement with wildfire victims

USA – Former FEMA director James Lee Witt, who led the agency from 1993 to 2001, said he was shocked when told by a reporter about the $4 billion being sought by his former agency, calling the move “unusual” and “inappropriate.”

Witt said the agency didn’t seek this kind of reimbursement during his tenure.

“You’re taking money away from the rebuild and individuals when your job is to help individuals — not to take money away from them,” Witt said.

Witt came to Sonoma County in the aftermath of the 2017 October fires to help launch a nonprofit initially created to help in the recovery, but Witt said he has not been involved in the local recovery efforts since.

FEMA filed its claims Oct. 18 in U.S. Bankruptcy Court, after negotiations were well underway.

By that time, wildfire victims had already reached a tentative deal with a group of bondholders offering more money to victims in a bid to wrest control of the company away from its majority shareholders — a competing plan that helped wildfire victims negotiate a better deal with PG&E than the utility’s initial offer of $8.4 billion.

As far back as June, local and state agencies, including Sonoma County and Santa Rosa governments, reached a $1 billion deal with PG&E.

The utility then in September settled with insurers for a sum of $11 billion. Both deals are separate from the $13.5 billion agreement proposed by PG&E to resolve all remaining wildfire claims.

FEMA’s request for compensation came late in the process, according to Santa Rosa resident Patrick McCallum, who lost his home in the Tubbs fire and lobbies on behalf of wildfire victims with the group Up from the Ashes.

“It squeezes wildfire victims and there are efforts to get the feds to reduce their claim and have the wildfire victims get first draw on the fund,” McCallum said.

The negotiations in PG&E’s bankruptcy have involved an unusually high number of creditors seeking to be made whole, said Jared Ellias, a UC Hastings law professor and bankruptcy expert who is a close observer of the case. The utility will leave with greater debt in the end but with a key success in settling claims from wildfire victims.

U.S. Bankruptcy Judge Dennis Montali and U.S. District Judge James Donato — both charged with overseeing aspects of the reorganization — have masterfully orchestrated the proceedings to lead to this deal, which will likely circumvent the need for a civil trial on the cause of the Tubbs fire, he said.

“Before FEMA showed up, this case was coalescing,” Ellias said. “A problem they have, I don’t think PG&E can find another $5 billion. I think this company is tapped out.”

Montali has scheduled a Dec. 17 hearing to discuss the proposed deal.

The legal argument against FEMA’s claim rests on federal law that states the disaster must have been caused by an intentional act for the agency to seek reimbursement, said Eric Goodman, an attorney with Baker & Hostetler who authored the objection.

In this case, PG&E may have been negligent but no state investigation has made claims about the utility’s intent, he said.

Goodman urged individuals hit by wildfires to file a claim form by the Dec. 31 deadline.