Former CEO And COO Of JHL Biotech Sentenced For Conspiring To Steal Trade Secrets And Commit Wire Fraud Exceeding $101 Million
SAN FRANCISCO—A federal jury found Pacific Gas and Electric Company (“PG&E”) guilty today of multiple willful violations of the Natural Gas Pipeline Safety Act of 1968 (“PSA”) and obstructing an agency proceeding, announced U.S. Attorney Brian J. Stretch, California Attorney General Kamala D. Harris, San Mateo County District Attorney Stephen M. Wagstaffe, U.S. Department of Transportation Office of Inspector General Special Agent in Charge William Swallow, FBI Special Agent in Charge John F. Bennett, and San Bruno Police Chief Ed Barberini. The PSA violations were uncovered in the course of an investigation initiated after the fatal San Bruno natural gas pipeline explosion in 2010. The obstruction charge was added later after investigators discovered PG&E attempted to mislead the National Transportation Safety Board (NTSB) during its investigation.
The verdict follows a 5 ½ week trial before the Honorable Thelton E. Henderson, U.S. District Judge. The PSA-related charges stem from PG&E’s record keeping and pipeline “integrity management” practices. The evidence at trial demonstrated that PG&E willfully failed to address recordkeeping deficiencies concerning its larger natural gas pipelines knowing that their records were inaccurate or incomplete. The evidence further demonstrated that PG&E willfully failed to identify threats to its larger natural gas pipelines and to take appropriate actions to investigate the seriousness of threats to pipelines when they were identified. In addition, PG&E willfully failed to adequately prioritize as high risk, and properly assess, threatened pipelines after they were over-pressurized, as required by the PSA and its regulations. On April 1, 2014, a federal grand jury for the Northern District of California returned an indictment charging PG&E with multiple pipeline violations. In finding PG&E guilty, the jury concluded the company knowingly and willfully violated the PSA and its regulations between 2007 and 2010. The jury found PG&E guilty of 5 out of the 11 separate violations of the PSA charged.
The charge of obstructing an agency proceeding was included in a superseding indictment filed July 29, 2014. The charge centers around PG&E’s use of a letter in an attempt to mislead the NTSB during an investigation. The NTSB began its investigation immediately after the deadly San Bruno explosion. During the course of the NTSB’s investigation, PG&E provided a version of a policy outlining the way in which PG&E addressed manufacturing threats on its pipelines. In accordance with this policy, PG&E did not prioritize as high-risk, and properly assess, many of its oldest natural gas pipelines, which ran through urban and residential areas. Although PG&E was operating under the policy from 2009 through April 5, 2011, the company submitted a letter to the NTSB attempting to withdraw the document. According to PG&E’s letter, the policy was produced in error and was an unapproved draft. In finding PG&E guilty of obstructing an agency proceeding, the jury concluded PG&E intentionally and corruptly tried to influence, obstruct or impede the NTSB investigation, in violation of 18 United States Code Section 1505.
U.S. Attorney Brian J. Stretch provided the following statement:
On occasion an event occurs that is sufficiently devastating that a public account must be made, either through an admission of wrongdoing and acceptance of responsibility, or through the judgment of the people acting through a jury. Such an event was the explosion in San Bruno on September 9, 2010, and the physical and emotional injuries suffered by so many that terrible day.
In the aftermath of the explosion, our office, along with the District Attorney of San Mateo and the California Attorney General’s Office, charted a course to examine whether PG&E had complied with the federal regulations designed to keep people safe, or willfully disregarded those regulations. To honor the memory of those who perished in the explosion required nothing less. The jury has determined that PG&E management chose willfully not to follow certain of those regulations.
This verdict in no way diminishes or calls into question the hard, honest work done by PG&E’s employees in the field, as they labor tirelessly day and night to provide us with light and heat. It is a reflection only of the choices and priorities set at the top.
PG&E provides gas and electricity to the citizens of Northern California and must adhere to certain safety requirements and financial limitations. We hope that the verdict today insures that PG&E’s management will adhere faithfully to this compact in the future.
I want to thank the many prosecutors and team members whose singular focus and dedication was nothing short of heroic. The Assistant United States Attorneys who tried the case to the jury -- Hallie Hoffman, Jeff Schenk, and Hartley West – represented the Department of Justice with highest degree of professionalism.
Our office was teamed up with the California Attorney General’s Office, the San Mateo County District Attorney’s Office, and the San Bruno Police Department. This was a shared responsibility and we are deeply appreciative of their commitment to joining us in the pursuit of justice.
In addition, the Federal Bureau of Investigation and the U.S. Department of Transportation Office of Inspector General were relentless in their pursuit of facts.
Finally, the City of San Bruno is a strong community with deep civic pride. It has steadfastly supported this prosecution and advocated for reform. Today’s verdict is an important step toward achieving the lasting change that San Bruno so very much deserves.
“We are very pleased with the verdict and commend the jury for their hard work and thoughtful deliberation,” said California Attorney General Kamala D. Harris. “The California Department of Justice is proud to have worked with the U.S. Attorney’s Office and various federal and state partners to investigate and ultimately prosecute this important case.”
“We are grateful to the US Attorney’s Office for outstanding work with the support of San Bruno Police Department and our office,” said San Mateo County District Attorney Stephen M. Wagstaffe. “Justice was done today and PG&E was properly convicted of multiple felonies insuring justice for our community.”
“These guilty verdicts against PG&E are a sobering reminder to those entrusted with ensuring public safety that we have a solemn obligation to place that safety foremost in our actions,” said William Swallow, regional Special Agent-in-Charge, USDOT OIG. “We appreciate the committed efforts of everybody who helped achieve this result, including our law enforcement peers and prosecutorial colleagues. DOT OIG remains committed to working with them to prosecute to the fullest extent of the law those who endanger public safety. On behalf of the Inspector General, I offer our deepest condolences to the family and friends of those who perished in the San Bruno explosion.”
“The San Bruno Police Department is extremely proud of the complex investigative work that led to a conviction in this case,” said San Bruno Police Chief Ed Barberini. “We are very grateful to the United States Attorney’s Office and all of the partners that contributed to a successful conclusion to this case.”
The maximum statutory penalty for each count for a corporation is $500,000. Judge Henderson has scheduled post-trial motions to be heard on October 11, 2016.
The prosecution is the result of an investigation conducted by the U.S. Attorney’s Office for the Northern District of California, the California Attorney General’s Office, the San Mateo County District Attorney’s Office, the United States Department of Transportation Office of Inspector General, the FBI, the Pipeline and Hazardous Material Safety Administration, and the City of San Bruno Police Department.