‘Pawns in this big game’: Frustration builds as 2017 North Bay fire victims wait for compensation

Daniella Stanghellini was determined to get her grandmother back home as fast as possible after the 2017 Tubbs Fire tore through the Orchard, a 55-and-older mobile home community in Santa Rosa where her grandmother had lived for 34 years.

Her grandmother, Eleanor Miller, struggled in temporary housing. Without her longtime friends and neighbors or any trappings of her former life, she became a shut-in.

“In the beginning, she just wanted to go home, that was it, so we got her home whatever it took,” Stanghellini said, tearing up at the memory.

Stanghellini stretched to pay for the replacement home where Miller lives now.

“At the time, she was 93,” Stanghellini said. “It’s a life clock, trying to get her home before she dies. That’s what I was fighting. I just wanted her to be home and comfortable before she goes.”

Today, Stanghellini is still fighting. Now her battle is to get Miller, now 98, paid from the Fire Victim Trust, which was established in U.S. Bankruptcy Court in 2020 to compensate victims of wildfires from 2015 to 2018 caused by utility Pacific Gas & Electric Co.

The fund covers damages for the victims of deadly wildfires, including the Nuns and Atlas fires in 2017 and the Camp Fire that devastated the town of Paradise and killed 85 people in 2018. Tubbs Fire victims are also covered by the fund, though Cal Fire investigators said that fire did not start from PG&E equipment.

(The Press Democrat Podcast: What’s wrong with the Fire Victim Trust?)

Victims’ attorneys and the utility agreed to a $13.5 billion sum. But victims, under considerable pressure, agreed to accept half that sum in stock even as the share price was dropping.

Today, people like Miller remain dependent on PG&E’s stock rising considerably to be made whole.

More than two years after the trust was established, Miller has received less than 40% of what is owed to her. She doesn’t know when she’ll see the rest.

“Nobody tells us anything,” Stanghellini said. “It's me stalking my lawyer. It’s my lawyer stalking them to try to get her paid out.”

In Miller’s case, insurance only covered a small portion of her burned home. Stanghellini is counting on trust funds to pay herself back for the new mobile home, pay for additional modifications to accommodate Miller’s age and maybe bring in a caregiver.

“This money, it's about protecting her life,” Stanghellini said.

Five years after the fire, tens of thousands of North Bay and Paradise residents remain in brutal limbo, unable to pick up their lives from flames that cost them homes, livelihoods and loved ones. There are many reasons the tragedy lingers in these communities, but the long wait for compensation for physical and emotional losses from the utility compounds the injury.

The trust’s rollout has been plagued with questions about administrative spending and transparency, leaving victims to fear they’ve been left with the short end of the stick. Meanwhile, the trust’s overhead, including payments to law firms, public relations firms and lobbyists, topped $132 million by the end of 2021.

The trust employs roughly 300 people to assess and process claims, according to trust administrator Cathy Yanni.

After a long wait, the trust is making payouts. To date, 82% of the people who have filed a claim, roughly 57,000 people, have received a “determination notice” stating the amount the trust intends to offer them. The goal, Yanni said, is to get to 90% by the end of the year.

In terms of money out the door, more than $5 billion in partial payments have been distributed to 48,000 of the 70,000 claimants, according to the trust’s most recent data.

Some of those payments were small amounts to get victims through immediate hardships. No one has received more than 45% of what the trust has determined they’re owed.

Yanni, who has led the trust since July, defends its performance and promised a new focus on outreach. Yanni is a longtime mediator who has worked on past mass tort settlements.

“My purpose is to make the victims as whole as possible,” she said. “That's my goal to get everybody paid.”

It is unclear when, or even if, victims will receive what they’re owed.

“It all depends on the stock, so at the moment, there's no way to know,” Yanni said.

When the trust received 477 million PG&E shares in July 2020, the company was trading at $9 per share. That price left the trust corpus $2.5 billion below what victims were promised.

Calls to ‘make it right’

To understand why Miller and so many other victims who lost everything remain uncompensated, it’s necessary to look to the years immediately after the fire, when widespread outrage and calls to “make it right” were diluted by the powerful forces of high finance, the legal system and political deal-making.

The 2017 North Bay firestorm and 2018 Camp Fire drove changes in how California reacts to, and seeks to prevent, utility-caused wildfires. PG&E, for its part, emerged from bankruptcy under new management and with new commitments to wildfire safety.

“I've spoken to victims, and it's heartbreaking,” PG&E CEO Patti Poppe told The Press Democrat in August, halfway through her second year leading the utility.

“I am not shying away from the hazard of wildfires and burying my head in the sand about the effects of it. Everything we're doing every single day will help all people, the victims who have previously been affected from having a second event, heaven forbid.”

But amid promises from PG&E — and policy reforms that Gov. Gavin Newsom and lawmakers say hold the utility accountable — many fire victims say the state put the disasters behind by leaving them unable to do the same. While the controversial half-cash, half-stock deal allowed the utility and its regulators to move on, it ensured victims would not be made whole for years to come, if ever.

Stanghellini, too, considers the fires “heartbreaking.” But she feels the same way about the deal that left her grandmother waiting for money.

“It’s been heartbreaking to watch this whole thing unfold,” she said. “But it’s really just been my honest goal to make to get her home and to give her whatever she needs, at whatever expense to have her have the end of life and place that she feels comfortable. So, we just make it work.”

Legislation ‘didn’t do squat’

When the vast majority of victims voted to accept the deal, it appeared they had little choice. Today, some victims and attorneys say there were better options, but the 70,000 victims spread around Northern California were no match for the more powerful, organized interests operating in the bankruptcy court and statehouse.

By the time fire victims began voting on the deal in spring 2020, the nation was gripped by the COVID-19 pandemic and the pressures for PG&E to clear bankruptcy were mounting.

The summer before, on July 12, 2019, the California State Legislature passed Assembly Bill 1054, Newsom’s reaction to devastating wildfires PG&E had previously sparked.

While reform advocates have criticized its effectiveness, the sprawling legislation created new rules to oversee wildfire mitigation work. AB 1054 also created the $21 billion California Wildfire Fund to ensure victims of future utility-sparked wildfires would have clear compensation for their losses – giving PG&E investors assurances the company was not likely to again face fire claims reaching the level of the Camp and North Bay wildfires that led them to declare bankruptcy.

While the bill changed the policy landscape for California wildfire victims and the company whose equipment continues to spark devastating fires, the legislation “didn’t do squat for the people already burned out and killed,” said Tom Tosdal, a veteran Southern California fire litigation attorney with 1,047 clients from the Camp, Atlas and Redwood Valley fires.

Others argued the legislation protected PG&E from declaring bankruptcy anew, which could have further compromised the Fire Victim Trust’s value or even allowed PG&E to back out of the deal.

AB 1054 included a line, characterized by Newsom as a twist of the utility’s arm, that required PG&E to emerge from bankruptcy by June 30 with a deal for victims if it wanted access to the California Wildfire Fund.

The utility was under immense pressure from the financial world to prove its viability. In January 2019, credit rating agencies S&P Global, Fitch and Moody’s downgraded PG&E’s bond rating into junk bond territory, increasing its borrowing costs.

AB 1054 created both a route to a more financially secure future and a pressing incentive to exit bankruptcy.

Big trial lawyers who had amassed clients through widespread advertising campaigns as the fires still cooled were already urging a yes vote on the deal. The same lawyers had pushed for the passage of AB 1054.

A new organization called Up From the Ashes acted as a grassroots advocacy group for wildfire victims. But the group was funded by the same attorneys who would later tell clients to embrace the deal, according to a complaint filed against Up From the Ashes by a labor union representing the utility’s workers.

In July 2019 victims traveled to Sacramento to urge lawmakers to pass AB 1054, armed with talking points drafted by Up From the Ashes.

They touted the bill’s safety measures, giving it the political endorsement of people devastated by PG&E-sparked blazes. The talking points also included a note that the bill “will help to speed resolution for current wildfire victims – so that they can finally begin rebuilding their lives.”

“The victims, being used as a sword, sealed their own fate, because nobody could come up with an alternate plan to actually pay the victims,” said Loretta Lynch, who served as president of the California Public Utilities Commission in the early 2000s during PG&E’s first bankruptcy and is a critic of current regulators.

“The race was on, the clock was ticking to get that bankruptcy done,” she told The Press Democrat.

By the spring of 2020, with voting underway, other attorneys and victims would sound the alarm about claimants being left with piles of poorly performing stock shares.

“It is woefully apparent that this PG&E ‘new deal’ is a bad deal for fire victims,” several attorneys for fire victims led by Jeremiah Hallisey wrote April 27, 2020.

In an email that same month, two Santa Rosa-born attorneys, Greg and Steven Skikos, warned their clients not to vote early. “A ‘yes’ vote at this early juncture would only serve to WEAKEN our ability to negotiate favorable terms,” Greg Skikos wrote, warning his clients not to be swayed by “advertising law firms.”

After repeatedly cautioning their clients, which made up one of the larger groups of victims, to hold their vote, the Skikos brothers ultimately urged a “no.”

Three of 13 committee members negotiating for the victims resigned in protest over the deal.

“Seeing the deal that was proposed, I knew the fire victims were gonna get screwed ... Unfortunately, my belief at the time came true,” said Kirk Trostle, a Camp Fire victim and one of those who resigned.

But with AB 1054, advocates for the deal had an even scarier scenario to point to.

“This is the only settlement option on the table. If it is rejected, a better deal is extremely unlikely and will only delay payments, if any, to survivors,” warned a website for Mikal Watts, a high-profile attorney from Texas who had picked up thousands of fire victims clients who was the most prominent “yes” vote advocate.

“Without access to (the California Wildfire Fund), it is unlikely that there will be another settlement offer anywhere near $13.5 billion,” the site continued.

Few options

Rod Gross lost his house to the Tubbs Fire, and his daughter Riz suffered serious burns to her body during a harrowing escape from their burning street in Coffey Park.

The Gross’s fled their home at 2:27 a.m. the night of the fire into a burning neighborhood. They had to make their way down the street as gas tanks exploded and “a thick river of embers roll(ed) in waves down the street,” Gross wrote in an email documenting his escape.

Riz’s pain has been intense and long lasting, she said, costing her considerably in payments for medicine and impairing her ability to work.

With a deal on the table, Gross was desperate for closure. The two were dealing with her physical and emotional pain. They were struggling to process the loss of their home and their inability to work — Riz because of her injuries and Gross because he lost equipment he used for his digital-graphics and video-editing work.

Gross did not have a lawyer. Through his own research he knew it was a bad deal but voted yes, he said, seeing no good option.

“Like voting for president,” Gross joked in an interview.

“We had no power,” he said. “The banks and the insurance companies had lots of leverage, lots of power and we had none.”

“At a certain point you just want to get it done and move on,” he said.

They are still waiting. They received a 5% preliminary payment in October 2021 after considerable haranguing of trust officials, Gross said.

Though he believes trust performance and outreach is improving since Yanni took over in July, he has not received a determination on a substantive claim that includes a lost home, lost wages, physical injuries and emotional distress.

But arguments that the deal was the best on the table won the day. An overwhelming 85% of the claimants who voted backed the plan.

In bankruptcy court, attorneys raised procedural issues about the vote, including concerns victims had not received an honest accounting of the deal. They asked the judge to reject or modify the bankruptcy plan so that victims weren’t the group taking on the greatest risk.

U.S. Bankruptcy Court Judge Dennis Montali, who has served on the bench for almost 30 years and presided over PG&E’s first bankruptcy in 2001, denied those efforts.

“The judge should have stood up for the fire victims and he didn’t,” attorney Tosdal said, “the politicians and the legal system did not protect the fire victims.”

Profiting from the wreckage

By declaring bankruptcy, PG&E entered into a process created to see it through to the other side of a playing field where victims were at a disadvantage.

Bankruptcy is “designed to help companies work through situations where their liabilities exceed their assets,” said Adam Zimmerman, a law professor at Loyola Marymount University.

“We have a legal structure that's there for people and companies that are insolvent, and we are kind of re-purposing it to deal with how we compensate a large group of people in the wake of mass disaster,” he said.

Even as the utility proceeded through bankruptcy, lawyers for PG&E shareholders repeatedly described the company as solvent in court hearings.

Investors and other parties well-equipped to maneuver in bankruptcy court recouped cash and in some instances even made a profit out of the wreckage. Hedge funds holding PG&E bonds ensured they would be paid back $21.5 billion by securing debt against the company’s assets. Insurers secured $11 billion in cash.

One hedge fund, Baupost, made a more than $3 billion profit through financial maneuvering amid the bankruptcy, according to reporting by Bloomberg. A 2021 analysis by Bay Area radio station KQED found 20 Wall Street hedge funds made at least $2 billion dumping stock after PG&E emerged from bankruptcy.

Only victims were left relying on ailing PG&E stock, ever vulnerable to future wildfires sparked by the company. Just last week, PG&E announced it’s under investigation to determine if it started the Mosquito Fire, California’s largest this year.

Trust officials, last month, pointed to positive signs for the stock. PG&E was recently accepted back into the Standard and Poor’s 500, one of the most commonly followed stock indexes, which Yanni said should lead to an uptick. On Wednesday, amid a broad stock market rally, the trust sold 35 million shares. Based on a stock price around $14 a share, The Press Democrat calculated the sale netted close to $500 million.

Still, all involved agree that getting the share price back to a price sufficient to make victims whole remains a long way off.

The April 2020 court filing by Hallisey two weeks before victims’ finished voting made the bleak prediction:

“The only group of creditors who are at risk of getting less than they deserve are the fire victims — the very individuals who suffered most,” the filing said. “It is also obvious that the ‘deal’ protects the current shareholders who swooped in to buy PG&E stock when it was at all-time lows and who will now reap billions of dollars in profits.”

‘So many power plays’

“We were just the small little pawns in this big game,” said Lisa Yoshida, who lost her home of 30 years in the Tubbs Fire. “There were so many power plays in Sacramento, and in the bankruptcy court.”

That feeling grew after two years of long communication gaps and endless back and forth with their lawyers and with the trust.

Yoshida’s husband, Jim Hunt, built the home with his parents when he was in high school in 1977.

“We’ve been just suffering at the whim of the trustee, and it's been horrible,” Hunt said.

As a custom house, the rebuilding costs were high. They put construction on hold part way through.

The couple rejected the trust’s first offer, which would have essentially given them nothing for the house after what was covered by insurance. The second offer was better but didn’t account for the property they’d lost, reconstruction and steep public adjuster fees they’d incurred itemizing their personal property.

By Hunt’s calculation, the rebuilding cost alone was about $850 per square foot. The trust offered only $450.

“I understand there's a finite amount of money, but we lost everything we had in this fire,” Hunt said. “It's not even close to the reality of what things cost.”

The limbo took an emotional toll, too.

“The recovery process is a roller coaster,” Yoshida said. “In addition to the grief of losing our home, there’s just that loss of control. It used to feel good thinking about being back in the house, and then it stopped feeling good because we didn’t know if we’d ever get back.”

“I've been depressed since the fire. I mean not just a little bit, really depressed,” Hunt said. “Every day I go home to this rental, it’s not my home. If somebody said, ‘you're not going to get your home back, this is where you're going to live.’ That's different than having an expectation that I can move on.”

Reading about the trust’s expenses hasn’t helped, they said.

In its first year, the trust spent $51 million on lawyers’ fees, claims administrators and financial professionals, while only paying out $7 million in claims, according to a May 2021 report by KQED. Among the costs is the $125,000 a month salary of the trust administrator.

Those numbers prompted widespread outrage among victims, lawmakers and others that has not faded even as the trust dramatically accelerated its payouts.

One Tubbs Fire victim, Will Abrams, has asked bankruptcy judge Montali for discovery into the trust’s spending and its financial relationships with trial attorneys on its oversight committee. He’s faced resistance both from the trust’s attorneys and at times Montali himself.

Yanni, who took over after previous administrator John Trotter resigned in July, pledged transparency during a recent meeting with The Press Democrat’s editorial board.

Yanni described failures in communication and outreach that led to a poor public view of the trust. Had she been in charge earlier, “I would have been much more open about what we were doing and why we were doing it,“ she said.

Assessing nine different kinds of damages, from property loss to emotional distress to wrongful death for 70,000 victims, through a pandemic, the trust has been faced with a particularly difficult task in an inherently complex and time-consuming process.

“The work is time consuming and requires a great degree of skill on the part of the trust administrators, as well as the professionals hired to work for the trust,” said Jared Ellias, a Harvard Law School professor specializing in bankruptcy law.

“These trusts do take a while to do their work. No matter how quickly they do it, there's a lot of unhappiness with how long they're taking,” he said.

But Daniella Stanghellini is worried about her grandmother. She has fallen three times in the last month.

“This is people fighting a life clock where there are serious repercussions if they don't have the money. Where’s she gonna go? How is she going to be taken care of?” Stanghellini said.

Stanghellini worries, too, if she'll be on the hook to pay off the house if the payment doesn’t come before Miller passes.

“That’s a burden I’ll take. I don’t have a choice at this point,” she said. “I wouldn’t do it any differently. She needs to be home.”

Coming Monday: The state board that regulates contractors is understaffed and overwhelmed, making it difficult to protect wildfire victims from unscrupulous builders.

You can reach “In Your Corner” Columnist Marisa Endicott at 707-521-5470 or marisa.endicott@pressdemocrat.com. On Twitter @InYourCornerTPD and Facebook @InYourCornerTPD.

You can reach Staff Writer Andrew Graham at 707-526-8667 or andrew.graham@pressdemocrat.com. On Twitter @AndrewGraham88