CALIF-DROPS-PGE-LAWSU
A judge dismissed a state lawsuit alleging that PG&E; Corp. drained as much as $4 billion from its Pacific Gas & Electric unit before putting it in bankruptcy, the company said Thursday.
The lawsuit, filed by former California Atty. Gen. Bill Lockyer in 2002, was dismissed in state court in San Francisco after an independent expert found PG&E; had done nothing wrong, the utility said in a regulatory filing.
“Following a neutral evaluation of the attorney general’s claims by a former California Supreme Court justice, the attorney general and the defendants jointly requested that the complaint be dismissed,” PG&E; said in the filing.
The lawsuit pitted PG&E; against Lockyer at a time when California’s 2001 energy crisis was fresh on consumers’ minds and politicians were seeking ways to fix the state’s deregulated power market. The state had sought damages of as much as $4 billion.
California Atty. Gen. Jerry Brown asked the judge to drop the case after accepting an out-of-court opinion issued in August by former California Supreme Court Justice Joseph Grodin, according to PG&E; spokesman Jonathan Marshall.
“We agreed to bring in a neutral party,” Marshall said Thursday. “We believe we did nothing wrong. That was supported by Justice Grodin’s decision and further endorsed by the attorney general’s decision to drop the case.”
The dismissal is with prejudice, meaning California can’t file the complaint again, PG&E; said. A similar lawsuit filed against PG&E; in 2002 by the city of San Francisco, where PG&E; is based, is pending in the same court, according to the filing.
Lockyer, who is now California’s treasurer, alleged PG&E; fraudulently transferred funds in the form of dividends and stock repurchases from Pacific Gas to PG&E; from 1997 to 2000 in a bid to hide cash from creditors. The scheme drove the utility into bankruptcy by using its cash to finance unregulated affiliates, Lockyer claimed.
The former attorney general also accused PG&E; of misleading the California Public Utilities Commission to gain approval of its holding-company structure. Lockyer at one point sought an investigation by the U.S. Securities and Exchange Commission.
Pacific Gas filed for bankruptcy in April 2001 after accruing $9 billion in debt from buying power for more than it could charge customers under California’s failed deregulation plan. The unit emerged from court protection three years later.
PG&E;’s shares rose 38 cents, or 1.1%, to $35.92.
