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Feds Hand PG&E A Legal Victory In Criminal Trial Over Its Pipeline Safety Policies

A massive gas pipeline fire roared through a neighborhood in San Bruno, Calif., on September 9, 2010. Federal prosecutors, without explanation, slashed the potential criminal penalties they were seeking in the trial of utility giant PG&E for violating gas pipeline safety laws.

In an unusual legal action, federal prosecutors in San Francisco drastically cut back the potential criminal penalties they were seeking in the trial of utility giant Pacific Gas and Electric Co. which is accused of violating pipeline safety laws in the wake of the 2010 San Bruno gas explosion. Eight people were incinerated and 38 homes were destroyed in that explosion.

The prosecutors did not explain their action and neither did U.S. District Judge Thelton Henderson who approved the reduction Tuesday.

The government was originally seeking a penalty of $562 million. But in a court filing, the prosecution withdrew its request and instead asked for only $6 million. The higher figure was based on a doubling of the amount of money prosecutors say the utility saved by not maintaining its pipelines to insure their safety. The potential $562 million would have ranked among the largest corporate criminal fines ever.

PG&E has been on trial for more than a month. Wednesday marks the fifth day of jury deliberations in which jurors are weighing 11 felony violations of federal pipeline safety laws. The company is also accused of obstructing the federal investigators by misleading them about the pressures at which it was pumping gas through aging pipelines, such as the one that ruptured in San Bruno.

The prosecution offered several former or current PG&E employees who testified that the utility cut corners by inadequately inspecting gas pipelines, leading to the failure to detect a faulty internal weld in the San Bruno pipeline.

The timing of the announcement has sparked speculation that the prosecution fears that jurors were hung up on the potentially large penalties. However, at this stage, the jury is still deliberating on whether PG&E is guilty or not.

One possible effect of the prosecution's action is to undercut the purpose of a potentially large penalty in deterring a company from violating the law.

As University of Virginia Law School professor Brandon Garrett told the Associated Press,"Obviously, if a company does not have to pay a fine that is larger than its gains, then its crime becomes profitable."

San Bruno Mayor Jim Ruane told member station KQED that the monetary penalty was not as important to him as seeing PG&E convicted.

Ruane said he was surprised by the fine reduction, but hoped the judge would decide on a conviction. "We still believe that the real important thing in this whole trial is a conviction — a black mark on the corporate seal of PG&E," Ruane said.

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