Why Trial Should Be an Option for Corporate Defendants

The Pacific Gas & Electric Co. (PG&E) company was just convicted on 6 out of twelve felony counts relating to the 2010 San Bruno gas explosion that caused death and massive property damage because of a deteriorated portion of the pipeline. I understand that my title seems strange in light of this conclusion but keep reading. The company was charged with eleven counts of violations of pipeline safety laws and one count of obstruction. They were convicted of five of the pipeline safety violations and one obstruction count. The trial lasted over a month and jurors had begun deliberating, when in a surprising move, the prosecutors informed the court last week that they wanted to reduce the criminal penalties they were seeking from PG&E from $562 million to only $6 million. Yes, you read that correctly: an approximately 99% reduction in the amount of penalties sought. Now with a conviction they face only a maximum penalty of $3 Million. This unexpected move by prosecutors is unquestionably a significant victory for PG&E in spite of the conviction.

What strikes me is that this is yet another example of a corporation reaping the benefit of going to trial to defend against a government accusation of criminal conduct, rather than plead out by reaching an expensive, non-prosecution agreement or other costly settlement.  I think it is safe to assume that during plea negotiations either prior to or after the prosecution’s indictment that the fines proposed by the federal government far exceeded $6 million.  That is because it is easy to talk tough when your evidence or theories of the case aren’t being tested in a courtroom in front of a judge or jury.  It’s one thing to champion a winning theory or your evidence in a conference room – but you put your money where your mouth is so to speak – in the courtroom.  I recently blogged about a similar situation in a criminal case brought against FedEx in which the judge dismissed some charges against the shipping company at trial and prosecutors later voluntarily dismissed all the remaining criminal charges.  

The prosecutors’ request to lower the proposed fine against PG&E to $6 million is a huge shift from their original position of $562 million, and it could be compared to an individual being charged with a felony which prosecutors then later reduce to a misdemeanor in the middle of trial. But this appears to be such a drastic reduction that one has to wonder if the Government’s pursuit of such a high penalty was anything but bluffing. When more and more corporate defendants start to stand up to the government rather than automatically thinking their only option is to “cooperate” then maybe we will start to see indictments based on stronger evidence, or criminal investigations that are simply ended because there is not enough evidence to win at trial.