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Fire Victim Trust letter to 2017-18 PG&E fire survivors details payments issued so far

Fire survivors from PG&E caused fires have asked Action News Now many questions about how the claims process is managed by the Fire Victim Trust. Trustee Judge Trotter responded to many of these questions this week in a letter to survivors.

Posted: Apr 13, 2021 6:10 PM
Updated: Apr 17, 2021 9:38 AM

Update 9:37 a.m. Saturday, Apr. 17, 2021 - We had an incomplete list of impacted fires in this article. It has since been updated from the list on the Fire Victim Trust website.


BUTTE COUNTY, Calif. -The Fire Victim Trust (FVT) set up to may payments to fire victims from several fires after the Pacific Gas & Electric Company (PG&E) bankruptcy payments has released a letter to survivors from the Trustee, Judge John Trotter.

The letter was filed with the court on Monday and was posted to the FVT website Tuesday afternoon.

Action News Now had posed several questions to the FVT that we have been asked to investigate by survivors of the 2018 Camp Fire and multiple other 2017 Northern California Fires. This letter from the Judge addresses several of the questions we asked them.

Here is the list of fires that are included in the proceedings (This list has been edited as it was incomplete)

(a) Butte Fire (2015)

(b) North Bay Wildfires (2017) (Includes 37; Adobe; Atlas; Blue; Cascade; Cherokee; Honey; LaPorte; Lobo; Maacama/Youngs; McCourtney; Norrbom; Nuns; Partrick; Pocket; Point; Pressley; Pythian/Oakmont; Redwood/Potter Valley; Sullivan; Sulphur; Tubbs Fires)

(c) Camp Fire (2018)

Many of the questions Action News Now asked the FVT concerned finances and transparency. Action News Now was told on Tuesday that a detailed accounting of all the Trust expenses through December 31, 2020, will be filed with the Court later in the month of April, along with an update on claims payments.

RELATED: Some fire survivors to receive 30% of their claim from Fire Victim Trust on Monday

As of Monday, the FVT reports that 7,364 Preliminary Payments have been issued for a total of $95,523,500.

Pro-Rata Payments of 30% of approved and signed-off claims have also been reported. 183 Pro-Rata Payments have been issued to fire survivors so far, totaling $45,816,527. The average of each of the 183 payments is $250,363.

The FVT says they hope to pay survivors 100% of their approved claims over a series of payments, but there is no guarantee that they will have enough money in the Trust, even after the sale of the 478 million shares of PG&E stocks that they possess, to pay 100% of the claims.

Judge Trotter said in his Monday letter that the proceeds of the Trust "currently do not come close to covering the cost incurred in the administration of the Trust."

Trotter said his goal is to keep administration costs below or as close to 1% as possible. He said typically in his experience managing large-claim processes, the administrative costs run between two to four percent.

In the letter, the judge addresses the hours required to review each of the 250,000 claims that are related to 70,000 claimants.

He said the firm that they hired to review the claims hired more people as late as last week and that by devoting resources effectively, they expect to review all claims within months, not years.

The letter from Judge Trotter is published below in its entirety.


Dear Fire Victims,

On January 26, 2021, I sent a letter providing you with an update on the status of the Fire Victim
Trust (the “Trust”) and an understanding of what you might expect in the future. I take this
opportunity to further inform you of our progress, including Claims Administration, monetization
of the stock, as well as the Trust’s involvement in the Third-Party Cases, designed to augment the
total amount available for distribution to Fire Victims.

Claims Processing

The Trust was created and funded on July 1, 2020. Prior to accepting any claims, the Trust was
tasked with creating machinery that would accept thousands of submissions electronically,
organize and compile documentation to be reviewed, and provide the reviewers with a consistent
way to make determinations. To handle this project, the Trust retained the services of BrownGreer,
a law firm that specializes in claims administration and claims processing. Approximately 300
staff members are committed to this project, including attorneys, project managers, analysts, claim
reviewers, and software developers. Out of this group, 130 of these employees are dedicated to
claims reviews, with BrownGreer adding staff as recently as this past week. In addition,
BrownGreer has increased the number of managers overseeing the claims reviews, which will
increase output by increasing the rate of claims assignments, ensuring quality control, and helping
to train reviewers on eligibility requirements.

On August 17, 2020, the claims process opened, and the Claims Questionnaire became available
for attorneys and claimants to use to submit claims. However, submission of the Claims
Questionnaire is only the beginning of the process. In order to fully value and verify a claim, as
required by the Court-approved Trust Documents, the reviewer must also have supporting 2
documentation, which can include proof of residence, content inventories, construction estimates,
tree or landscaping estimates, insurance information, photos, videos or medical records. A
submitted claim must be identified as complete, including all necessary supporting documents,
before it can be reviewed. The Trust has no ability to independently gather information related to
a claim and must therefore rely upon the sufficiency and timely submission of material provided
to the Claims Administrator by the claimant herself, or, if the claimant is represented by an
attorney, by claimant’s counsel.

To date, the Trust has received 40,000 Claims Questionnaires representing over 70,000 claimants
and approximately 250,000 individual claims. Roughly 27 million pages of materials have been
received by the Claims Administrator and must be reviewed so that the circumstances of each
claim can be fully evaluated.

The damage categories eligible for payment are claims for real property, including forestry and
landscaping, personal property, personal or business income loss, out-of-pocket expenses,
wrongful death, bodily personal injury, emotional distress and other injuries. Claimants may make
claims for each category of loss which they have suffered. For example, some claimants have made
multiple claims within one damage category, multiple claims across several damage categories or
multiple claims in every damage category. Because each of the claims involves unique
circumstances, every claim must be individually assessed and valued by a reviewer, and the entire
claim, including each of the damage categories claimed, must be reviewed, approved and finalized
before any notice of determination can be sent.

The Trust regularly receives inquiries from claimants regarding when payments will be made.
Understandably, you have suffered with the devastating effects of these disasters for many years
and are anxious to receive a recovery after so much time has already passed. Although it may seem
that this process is moving slowly, it is actually much more efficient when compared to the court
system. Plagued by COVID-19 and heavy dockets, it can take years for a civil case such as those 3
that the Trust is administering to wind its way through San Francisco or Alameda county courts.
Some of the cases now appearing on the court trial calendar have been on file for over five years.
If a plaintiff were to file a Complaint in the court today, it is possible that it would take even longer
to be heard, given the impacts of the pandemic. Even if a plaintiff did try a case to verdict today,
it is likely that a post-verdict appeal would take two to four additional years to completion.

Alternatively, the Trust, which has only been funded since July 2020 and only started accepting
Claims Questionnaires in August 2020, has already started to make payments to Fire Victims. As
of November 23, 2020, the Trust responded to victims who were vulnerable and struggling because
of the fires and impacted even more by the COVID-19 crisis by issuing Preliminary Payments of
up to $25,000. As of today, the Trust has issued 7,364 Preliminary Payments for a total of
$95,523,500 paid to victims. The Trust continues to review and respond to those requests on a
rolling basis.

In addition, as of March 15, 2021, the Trust began distributing the first round of pro rata payments
toward satisfying the claims of individuals and families who suffered losses in the 2015 Butte Fire,
2017 North Bay Fires and 2018 Camp Fire. The initial pro rata payment is 30% of the total
approved and accepted claim amount. As of today, the Trust has issued 183 pro rata payments,
totaling $45,816,527. In all, the Trust has issued payments totaling $141,340,027 to Fire Victims.
Notices of payments, which began being issued to claimants on February 15, 2021, continue to be
issued daily and payments are made on a twice monthly basis, on the 15th and last day of the month.

To put the magnitude of our undertaking in perspective, assume each claim took only one hour of
a reviewer’s time to process and approve, and further assume there are 2,000 working hours per
reviewer per year (forty hours times fifty weeks). The 250,000 claims would require 125 reviewer
work years to complete. By devoting resources effectively, we expect to review all claims within
months, not years.

Although these numbers seem daunting, the Trust has and will continue making payments twice
per month on all claims that are fully submitted, reviewed and eligible. While this effort may seem
to be progressing slower than anticipated, the Trust anticipates that as more supporting documents
are provided, a greater number of claims will become complete allowing them to be reviewed and
more payments made.

Monetization of PG&E Stock

As you know, the Trust holds approximately 478 million shares of PG&E Stock and one of my
duties as Trustee is to monetize these shares in the best interests of the Fire Victims. As such, I
have been working closely with Trust advisors regarding the sale of PG&E Stock. This matter has
involved some complexity: PG&E sought and obtained from the IRS a Private Letter Ruling so
that it could make a significant tax election which benefits the Trust. This is the “Grantor Trust
Election” and this election provides the necessary foundation for the Trust to sell PG&E Stock
without federal or state taxes being imposed in connection with a stock sale. Without this “Grantor
Trust Election,” the Trust would be subject to a 37% federal income tax and an 8.84% California
state income tax on its gain from the sale of PG&E Stock to the extent the stock is sold at a value
higher than its value on the Effective Date.

The benefit of the Grantor Trust Election using illustrative numbers follows:

      The Trust acquired the PG&E Stock with a fair market value (i.e., tax basis) of roughly $9
      per share. If the Trust were to sell the PG&E Stock at $11 per share without the Grantor
      Trust Election, it would be subject to tax on the $2 per share gain. Because the Trust
      currently has approximately 478 million shares of PG&E Stock, the tax cost to the Fire
      Victims would be over $400 million based on these assumptions. If the Grantor Trust
      Election is made, and the PG&E Stock is disposed of in accordance with necessary steps,
      the Trust would pay no tax on the same assumed facts.

The complexity that we have been working on recently involves the “necessary steps” to monetize
the stock. Basically, before the Trust sells any of its existing PG&E Stock, it must exchange those
shares with PG&E (in a one-for-one exchange) and then sell the exchanged shares. Economically,
this is neutral to the Trust, but it allows for the income tax result we desire.

Because an exchange transaction of this type is not routine, I determined that it was prudent to
seek the order of the Bankruptcy Court to proceed with these “necessary steps” which are detailed
in an “Exchange Transaction Agreement” with PG&E. We intend to file with the Bankruptcy Court
and post on the Fire Victim Trust website the Exchange Transaction Agreement, when finalized.

I have sought and obtained the consent of the Trust Oversight Committee on this matter. And, I
have stated in a declaration to the Bankruptcy Court that the execution of the Exchange Transaction
Agreement on behalf of the Trust is in the best interests of Fire Victims and is consistent with the
Plan, Confirmation Order and Trust Documents. The hearing on this matter is set for April 28,
2021 before the Bankruptcy Court, and I will keep you updated on developments.

Third-Party Litigation

When the Trust was created, in addition to cash and stock, it was assigned the right to pursue legal
claims held by PG&E before the bankruptcy. This includes a derivative claim against the former
officers and directors of PG&E in connection with their failure to assess and take appropriate
action to manage the wildfire risk.

The Trust has also begun to prosecute claims regarding third-party liabilities arising from the
subject fires. These third-party claims involve individual and corporate contractors allegedly
responsible for failing to maintain vegetation, trees, lines, poles and other PG&E equipment
consistent with rules and regulations intended to prevent wildfires.

These cases are in their early stage and I will keep you informed as they develop and progress.

Additional Trustee Obligations

As Trustee, I am also obligated to monitor the activities of PG&E as it might relate to its stock
price. One arena that is particularly sensitive is the California Public Utilities Commission
(“CPUC”). The Trust has employed an experienced law firm to represent it before the CPUC.
Significant hearings took place in December 2020 and January/February of this year regarding rate
payer issues and PG&E’s request to issue recovery bonds of $7.5 billion in order to retire
outstanding short-term debt and accelerate a final cash payment to the Trust. While the prospects
for all of the above appear favorable, a final decision is due May 6, 2021. Obviously, no one can
predict the future or outguess the stock market. These developments, however, may seem favorable
to PG&E’s stock price.

Finally, as Trustee, I am fully aware of my obligation to minimize the cost of administration while
increasing the speed and fairness of payments. This is a daunting challenge. In my career, I have
served as Court-Appointed Special Master in numerous large-claim processes. In most, the average
cost of administration ran between two and four percent. That cost was generally covered by the
return on investment of the proceeds of the settlement pending distribution. The Trust Documents
mandate the proceeds be invested in government securities, which now are averaging 1.7 basis
points and thus, do not come close to covering the cost incurred in the administration of the Trust.
My goal is to keep the cost of administration below or as close to one percent as possible. I
continually balance the need for personnel to assist in the resolution process against the cost, which
reduces the corpus of the Trust. A detailed accounting of all the Trust expenses through December
31, 2020 will be filed with the Court later this month, along with an update on claim payments.

Everyone employed by the Trust, including myself, knows there is little that can be done to ease
the suffering that you have experienced. What we can do, and have been doing, is to direct our
energies to the expeditious and fair administration of claims. Accordingly, we are focused on our
responsibility to distribute funds to qualifying Fire Victims as quickly as we can. I hope that the
foregoing provided you with some information and understanding of how we are accomplishing
that task, balancing the need for alacrity against the need for accuracy, fairness, and economy.

Very truly yours,
Justice John K. Trotter (Ret.), Trustee

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