SAN FRANCISCO – A surprising decision by federal prosecutors in San Francisco to drop their pursuit of a potential $562 million fine against one of the nation’s largest utilities after a deadly pipeline blast marked the second time in recent months that the office has backed down in a high-profile criminal case against a major corporation.
The decision Tuesday involving Pacific Gas Electric Co. came weeks after the U.S. attorney’s office abruptly abandoned drug trafficking allegations against shipping giant FedEx during a trial.
The apparent misfires have raised concerns among legislators and legal observers about the performance of the office.
“It is so unbelievable that the U.S. attorney doesn’t have either the confidence or the faith in their work to be able to defend the charges that they originally made,” State Sen. Jerry Hill said about the decision to pursue a lower penalty against PGE. Hill’s district includes San Bruno, the scene of the pipeline blast.
The setbacks more broadly indicate “the office is not adequately planning and investigating its corporate cases before trial,” added Brandon Garrett, a professor at the University of Virginia School of Law who studies corporate crime.
Criminal prosecutions of corporations rarely go to trial and are more often settled through plea deals or agreements.
Laurie Levenson, a former federal prosecutor who now teaches at Loyola Law School in Los Angeles, said corporate criminal prosecutions are high stakes and usually involve skilled defense attorneys, making them difficult to win.
Prosecutors sought a court order Tuesday allowing them to seek a lower fine against PGE if the company is convicted of violating pipeline safety regulations and obstructing investigators.
The 2010 blast sent a giant plume of fire into the air, killing eight people and destroying 38 homes in suburban San Bruno.
Prosecutors did not explain their decision, which came after more than a month of testimony at trial and as jurors deliberated for a fourth day on 11 counts of safety violations and one count of obstruction.
The judge who later granted the request also provided no explanation. His ruling reduced the maximum fine PGE could face to $6 million.
Assemblyman Kevin Mullin, whose district also includes San Bruno, said he was shocked to hear about the lower penalty and wants to hear more details about the decision.
“Until we know the rationale, the victims’ families, residents of San Bruno and current PGE customers everywhere are likely to feel that their concerns are being ignored,” Mullin said.
The potential $562 million fine was double the amount of money prosecutors said PGE saved by skirting pipeline safety requirements. The utility argued in a court filing that determining any savings would be complicated and unduly prolong a possible penalty phase of the trial if jurors return guilty verdicts.
Hill speculated that the U.S. Department of Justice may have seen PGE’s filing and decided it didn’t want to spend more money by going to a second phase of the trial.
California regulators previously fined the utility $1.6 billion for the 2010 blast.
Prosecutors may have been concerned that jurors could get angry and side with PGE because of the amount of damages sought and the time jurors would have to serve during a penalty phase, said Robert Weisberg, a criminal law professor at Stanford University.
“There were various things that the government could have rationally accomplished, and it seems like the government either hadn’t thought it through very well or its motivation shifted during the trial,” he said.
The U.S. Attorney’s Office said Wednesday it could not comment on the PGE decision during ongoing jury deliberations. It declined immediate comment on its handling of corporate prosecutions.
U.S. Attorney Brian Stretch previously said his office will investigate the FedEx prosecution for any lessons that can be applied to future cases.
That case — nearly two-years in the making — accused FedEx of shipping prescription drugs that it knew were illegal to dealers and addicts, some of whom died. But days into the trial, prosecutors moved to drop the charges, again without explanation.