ONE MADE $31,140, ANOTHER $87,512 BEFORE THE FIRMS’ FINANCIAL PROBLEMS WERE WIDELY KNOWN. PG&E AND EDISON DEFEND THE TRANSACTIONS.
Los Angeles Times
Three senior executives and a board member of Pacific Gas & Electric and Edison International profited from stock sales last year after debts that would lead to the specter of the utilities’ bankruptcy had begun to mount.
In the case of PG&E, a board member and an executive sold nearly $ 119,000 in stock in August, before the depth of the utility’s financial problems were widely known.
“In a disaster that has been characterized by unquenched greed, this takes the cake,” said Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica.
Both utilities said their officials did nothing wrong, because the companies’ financial difficulties had been reported to the government in public documents before the trades.
PG&E spokesman Ron Low said the company filed a disclosure with the SEC on Aug. 2 that “outlined the potential negative financial impact to the company from the energy crisis. It talked about the size of the under-collection. It talked about the financial impact. It was an update of the financial situation.”
Low added that the company’s stock price hit a 52-week high after the trades.
On Aug. 11, Gordon Smith, chief executive officer and president of PG&E‘s utility, exercised an option, buying 7,500 shares at $ 24.38 and selling them the same day at $ 28.50 for a profit of $ 31,140, according to First Call/Thomson Financial, a Maryland-based SEC document source. The options on those shares were not due to expire until 2005.
The trade was the first by Smith since 1980, when he was first required to report such activity to the SEC. On Aug. 24, Richard Clarke, a PG&E Corp. board member and former utility CEO, exercised an option to acquire 25,000 shares at $ 24.75 and sold them the same day at $ 28.25, taking $ 87,512 in profit. The options on those shares would have expired this month.
The trade was his first reported one in four years.
“These guys aren’t really frequent sellers, which makes the timing of their activity that much more significant,” said Sean Loren, research manager for First Call.
Rosenfield said he hoped the SEC would investigate the trades. Securities law prohibits public company officials from trading stock on the basis of information not available to the public.
An official with the U.S. Securities and Exchange Commission declined to comment on the disclosures or say whether they were under investigation.
On Nov. 20, Edison International Vice President and Controller Tom Noonan exercised an option to buy 8,300 shares at $ 19.75. He sold them the same day at $ 23.88 for a profit of $ 34,915, according to First Call.
The trade was Noonan’s first since March 1999 when he was required to report such activity to the SEC. The options were not due to expire until 2007.
On Nov. 1, Edison Senior Vice President and Chief Information Officer Mahvash Yazdi sold 3,000 shares of common stock at $ 24.25. The purchase date and price were not known.
Before the November sales, the last insider trade reported by an Edison official was in February of last year, according to First Call.
The officials who made the trades did not respond to requests for comment.
“These officers waited until disclosure filings had been made with the Securities and Exchange Commission and obtained clearance from the company before initiating their personal stock transactions,” Edison International said in a statement.
Both companies’ stock prices began to decline in early December when the state declared its first Stage 3 power alert, indicating that the transmission grid serving much of the state was in danger of exhausting reserves.
After the first weekend of threatened blackouts, Edison stock prices tumbled on Dec. 11, closing down 9% at $ 18.62. The stock closed Thursday at $ 13.45, up 0.11.
PG&E stock prices closed Dec. 11 at $ 21.93, down 7% from the close on the previous Friday. The stock closed Thursday at $ 14.31, up 0.06.