Santa Monica, CA — Governor Brown’s top aide, Nancy McFadden, appears to have broken state laws by owning up to $1 million in stock in her former employer, Pacific Gas & Electric, and using her official position for personal financial benefit by intervening to inflate the company’s stock price, according to a complaint filed with the Fair Political Practices Commission by the nonprofit group Consumer Watchdog. She also failed to appropriately disclose the timing of her PG&E stock sales.
Read the complaint at: http://www.consumerwatchdog.org/resources/mcfaddenfppccomplaintcpuc.pdf
Emails produced by the Public Utilities Commission through Public Records Act requests show that former PG&E lobbyist Brian Cherry, fired by the utility in the wake of the San Bruno corruption scandal, and former PUC President Michael Peevey, currently under criminal investigation with Cherry, tapped McFadden as the Governor’s rep to rescue plummeting PG&E stock. The emails finger McFadden as the arranger of the appointment of a pro-utility Commissioner to the PUC that sent a reassuring signal to Wall Street and lifted PG&E’s stock value, including McFadden’s holdings.
“Ms. McFadden has a duty to prove she recused herself from PG&E decisions or she should resign,” said Jamie Court, President of Consumer Watchdog. “Public officials who hold hundreds of thousands of dollars in stock options in a utility that employed them need to create a clear record for their colleagues that they will not participate in decisions that affect the value of their stock. The Governor’s top aide sets the ethical tone for the entire Administration.”
California Government Code Section 87100 prohibits a public official from using her official position to influence a governmental decision in which she knows or has reason to know she has a financial interest. Ms. McFadden appears to have broken that law, according to the complaint.
McFadden was also the point person in the governor’s office for all legislative matters and did not create a record of recusal on legislative or other matters related to PG&E, according to Governor Brown’s response to a Public Records Act Request filed by Consumer Watchdog.
"Nancy McFadden's involvement while having a financial interest in PG&E shows that Wall Street's hold over utility regulators in California extends beyond the PUC to the Governor's Office. Neither the PUC, nor the government appear to represent the interests of the ratepayers," said Mike Aguirre, a San Diego attorney who has won Public Records Act victories over the PUC, to make public emails from Governor Brown regarding the PUC corruption scandal.
The emails between Peevey and Cherry call McFadden the utility's "back door route" and go-to person in the Governor's office. McFadden had been PG&E’s Sr. VP for Governmental Affairs and left the company with $1 million in severance pay in addition to the stock.
During the first weeks of the Brown Administration, on January 27, 2011, in wake of the PG&E San Bruno explosion, emails released under the Public Records Act show Cherry forwarding Peevey a PG&E roundup of a Wall Street downgrade of Edison International and PG&E stock from “BUY” to “HOLD.” Cherry writes, “Investors fear the Governor could have swung the Commission too far in the consumer-oriented direction with the appointments of Mike Florio and Catherine Sandoval…” Peevey responds, “this info should go to the Governor’s office, probably best to Nancy McF.” Half an hour later, Cherry writes Peevey, “Nancy asks if you have any names you could recommend. You can call her directly if you’d like.”
Cherry says this in another email to a prospective appointee to the Office of Ratepayer Advocate about gubernatorial appointments to the PUC:
“Typically, support letters from the utilities are the kiss of death for appointments. We never do it for Commissioner appointments. Instead, we go the back door route. I’d be happy to do that with Nancy, but I’m not sure a letter would be advantageous to you given the mess around San Bruno, et al. Your choice.”
The complaint also states that many pieces of legislation relating to PG&E were debated in the state during 2011 – 2012, when McFadden held stock in PG&E. Many would have affected the value of her stock. One was aimed at her personal economic interest, AB 861, which would have required former utility executives like McFadden to return incentive pay in the wake of fines related to disasters like the San Bruno explosion. McFadden received a $1 million payout from PG&E as she left for the Governor’s office, according to SEC filings. Brown signed the legislation but the provision relating to requiring former executives like McFadden to return special compensation was amended out of the bill prior to receiving his signature.
McFadden also failed to accurately account for her trades in PG&E stock as required by state law, concealing the dates of her stock trades and their amount, which could reveal insider trading. She reported in her February 2011 conflict of interest disclosure forms that she held up to $1,000,000 in PG&E stock. She reported on April 2, 2012 that by the end of 2011 she had only up to $100,000 in stock, and she failed, despite the form’s requirement, to disclose when she sold the stocks and their worth. Her form covering 2012, filed on March 26, 2013, shows she still held up to $100,000 in PG&E stock that year. She then belatedly disclosed in her forms for 2013, filed on March 25, 2014, that she sold the PG&E stock in 2012, failing to give a date or amount for the sale. The inaccuracies and omissions prevent the public from knowing when she made her sales, which is critical given that she had inside information about the investigation into the San Bruno explosion, which had a material impact on a volatile stock.
“The FPCC investigation of Ms. McFadden’s role is vital to the public interest because it may have broader implications,” the complaint states. “A Superior Court judge in San Francisco has already determined there was probable cause to believe that there were felonies committed involving one of the parties to the email communications above, Mr. Peevey. His home was the subject of a search warrant in which evidence was uncovered about an agreement to make ratepayers to pay for the failed San Onofre Nuclear Power Plant.”