FPPC Investigation Shows McFadden Concealed Three More Years of PG&E Stock Option Ownership

California's Fair Political Practices Commission (FPPC) has opened an investigation into Nancy McFadden’s failure to report the dates and times of stock sales in PG&E, her former employer, where she held hundreds of thousands of dollars in stock options she took with her when she became Governor Brown's top aide.  
 
The action came in response to Consumer Watchdog’s ethics complaint alleging, in part, that Gov Brown’s Executive Secretary had failed to disclose the date and value of her investments as they were disposed of in 2012, as required by state law.  (Consumer Watchdog is Capitol Watchdog’s owner.) Now we know more, based on responses from the Governor’s office on behalf of McFadden.
 
McFadden’s revised disclosures now show she held and sold significant PG&E stock in 2013 without reporting it – hundreds of thousands of dollars worth.  She also held lesser PG&E stock options through 2015, options she claims not to have known about until 2015.   
 
The Governor’s spokesperson dismissed the revelation as “inadvertent, filing errors” and claimed “amended Form 700s have already been re-filed with the FPPC to clear this up.”
 
But the fact that McFadden failed to file the required state documents is significant because it means that McFadden should not have participated in any decision that would inflate her PG&E stock from 2011 through 2015, Governor Brown’s first term plus, rather than just from 2011 until 2012. State law prevents public officials from participating in public decisions that affect their pecuniary gain.  
 
There’s no record of recusal on any decisions according to the Governor’s office.  And if McFadden didn’t know she held stock from 2013 -2015, as the Gov’s office now claims, why would she have removed herself from decisions affecting PG&E during those years?  
 
We are now broadening our investigation of McFadden’s conduct on utilities' matters to between 2011 and  2015, from the original two-year time frame. Since McFadden did not signal stock option ownership in those added years, the public and policymakers were deprived of knowing of her potential conflicts, and therefore reporting them. 
 
With regard to the part of Consumer Watchdog’s complaint that noted McFadden appeared to participate in a decision to appoint a pro-PG&E regulator, the FPCC claimed there was “insufficient evidence” to pursue an investigation into McFadden’s conflict. This is remarkable because emails exchanged between the PG&E lobbyist Brian Cherry, now a US government witness, and PUC President Michael Peevey, under investigation for criminal conspiracy, claimed McFadden helped broker a pro-utility appointment to the PUC. That may not be the basis for a conviction, but it is sound enough evidence to open an investigation to the fact that McFadden participated in a decision.
 
Nonetheless, McFadden's new disclosures provide the basis for collecting more evidence. For example, why did McFadden file amended financial disclosure forms for every year but 2011 with the FPPC? Consumer Watchdog will continue to investigate McFadden in conjunction with the law offices of Aguirre & Severson, which issued a Public Records Act request to McFadden for further information, including calendar entries.  
 
The Governor’s office is doing all it can to minimize and muddy the issue. Spokesman Evan Westrup claimed erroneously to reporters, and apparently the FPPC, that McFadden did not have a duty to report the investments in PG&E stock using a code section that applies to “income.”  But investment disclosures are a separate category on the Form 700s and require disclosure about disposition of stock option ownership, including date and amount. McFadden clearly violated disclosure laws by the failure to report PG&E investments from 2013 – 2015 as well as the time and value of the disposal of stock in earlier years.
 
We will be providing whatever new evidence we can to the FPPC about McFadden’s conflicts. It’s clear that the threshold for this FPPC, controlled by Brown appointees, to investigate the top aide to Governor Brown is very high.  Former government prosecutors and a former FPPC official claim they would have investigated McFadden for conflicts of interest based on what is known. We will provide whatever evidence we find. The resolution of the matter ultimately may reflect as much on the independence and efficacy of the FPPC as on McFadden's ethics. 

Capitol Watchdog is owned and operated by nonprofit Consumer Watchdog. For more information about Consumer Watchdog visit http://www.consumerwatchdog.org

 
 

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