California public officials are not allowed to participate in decisions in their public office when they have an financial interest in the outcome. Evidence uncovered in wake of the PUC public corruption scandal fingers Governor's Brown top aide, Nancy McFadden, for doing just that.
Emails between former PUC president Michael Peevey and PG&E lobbyist Brian Cherry, both under criminal investigation, call McFadden the utility's "back door route" and go-to person in the Governor's office for the appointment of a pro-utility commissioner to bolster PG&E's stock price. At the time, McFadden held hundreds of thousands of dollars in stock options in PG&E, her former employer, where she was Sr. VP for Governmental Affairs.
During the first weeks of the Brown Administration, on January 27, 2011, in wake of the 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.”
Consumer Watchdog filed this complaint with the Fair Political Practices Commission that lays out evidence about McFadden's role in public office decisions about PG&E from appointments to legislation.
The response of the Governor's office:
“Nancy did not play a role in the decisions you’re asking about while she had these holdings,” said Evan Westrup, a spokesman for Brown. “Folks inflate their influence on and access to this office every day of the year in this town – and this individual is no different.
The email discussion takes place three weeks after McFadden was named to her post as Executive Secretary in charge of "Appointments and Legislation." In one email, Cherry and Peevey celebrate that announcement. Our Public Records Act (PRA) request to the Governor's office for evidence that McFadden recused herself from decisions related to PG&E came back with a written response that there was no written record of such a recual. There must a be A record, however, or there would be no recusal.
The burden was on McFadden to recuse herself, which means making a reasonable effort to let those around her know that she would not participate in decisions so that they did not discuss decisions with her. McFadden should have to prove to the FPPC she informed others of a recusal and did not participate in the appointments or legislative process as it pertained to PG&E.
As our complaint documents, it's highly unlikely McFadden recused herself from PG&E deliberations. Interviews with staff in the Capitol confirmed the email evidence that McFadden was the point person for the Administration on PG&E and utility matters related to legislation and appointments. 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.”
Given the breadth of the back-and-forth with Peevey and others on the PUC appointment of a pro-utility commissioner, it's not reasonable that Cherry made up his conversation with McFadden about the PUC appointment. He would have been found out very quickly.
There's also legislation explicitly affecting McFadden's stock options as a former executive in wake of San Bruno that was gutted of the provision related to her options before being signed by the Governor. Roughly nine pieces of legislation were introduced in the legislature to improve the gas distribution and transmission system for the State of California after the San Bruno explosion. The bills (AB 56, AB 478, AB 578, AB 861, SB 44, SB 216, SB 705, SB 879, SB 1350), all of which impacted PG&E, increased maximum fine levels against public utilities, established new safety standards, and mandated improvements in emergency response systems. One piece of legislation--AB 861-- would have affected not only the price of Nancy McFadden’s PG&E stock options, but also the $1 million in severance compensation she received from PG&E. Yet there's no record of McFadden's recusal on any of these matters, but there are statehouse sources who remember her weighing in.
McFadden has some explaining to do. There had to be a visible, recognizable record of that recusal or it didn't happen. McFadden failure to recuse herself is a violation of the Poltical Reform Act and cause for her removal. If she cannot produce the evidence she should step down or be required to.