PG&E's conviction takes corporate crime seriously — its punishment doesn't

PG&E's conviction takes corporate crime seriously — its punishment doesn't
© David McNew/Getty Images

The Pacific Gas & Electric Company plead guilty this week for its faulty equipment igniting California’s deadliest wildfire. A weeks-long conflagration that killed 85 people, the 2018 tragedy is known simply and ominously as “the Camp Fire.” PG&E’s conviction includes 84 separate counts of involuntary manslaughter. It is a landmark conviction — arguably the largest, and one of the most significant, corporate homicide cases in American history.

But then came the punishment. An individual who committed these crimes would face a prison sentence nearly a century long. But because PG&E is a corporation, it will be forced to pay only a $3.5 million fine — the equivalent of two weeks’ worth of annual revenue. Worse, PG&E reportedly chose a manslaughter conviction in order to avoid being charged with arson. Why? Because, owing to state sentencing law, an arson conviction could have carried a fine 50 times larger, nearly $200 million. It’s a stark illustration of how our criminal justice system favors companies over individuals.

Many people are surprised to discover that a corporation can be found guilty of a crime — a testament, perhaps, to how rarely they are prosecuted. And over the years, skeptics have scoffed at the idea that a corporation can be punished, quipping that corporations have “no soul to damn, and no body to be kicked.” But applying the criminal law to corporations does not require theology or complicated metaphysics. It just requires adhering to a simple principle of fairness, which remains as relevant now as when courts conceived it at the turn of the 20th century.

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The idea is this: Corporations receive a privileged legal status in our society, which is captured by the notion that a corporation is a legal person. But if corporations are going to receive the benefits of legal personhood, they should have to accept its burdens. Otherwise, in a world of ever-expanding corporate rights, exempting corporations from criminal liability creates a two-tier system of legal personhood — one where, perversely, we individuals are relegated to the bottom tier.

PG&E’s misconduct exemplifies the need for a criminal law that applies to all persons, corporate and individual alike. The Camp Fire occurred when a long-dilapidated metal hook – some still in use were manufactured before World War I – broke, sending a high-power voltage line into the brush. The resulting wildfire burned for weeks. Beyond the lives lost, it dislocated more than 1,000 families and caused billions of dollars in property damage. But the deeper problem is that, by 2018, PG&E had all but turned neglect into a business model.

At the time of the Camp Fire, state regulators identified more than 900 repairs PG&E needed to make. Yet the company disregarded some of the most urgent items on that list for nearly two years. Other repairs lingered, unaddressed, for seven years. As a result, during this period PG&E’s equipment caused over 1500 fires, including more than a dozen major wildfires. Fatalities became common, including the 46 lives lost in a 2017 wildfire, which regulators determined occurred because PG&E had failed to keep its powers lines clear of trees. And neglect wasn’t limited to fire hazards: The company is currently under federal probation for causing a 2010 pipeline explosion that killed eight people.

This week’s conviction should have been a triumph for the criminal justice system. And yet, a $3.5 million fine calls into question whether the company is being treated the same as individual criminals. True, PG&E will pay the maximum penalty under California’s sentencing laws. But this monetary cap presumes the defendant will already be serving a prison term. PG&E, of course, cannot go to prison.

To be sure, criminal liability is not the only response to corporate wrongdoing. PG&E has agreed to pay billions to state and federal regulators, with individual lawsuits pending. And this week’s result will smooth PG&E’s passage through federal bankruptcy. As a result, we are told, PG&E simply could not afford to pay a more serious criminal penalty.

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But if the criminal law is to play a role in how our society responds to wrongdoing, PG&E’s sentence is a worrying result. A conviction expresses our collective condemnation more severely than any civil suit. And, for better or worse, the use of harsh sanctions is what gives that expression recognizable weight and force.

Our criminal law can apply to individuals and businesses alike, provided lawmakers remain sensitive to the differences between the two. For starters, sentencing laws in many states are heavy on prison terms and light on monetary fines. Imposing long prison terms is an injustice against our fellow citizens. But capping fines for corporations, instead of just for individuals, makes crime a cheap cost of doing business. And without a punishment commensurate to the crime, it becomes hard to see how justice has been done.

Will Thomas is an assistant professor of business law at the University of Michigan Ross School of Business.