United States v. Pacific Gas and Electric Co.

          SECOND ORDER REGARDING DEFENDANT'S OBJECTIONS TO MANEGOLD EXHIBITS

          THELTON E. HENDERSON United States District Judge

         Yesterday, July 6, 2016, the Court issued its first set of evidentiary rulings on the 43 exhibits Defendant Pacific Gas and Electric Company ("PG&E") objects to of the 96 exhibits that the Government intends to introduce through witness William Manegold. Dkt. No. 724 ("First Order"). PG&E lodged these objections on the day prior, July 5, 2016. Dkt. No. 717 ("Objs."). The Government filed a written opposition to these objections just before midnight the same day, only hours before Mr. Manegold began testifying. Dkt. No. 718 ("Opp'n"). As Mr. Manegold is presently testifying, the Court continues its issuance of piecemeal orders on PG&E's objections with this Second Order regarding PG&E's next fifteen exhibit-specific objections.

         GOVERNMENT'S EXHIBIT 351

         This exhibit is an email titled "2Q 2008 Earnings Materials" and an attachment of tables containing those materials.

         This exhibit is admissible, provided the Government lays the proper foundation for the email being a nonhearsay statement of a party opponent under Federal Rule of Evidence ("Rule") 801(d)(2) (which, as discussed in the First Order, the Court believes it should be able to do through Mr. Manegold). Tables such as Table 1, titled "PG&E Corporation Business Priorities 2008-2011, " are not the sort of financial evidence prohibited by the Court's order on PG&E's Motion in Limine Number Four, Dkt. No. 460 ("MIL Order") at 17-19, because such evidence is probative of PG&E's mental state on the charged crimes and not excludable under Rule 403. Specifically, the Government notes that Table 1 states the number one corporate priority as "Deliver on [Earnings per Share] goals, " and that Table 6 shows "Earnings From Operations" comprised 40% of PG&E's "Operational Performance Metrics." Such information is relevant to the Government's theory that "PG&E's profit motives drove its compliance (or noncompliance) with the charged regulations, " id. at 19, and the probative value of this information is not substantially outweighed by a danger of unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.

         However, to minimize unfair prejudice and maintain compliance with the Court's order on PG&E's Motion in Limine Number Four, the Government has offered to "redact the dollar amounts" from Table 6 (and, presumably, any other Table where such figures appear) "to protect against concerns of untethered financial evidence." Opp'n at 4. The Court accepts this invitation, and the Government is hereby ORDERED to redact the dollar amounts from Table 6. If PG&E would actually prefer that the dollar amounts not be redacted, then it should so indicate to the Government before the admission of this exhibit. The same is true of any redactions ordered below.

         Moreover, the Government has offered relevance arguments for only Tables 1 and 6, so the Court holds only that the email and Tables 1 and 6 (as redacted) are admissible. If the Government wants to introduce any other Tables, it must first share those Tables with PG&E to determine whether PG&E's objection still stands. PG&E is directed to approach any such conversation with the understanding that its reading of the Court's order on PG&E's Motion in Limine Number Four appears (from its objections) to be far too broad. See First Order at 3-4.

         GOVERNMENT'S EXHIBIT 376

         This exhibit is an email exchange regarding "2009 IM forecast - further reductions necessary, " including an associated spreadsheet.

         This exhibit is admissible. Information that budgetary pressures informed PG&E's Integrity Management ("IM") practices is not the sort of financial evidence prohibited by the Court's order on PG&E's Motion in Limine Number Four, MIL Order at 17-19, because such evidence is probative of PG&E's mental state on the charged crimes and not excludable under Rule 403. Specifically, the author of the first email asks whether, given the "very low 2009 budget" for the IM group, "there are any reductions [to the IM projects planned for 2009] that can be made while maintaining compliance, " and Mr. Manegold responds, "we can probably knock the leak investigation budget down." Such statements are relevant to the Government's theory that "PG&E's profit motives drove its compliance (or noncompliance) with the charged regulations, " id. at 19, and the probative value of the statements is not substantially outweighed by a danger of unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.

         GOVERNMENT'S EXHIBIT 409

         The parties have reached agreement on the admissibility of this exhibit, provided the Government lays the proper foundation (which PG&E has conceded it likely can through Mr. Manegold). Trial Tr., Vol. 15 at 2286:23-2287:14.

         GOVERNMENT'S EXHIBIT 432

         This exhibit is several email exchanges concerning IM assessments and the associated costs, including an expense spreadsheet.

         This exhibit is admissible. Information on PG&E's "Integrity Assessment Strategy, " including the impact of budget on that strategy, is not the sort of financial evidence prohibited by the Court's order on PG&E's Motion in Limine Number Four, MIL Order at 17-19, because the evidence is probative of PG&E's mental state on the charged crimes and not excludable under Rule 403. Specifically, Mr. Manegold states (among other relevant statements) that "[PG&E is] looking at having to defer some assessments this year in order to meet budget, " and therefore asks which "NSEGS have high risk segments." Such statements are relevant to the Government's theory that "PG&E's profit motives drove its compliance (or noncompliance) with the charged regulations, " id. at 19, and the probative value of the statements is not substantially outweighed by a danger of unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.

         GOVERNMENT'S EXHIBIT 470

         This exhibit is an email exchange regarding budget slides.

         This exhibit is admissible. Information regarding the interplay between PG&E's budget concerns and IM compliance is not the sort of financial evidence prohibited by the Court's order on PG&E's Motion in Limine Number Four, MIL Order at 17-19, because such evidence is probative of PG&E's mental state on the charged crimes and not excludable under Rule 403. Specifically, in one email Mr. Manegold discusses the reason PG&E switched from In-Line Inspection to External Corrosion Direct Assessment, the sort of decision that is directly at issue in this prosecution. Such statements are relevant to the Government's theory that "PG&E's profit motives drove its compliance (or noncompliance) with the charged regulations, " id. at 19, and the probative value of the statements is not substantially outweighed by a danger of unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence. To the extent PG&E believes that any inferences drawn by the Government from this exhibit are incorrect or unwarranted, PG&E will be free to make its case on cross-examination.

         GOVERNMENT'S ...