PG&E management allegedly ordered papers destroyed after blast

File - In this Sept. 9, 2010 file photo, a massive fire roars through a mostly residential neighborhood in San Bruno, Calif. The California agency investigating a deadly pipeline explosion and the City of San Bruno are set to propose major fines they say Pacific Gas & Electric Co. should pay for its negligence leading up to the blast. The City of San Bruno says the utility's shareholders should pay no less than $1.25 billion for violations regulators say PG&E committed before the 2010 explosion. (AP Photo/Paul Sakuma, File) less File - In this Sept. 9, 2010 file photo, a massive fire roars through a mostly residential neighborhood in San Bruno, Calif. The California agency investigating a deadly pipeline explosion and the City of San ... more Photo: Paul Sakuma, Associated Press Photo: Paul Sakuma, Associated Press Image 1 of / 1 Caption Close PG&E management allegedly ordered papers destroyed after blast 1 / 1 Back to Gallery

A former Pacific Gas and Electric Co. official hired after the San Bruno gas-pipeline explosion to clean up the company’s records said management ordered her to destroy documents, and that she found a telltale preblast analysis of the pipe in the garbage, according to a federal court filing.

Prosecutors say they intend to use Leslie Banach McNiece’s testimony during a trial of PG&E on a dozen counts of pipeline safety violations and one count of obstructing the federal investigation into the September 2010 blast, which killed eight people and destroyed 38 homes.

PG&E’s record keeping is at the heart of the case, which is scheduled to go to trial in March in U.S. District Court in San Francisco. Prosecutors with the U.S. attorney’s office allege that the company relied on records that executives knew were suspect to vouch to government regulators before 2010 that the San Bruno transmission pipe and other gas lines were safe.

Prosecutors will seek a penalty of as much as $500 million against the firm. No current or former PG&E executives are facing charges.

Records ‘mess’

Officials of the company have denied criminal wrongdoing. A spokesman denounced the allegations in the latest filing as “mischaracterizations.”

In their court filing late Monday, prosecutors said PG&E hired McNiece in April 2012 to clean up what they called the firm’s record-keeping “mess.”

McNiece, who previously worked in records and information management for IBM and the accounting firm KPMG, was told by then-PG&E President Chris Johns and legal-division Vice President Sandy Hartman to address problems that the California Public Utilities Commission found during its probe of the San Bruno blast, prosecutors said.

However, McNiece soon started to get “pushback from management,” prosecutors said. When she suggested changes, Johns told her PG&E could not adopt them because the company would “immediately be out of compliance” with the reforms, prosecutors said.

McNiece also told prosecutors that there were “instances when she received specific instructions to destroy documents, such as from Sumeet Singh,” who oversees PG&E’s gas operation, according to the prosecution filing. Prosecutors did not specify which documents the company allegedly ordered destroyed.

“We obviously and unequivocally disagree with the claims and mischaracterizations contained in the government’s filing,” PG&E spokesman Greg Snapper said in a statement Tuesday. “We look forward to the opportunity to shed light on the facts in court.”

‘Financially motivated’

The prosecution document details PG&E’s alleged “pushback” against McNiece’s recommendations as “financially motivated.”

“This ‘pushback’ evidence is direct evidence of PG&E violations of record-keeping regulations, and explains how PG&E did not genuinely attempt to address its known record-keeping deficiencies,” prosecutors said.

Johns ultimately rejected McNiece’s proposal for improving the organization of PG&E’s records, and the company laid her off in 2014, the court filing said.

McNiece, 57, moved to Westport, Conn., and now works as a director for a legal software services firm in New York. She could not be reached for comment for this story.

As an example of the poor state of PG&E’s pipeline records, prosecutors said, McNiece described finding a box outside her office in May 2013 that included documents about Line 132, the pipeline that caused the San Bruno fireball.

McNiece said a note was attached to the records. “The note read words to the effect of, ‘I’d rather give this to you than gas ops,’” prosecutors said, referring to PG&E’s gas operations division.

“McNiece’s testimony regarding the box of Line 132 documents tends to show that PG&E engaged in a pattern of poor record-keeping conduct, so much so that an employee only ‘trusted’ giving McNiece the records,” prosecutors said.

Map in trash bin

In September 2013, McNiece found documents related to the San Bruno pipeline, dating from before the explosion, “discarded in a Dumpster outside of PG&E’s gas operations facility in Walnut Creek,” the court filing says.

The documents included a map with a handwritten notation alerting PG&E engineers about the lack of an explanation for a 1988 leak on Line 132 near Crystal Springs Reservoir, south of San Bruno. It turned out that the cause was buried in PG&E’s files: The section of pipe had a faulty seam weld, the same problem that later caused the San Bruno disaster.

That should have been a red flag for PG&E, which ought to have tested the rest of Line 132 for bad welds, prosecutors have said.

As it was, PG&E’s records inaccurately described the part of the Line 132 under San Bruno as free of seam welds — so the company never did the testing that could have detected the weld that ruptured in 2010.

Federal probe

The map that McNiece found in the trash was never turned over to the National Transportation Safety Board when it investigated the San Bruno blast. The agency learned of the 1988 leak by happenstance, near the end of its probe.

When the leak came to light, PG&E officials sought to downplay its importance, saying there was no proof it was a seam weld that had failed in 1988.

Singh acknowledged to The Chronicle last year that the map revealed gaps in what the company knew before the blast.

“I can’t speak to what should have been done back then,” Singh said. He added that the company had since implemented a “very robust” accounting system for pipe problems.

Prosecutors say the map shows the company knew its pipeline accounting was deficient, and “that by discarding this original map, PG&E was failing to maintain records, as required, for the life of a pipe.”

‘PG&E was on notice’

Prosecutors said the company has “repeatedly claimed to regulators, politicians, and the press that it was unaware of this seam leak and found records of leak only after the explosion. The Dumpster map demonstrates that PG&E was on notice that the information concerning the leak was not incorporated into its records system.”

PG&E’s Snapper said the company has made major changes to its record-keeping protocols, has digitized more than 12 million pages of gas-pipeline records, and is “focused on the future.”

“We have made great progress since 2010,” his statement said. “We look forward to continuing that progress and to re-earning the trust of our customers and the communities we serve by leading in safety, reliability and clean energy.”

Jaxon Van Derbeken is a San Francisco Chronicle staff writer. E-mail: jvanderbeken@sfchronicle.com