CA State Telephone Regulation Report
A California court ruled PUC Comr. Henry Duque must be removed from office for financial conflict of interest. But his attorneys said he would appeal, meaning there was a chance Duque still could complete his current term, which began in 1995 and ends Dec. 31st.
Judge Alfred Chiantelli of Cal. Superior Court, San Francisco, ruled Duque had violated conflict-of-interest laws because he owned stock in a telecom carrier regulated by the PUC. In addition to ordering removal from office, Chiantelli fined Duque 5,000 plus reimbursing the legal fees of the consumer group that sued to oust him from his 107,000 per year position.
Duque has until April 14 to ask that the court reconsider its decision and he’s expected to do so. If the court refuses and the decision becomes final, Duque’s attorneys said he would appeal and seek a stay of the court’s ouster order pending a final ruling on the appeal.
Duque invested 10,000 in May 1999 in stock of wireless carrier Nextel Communications. He reported the investment on financial disclosure statements filed with state. In Aug. 2000, after local reporters inquired about the investment, he sold his Nextel stock at a 59,000 profit.
The Foundation for Taxpayer & Consumer Rights sued Duque on behalf of the public, after getting clearance from the state Attorney Gen. During the trial in Dec., Duque argued that he had relied on assurances of his investment adviser that Nextel was regulated by the FCC, not the PUC, and he wasn’t aware that the company could be affected by matters before the PUC.
But Judge Chiantelli ruled that reliance on a stockbroker’s expertise was an insufficient defense. Duque “had a duty to keep himself informed of his investments so he would not be in conflict.” The judge noted at least 5 instances where issues affecting Nextel‘s interests arose at the PUC during the 15 months when Duque held Nextel stock. The court said Duque should have sought a definitive legal ruling on whether Nextel was regulated by the PUC, especially after the agency in Feb. 2000 opened a docket to establish consumer protection rules for all telecom carriers within its jurisdiction.
The court said this was a case of “bad judgment” and failure to take reasonable precautions against conflicts. It didn’t address the legal validity of Duque’s votes since his May 1999 stock purchase put him in conflict, and there was no legal or policy precedent to apply.
Duque’s attorneys said the judge didn’t conclude Duque was violating law deliberately, so the harsh penalty of ouster wasn’t justified legally for a case of innocent bad judgment. But plaintiff’s attorneys said the court affirmed that public officials must stay totally free of financial conflicts and PUC officials must be more careful than most because of the PUC‘s broad range of activity.
Duque is the PUC‘s only Republican since fellow Republican Richard Bilas quit the agency last month due to ill health and policy differences. If Duque is ousted, the PUC would have only 3 sitting members, all Democrats.