Consumer Group Demands Utility Regulators Stop Funding Ousted PUC Official’s Legal Defense

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PUC Using Taxpayer Funds to Fight Removal of Commissioner

Click here to read the letter to CPUC President Lynch

Santa Monica, CA — The California Public Utilities Commission (CPUC) should stop using taxpayer funds to pay for the legal defense of commissioner Henry Duque, who is to be removed from office for violating a constitutional conflict of interest prohibition, the Foundation for Taxpayer and Consumer Rights (FTCR) wrote in a letter today to CPUC President, Loretta Lynch.

In a special legal proceeding approved by Attorney General Bill Lockyer, FTCR sued on behalf of the People of the State of California to remove Duque from office last year after it was revealed that he invested in the stock of Nextel Communications, Inc., a cellular phone company regulated by the CPUC. Duque actively traded stock in Nextel over a fifteen month period during 1999-2000. He sold his remaining Nextel shares, ultimately earning an approximate $69,000 profit, only after a reporter for the San Francisco Chronicle discovered and informed him of the conflict of interest. The California Constitution and state law require forfeiture of office for any PUC commissioner who holds such a conflict of interest. When FTCR sued, the CPUC agreed to pay Duque’s legal costs.

On April 2, a San Francisco Superior Court issued a tentative ruling that Duque is removed from office, must pay a $5,000 fine, as well as FTCR’s legal fees and court costs. The ruling is expected to become final within a few weeks, immediately upon which the office will become vacant.

“California taxpayers should not have to foot the bill for a $300 per hour lawyer to defend a Commissioner who made $69,000 investing in a company he regulates, breaching the public trust,” said Harvey Rosenfield, FTCR President, who signed the letter to the CPUC along with FTCR attorney Pamela Pressley. “Mr. Duque benefited personally from his stock investment and must personally bear the consequences.”

FTCR also requested that Duque be ordered to repay the legal fees — the total amount of which is likely over $100,000 — that taxpayers have picked up in the case thus far.

FTCR noted that public officials may be held personally liable for improper use of taxpayer dollars.


April 9, 2002

Loretta Lynch, President

California Public Utilities Commission

505 Van Ness

San Francisco, CA 94102

Dear President Lynch:

As you are aware, this organization represents the People of the State of California in a quo warranto proceeding against Mr. Henry Duque, in which he is charged with violating article XII, section 7 of the California Constitution and section 303(a) of the Public Utilities Code because while serving as a commissioner, Mr. Duque made investments in the stock of a company regulated by the Public Utilities Commission (CPUC). People, ex rel. Foundation for Taxpayer and Consumer Rights v. Duque, S.F. Super. Ct., No. 318146. Last week, on April 2, the San Francisco Superior Court tentatively ruled that Mr. Duque shall be excluded from office as a result of his financial conflict of interest. The ruling, which is expected to become final on or about April 22, forbids Mr. Duque from performing any further duties as a CPUC commissioner, requires that he pay a fine of $5,000 to the State Treasury as well as FTCR’s legal fees and court costs incurred in representing the People in this matter.

We write now regarding the CPUC’s responsibilities concerning expenditures of taxpayer money the CPUC has previously authorized for the payment of Mr. Duque’s attorneys’ fees and expenses in this matter. Initially, the CPUC’s Executive Director, Wesley Franklin, by a letter dated December 19, 2000, denied Mr. Duque’s request for reimbursement of his attorneys’ fees in the quo warranto action. Subsequently, on December 22, 2000, a letter signed by you in your official capacity as CPUC President, authorized payment of those fees. FTCR then wrote to Governor Gray Davis in January 2001 and to the CPUC in April 2001, urging that the CPUC’s decision granting Commissioner Duque’s request to have the public pay his attorneys’ fees be reversed on the ground that his stock purchases in Nextel were personal actions completely outside the scope of his official duties.

Now that the court has determined that Mr. Duque violated the law by his purchase of Nextel stock, the CPUC must immediately cease its expenditure of public funds on his behalf and recover from Mr. Duque the legal defense costs already unfairly and improperly borne by taxpayers. Otherwise, the CPUC creates a dangerous precedent that public officials may freely violate the law knowing that they will never be held personally liable for their wrongdoing. It goes without saying that once the ruling becomes final, Mr. Duque will become a private citizen; therefore, any further legal action Mr. Duque chooses to pursue is a private matter for which he must bear the cost. The public will simply not tolerate the continued use of their money to defend Mr. Duque.

As you ponder these matters, bear in mind that state officials may be held personally liable for improper expenditures of taxpayer money. Cal. Code of Civil Procedure §526a; see Stanson v. Mott (1976) 17 Cal.3d 206, 210.

The conflict of interest created when a PUC commissioner invests in any company subject to his or her jurisdiction so endangers the public interest that the law renders the post vacant immediately upon acquisition of the stock, or at the very latest, when a reasonable person should have known that he acquired stock in a regulated company. That Mr. Duque exercised the authority of a commissioner for nearly three years after committing this breach of the public trust raises serious questions regarding the validity of all CPUC decisions in which Mr. Duque’s vote was determinative of the outcome. At minimum, once the superior court’s decision becomes final, Mr. Duque must not be allowed to participate in any CPUC decisions or perform any duties whatsoever as a CPUC commissioner.

We are available to discuss these matters further, at your convenience.


Harvey Rosenfield


Pamela Pressley

Staff Attorney

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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