Court Reverses Order Ousting Henry Duque From PUC for Conflict

Published on

Metropolitan News-Enterprise

A court order stripping California Public Utilities Commission member Henry Duque of his post for owning stock in a company he helped regulate has been overturned due to an apparent statutory drafting error.

The Friday ruling by the First District Court of Appeal came more than a week after Duque’s term on the five-member panel expired.

But Duque’s counsel, attorney Thomas A. Willis of the firm of Remcho, Johansen & Purcell, said the ruling was far from moot because it clears his client’s name and wipes out a $ 5,000 penalty and an award of attorney fees.

“We’re very pleased with the decision,” Willis said.

San Francisco Superior Court Judge Alfred Chiantelli in April ordered Duque, the commission’s sole Republican, to give up his seat after the Santa Monica-based Foundation for Taxpayer and Consumer Rights filed a quo warranto action. He was permitted to stay on the commission pending the appeal.

Nextel Stock

The foundation move came after revelations that Duque owned 700 shares of Nextel Communications, Inc., a mobile phone company that is regulated by the PUC. Foundation lawyers argued that Duque had automatically forfeited his office under Public Utilities Code Sec. 303(a), which requires commissioners to divest themselves of interests in regulated companies.

The remedies portion of the statute reads in part that if a commissioner “acquires a financial interest in a corporation or person subject to regulation by the commission other than voluntarily, his or her office shall become vacant unless within a reasonable time he or she divests himself or herself of the interest.”

The twist in Duque’s case was that although the Nextel stock was purchased by his stockbroker without Duque’s knowledge, the parties agreed that he had acquired the stock voluntarily.

The statute prohibits members from voluntarily purchasing stock in a company subject to commission regulation, but is silent on how to deal with that situation.

The foundation argued that the removal provision for a commission member who created a conflict by acquiring stock involuntarily, by inheritance, for example, must logically apply to one who sparked the conflict by obtaining the stock deliberately. To find otherwise, it asserted, would render an absurd result, providing a harsh remedy for an involuntary act but no penalty for a more serious violation.

Statutory ‘Gap’

Presiding Justice Barbara J.R. Jones of Div. Five acknowledged there was a “gap” in the statutory language, but she said it was not the court’s place to fill that gap. For one thing, she explained, courts strictly construe any statute that encroaches on the fundamental right to hold office.

She added that courts must also interpret a statute according to its plain meaning.

The result might seem absurd when reading the statute alone, Jones said, but makes sense when read in conjunction with the civil and criminal penalties in the Political Reform Act of 1974 and the Legislature’s power, under Art. XII, Sec. 1 of the state Constitution, to remove a commission member for incompetence, neglect of duty or corruption. A two-thirds vote of each house is required for such an action.

That power to remove actually raises another question. Since the Legislature is granted power to remove, the courts arguably could be barred from determining whether removal is appropriate. Jones said her court need not reach that issue, having concluded that a commissioner who violates Sec. 303(a) by voluntarily owning stock does not forfeit the office under the statute.

Foundation attorney Pamela M. Pressley called the ruling a “huge disappointment” and said her organization may seek review in the state Supreme Court.

“I just think the Court of Appeal’s decision is ultimately a miscarriage of justice when you look at the result that flows from it,” she said.

Even with other remedies available against a commissioner, Pressley said, the history of the PUC as an independent body created to stave off political pressure exerted by the railroads shows the Legislature intended the commission to live up to a higher standard.

Duque was a former banking executive when he was first appointed to the state PUC by then-Gov. Pete Wilson in 1995. In court documents, he said he instructed his stockbroker, Michael Golub, that he could not own companies regulated by the PUC. Golub bought him shares in Nextel in 1999. Both men apparently believed at the time that wireless carriers were regulated not by the state but by the Federal Communications Commission.

It turned out that both the FCC and the state PUC regulate wireless carriers.

Duque sold his interest-at a $ 70,000 profit-after a reporter for the San Francisco Chronicle questioned him on his ownership of Nextel stock.

The quo warranto action was authorized by Attorney General Bill Lockyer in a Nov. 29, 2000 opinion.

The case is People ex rel. Foundation for Taxpayer and Consumer Rights v. Duque, 03 S.O.S. 196.

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.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases