A state judge has ordered Henry Duque to leave his post in 10 days for investing $10,000 in Nextel Communications Inc., a mobile phone company regulated by the PUC. Consumer activists sued to remove him from his $107,000-a-year job.
Duque, a six-year member of the PUC, testified before San Francisco Superior Court Judge Alfred Chiantelli in December that he did not know until last year that his agency regulated the wireless telecommunications industry.
The Public Utilities Code prohibits commissioners from having a financial interest in companies they regulate, which also include energy utilities, railroad crossings, moving companies and airport shuttle services.
Duque is the last Republican appointee on the commission and a consistent pro-business vote. His departure would create a PUC entirely of regulators appointed by Davis, a Democrat, and in the short term, leaves the commission without a clear majority leaning in favor of consumers or industry.
Whomever Davis appoints will affect the outcome of major upcoming decisions, such as local phone service giant Pacific Bell’s hopes of selling long distance service in California and whether businesses will have to pay a portion of the roughly $10 billion the state spent buying energy for the state last year.
One consumer activist and former leader of the PUC‘s consumer advocacy arm said the changes may create a commission with a more focused mission.
“It will be better for the commission to have five members appointed by Gov. Gray Davis. They may work as a team better,” said Bill Ahern of Consumers Union. Steve Maviglio, a spokesman for Davis, declined comment because the judge’s decision is not yet final.
Davis outraged consumer advocates with his latest appointment, former Southern California Edison president Michael Peevey.
Groups such as the Foundation for Taxpayer and Consumer Rights said Davis was rewarding businesses by adding a deregulation proponent to the commission. Davis said he wanted Peevey for his experience in the energy industry.
A week later, the commission narrowly voted to allow businesses to save money and buy electricity from non-utility energy providers. That angered consumer groups, who said residential ratepayers would be stuck paying a larger share of the state’s $10 billion power-buying bill, and they are prodding the commission to keep its promise and charge businesses an exit fee to ensure they chip in a portion of the cost.
San Francisco County Superior Court Judge Alfred Chiantelli ruled Thursday that Duque could not claim ignorance of the law, and rely on his stockbroker’s advice that it was not a violation.
“Allowing such a dispensing defense in this case would not serve the principle of fairness and justice,” said Chiantelli, who ordered Duque to vacate his post in 10 days unless the judge changes his mind.
Duque’s attorney, Joe Remcho, said he would try to change the judge’s mind and would seek to have the order overturned by appeals courts.
The PUC, which also oversees the state’s electricity rates, regulates a host of wireless industry undertakings, including its interconnection agreements with wired phone companies, the designation of area codes and consumer complaints. In some instances, it sets environmental rules on where antennas for wireless carriers can be placed. Calls to a PUC spokeswoman were not immediately returned.
The Foundation for Taxpayer and Consumer Rights filed suit last year seeking Duque’s removal.
“The bottom line is that we have these financial conflict of interest statutes on the book for a reason,” said foundation attorney Pam Pressley. “It’s the public’s right to have their public officials utterly free from financial conflicts of interest. This court decision vindicated that.”
Even so, Duque did not try to hide his investment, and noted it on economic interest papers filed with the state. None of Nextel‘s business transactions with the PUC were affected by Duque’s investment, because the deals were approved by most members of the five-member commission.
He testified that his stockbroker said Congress regulated the industry. But he said he divested his holdings when a San Francisco Chronicle reporter called him last year and told him that the PUC does regulate the wireless industry.
“That was my first red flag that went up,” he testified.
The case is Foundation for Taxpayer and Consumer Rights v. Duque, 318146.