SAN FRANCISCO: A state judge ordered California Public Utilities Commission member Henry Duque removed from office Thursday for investing $10,000 in a mobile phone company regulated by the commission.
Duque, a six-year member of the PUC, testified he did not know until last year that his agency regulated the wireless telecommunications industry. Consumer activists sued to remove him from the $107,000-a-year job.
San Francisco County Superior Court Judge Alfred Chiantelli ruled 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.
The judge added: “His failure to fulfill his duty should not serve as a defense, otherwise the law would encourage willful blindness and moral precepts would be undermined.”
The only current commissioner appointed by a Republican governor, Duque was a consistent pro-business vote. His departure would leave the five-member commission roughly split on business and consumer issues, and possibly could affect the outcome of major upcoming decisions such as local phone service giant Pacific Bell’s hopes of selling long distance in California.
If the decision is upheld, the move would allow Democratic Gov. Gray Davis to appoint a successor. Davis spokesman Steve Maviglio declined to comment on the ruling because it is not a final judgment.
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.
“In our view, the law provides no penalty for innocently holding the stock, let alone the harsh remedy of exclusion from office,” Remcho said.
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.
Duque, during nearly 90 minutes of testimony before the judge in December, said he didn’t think it was a conflict of interest to have purchased Nextel Communications Inc. stock.
“My feeling was that we don’t regulate wireless companies,” he testified.
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.
Duque also testified he was never aware that Nextel was doing business with the commission.
“A commissioner cannot read everything. It is physically impossible,” he testified.
He also testified that he did not know Nextel was a wireless company, but he thought that the letters “tel” in the company’s name may have meant it had an affiliation with the telecommunications industry.
“I thought, gee, that may have something to do with telephones,” he testified. “I had no idea what they did.”
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 Public Utilities Code prohibits commissioners from having a financial interest in companies they regulate. The commission also regulates a host of other types of utilities, including energy companies.
If Duque is forced to leave his post, all five commissioners would be Davis appointees.
“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, who called Duque “very much a Republican advocate for deregulation.”
The commission faces several key energy votes, and plans to submit its own plan to get Pacific Gas and Electric Co. out of bankruptcy. The PUC also has to set rules for retail competition in the electricity market, and is a key player as the state determines its energy future.
The case is Foundation for Taxpayer and Consumer Rights v. Duque, 318146.