San Francisco Daily Journal

     SAN FRANCISCO – A state public utilities commissioner should be ousted because he bought stock in a company he regulates, a government watchdog group claims in a lawsuit filed Thursday.

        In a rare quo warranto lawsuit targeting a state official, the nonprofit Foundation for Taxpayer and Consumer Rights seeks to remove PUC Commissioner Henry Duque from office.

        Duque bought about 700 shares of Nextel Communications, a wireless communications company, in May 1999. The PUC regulates several aspects of the wireless communications industry, and its oversight extends to Nextel. Duque held onto varying amounts of the stock until last August, when a newspaper reporter asked about the apparent conflict of interest.

        The lawsuit, filed in San Francisco Superior Court as People v. Duque, claims the commissioner forfeited his post when he first bought the stock. It cites Article XII, Section 7 of the state Constitution, which prohibits public utilities commissioners from having a financial interest in a company subject to their regulation. The lawsuit also cites section 303(a) of the Public Utilities Code, which says that any commissioner who acquires such an interest must vacate the office within a reasonable time unless he divests himself of the interest.

        The five PUC commissioners regulate all public utilities in the state. Although plaintiffs attorneys said they aren’t aware of any action Duque took that overtly affected Nextel‘s stock price, Duque, along with the rest of the commission, approved an agreement between the company and another public utility during the time he held the stock, according to the state attorney general.

        Plaintiffs attorneys estimate Duque sold the stock for a gross profit of about $70,000.

        Duque, his attorney Joseph Remcho, and PUC attorneys did not return phone messages Thursday, and a PUC spokesman declined to comment. Duque has publicly declined to resign his post, arguing that the purchase was involuntary because his stock broker is empowered to make purchases for him without prior approval. He has also argued that he divested himself of the stock within a “reasonable time,” because he didn’t know that the PUC regulated Nextel until the newspaper reporter brought the matter to his attention.

        Plaintiffs attorneys said that Duque bears the burden of knowing what’s in his portfolio and recognizing conflicts.

        “We’re saying it was his duty as a commissioner to know what companies he regulated,” said attorney Pamela M. Pressley. “As soon as he got a statement from his stockbroker, he should have taken steps to find out.”

        State law requires the attorney general to approve quo warranto actions for private entities seeking to sue on behalf of the state. Attorney General Bill Lockyer granted plaintiffs the right to sue Duque last month, saying that “it would appear that defendant’s office became vacant immediately upon his acquisition” of the stock.

        Plaintiffs attorneys said it’s rare for an official holding statewide office to retain office once the AG has granted leave to file a lawsuit. In fact, Pressley said, she knew of just one other such case, filed last year against a member of the state Occupational Safety and Health Administration board.

        The attorney general usually rejects requests for quo warranto status, said spokesman Nathan Barankin. “We don’t grant leave unless the case is really compelling,” he said.