PUC Official’s Investments Questioned

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Group already filed suit, charging conflict of interest

San Francisco Chronicle

A consumer watchdog group, which filed suit last year to oust one of the state’s top utility regulators for investing in a mobile phone company, is now questioning some of his other holdings.

The Foundation for Taxpayer and Consumer Rights in Santa Monica said six of Henry Duque’s other investments may pose serious conflicts of interest — including one in a company involved in the current energy crisis.

Duque, appointed to the California Public Utilities Commission by former Governor Pete Wilson in 1995, put money in:

— A trust that received much of its proceeds from selling natural gas to Duke Energy, one of the key electricity suppliers in California. Duque owned shares in the San Juan Basin Royalty Trust from April 7, 2000 to Sept. 20, 2000.

Foundation lawyer Pamela Pressley said the investment was worrisome because Duque was in a position to vote on policies that might favor maintaining higher wholesale energy prices.

— Telewest Communications, a British cable and phone company that is owned largely by utilities regulated by the PUC. The company was originally a joint venture of TCI and US West, which are both registered with the agency as telecommunications carriers. AT&T acquired a significant interest in the company after it purchased Media One, which was split off from US West. Duque owned stock in Telewest from April 6, 2000 to Sept. 25, 2000.

— Loral Space and Communications, which began a satellite-based telephone company in San Jose called GlobalStar Telecommunications. Duque owned shares from September 14, 1999 to June 16, 2000.

— NTL, a British cable television operator, which acquired Cable & Wireless Communications’ consumer arm. Cable & Wireless’ U.S. arm is subject to regulation by the PUC, the foundation said. Duque sold his stake in the firm on Sept. 20, 2000.

— Two firms that supply equipment to AT&T and other telecommunications firms regulated by the PUC. Paradyne makes DSL equipment, which helps provide high-speed Internet access. Vertel develops software called “middleware” for the telecommunications market. Duque owned stock in both companies at the end of the year.

“If these allegations are true, Mr. Duque should resign,” said Robert Fellmeth, director of the Center for Public Interest Law at the University of San Diego.

Duque’s attorney has already acknowledged that the investment in the wireless company was an oversight, but dismissed the latest complaints as unfounded.

“It’s silly,” said attorney Joseph Remcho. “It’s no wonder they (the foundation) are not being helpful” in solving the energy crisis.

Pressley, the foundation attorney, first raised the issue in a letter to PUC President Loretta Lynch yesterday, and provided a copy to The Chronicle. In light of the findings, Pressley said the PUC should reverse its decision to pay Duque’s legal fees to fight a suit to remove him from office. PUC lawyer Gary Cohen declined comment, adding that the agency hasn’t had a chance yet to review the complaints.

In December, the foundation asked a San Francisco Superior Court judge to oust Duque because he bought 700 shares in Nextel Communications, the nation’s fifth-largest wireless phone company. State rules bar PUC commissioners from owning stock in companies regulated by the agency.

Nextel is registered with the PUC as a utility, and Duque has voted on several matters involving either Nextel or the cellular phone industry as a whole. A hearing has not been scheduled so far in the case, Remcho said.

Another consumer advocate said he didn’t think the latest investments would make much difference.

“He has already violated the law (by investing in Nextel) and refused to resign,” said Michael Shames, executive director of the Utility Consumers’ Action Network.

Unlike the Nextel investment, Shames said he didn’t think the other investments were illegal. But he thought the law should be changed to bar commissioners in the future from investing in industries they regulate, even if the specific company isn’t registered as a utility with the PUC, he said.

“These are examples of the interconnectedness of this industry,” Shames said. “All the companies within the industry are connected, so whether they have come up before the commission shouldn’t matter.”

Consumer Watchdog
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