San Francisco Chronicle

The courts cannot punish a utility commissioner for deliberately flouting state rules by buying stock in PG&E Corp., Verizon Communications or other regulated companies, a San Francisco Superior Court judge ruled yesterday.

Though based on a legal loophole, the decision is a victory for California Public Utilities Commissioner Henry Duque, who is fending off a lawsuit to oust him for investing $27,000 in Nextel Communications, a mobile-telephone company.

State law says commissioners can lose their jobs if they inadvertently obtain stock in a regulated company and don’t divest their holdings quickly.

But Judge James Robertson said lawmakers neglected to spell out a penalty for purposely buying stock in a regulated company.

“The thing does not make a lot of sense,” Robertson said. “I do not know what I can do about that.”

Pamela Pressley, an attorney for the Foundation for Taxpayer and Consumer Rights, which filed the suit, complained that the ruling would gut the law — letting Duque buy stock in AT&T, PG&E and Edison without consequence.

“I suppose that’s right,” Robertson said. “He could do that.”

But the foundation might still try to oust Duque by arguing he inadvertently obtained the stock and did not sell it in a reasonable period of time.

In court papers, Duque’s attorneys argued that the stock purchase was inadvertent, because Duque’s stockbroker handled the transaction without consulting Duque first. The broker notified Duque shortly afterward.

But Duque said he didn’t realize that Nextel could be considered a regulated company until 15 months later, when a Chronicle reporter asked him last August about the investment. Duque sold the stock a few days later, which his attorney said is reasonable.

Pressley, however, insists the clock should have started ticking immediately after Duque learned about the purchase in May 1999, making him subject to removal.

Regardless, Duque’s attorneys have long maintained that the purchase was simply an innocent mistake. They accused the foundation of trying to exploit a technical violation to oust a Republican appointee.

“If you wish to push an injustice based on a technicality, you’d better be sure your arguments are airtight,” said Duque’s attorney, Joseph Remcho.

The state is paying Duque’s legal bills, which already total $55,288 and could climb to $93,000.