Judge tentatively ousts commissioner

The San Francisco Chronicle

A San Francisco Superior Court judge tentatively ordered that one of the state’s top utility commissioners be removed from office and pay a $5,000 fine for buying stock in a wireless telephone company his agency oversees.

In a preliminary decision, Judge Alfred Chiantelli ruled that Henry Duque, a veteran member of the California Public Utilities Commission, ran afoul of conflict-of-interest rules by investing roughly $27,000 in Nextel Communications, the nation’s fifth-largest wireless company. State law bars PUC commissioners from owning stock in companies they regulate.

If the decision stands, it will mark the first time a commissioner has been removed for violating the ethics statute. Chiantelli said he will finalize his order on April 12 unless Duque persuades him to change his mind.

“This is a vindication for the public,” said Pamela Pressley, a lawyer for the Foundation for Taxpayer and Consumer Rights, a liberal watchdog group that filed the suit to oust the Republican appointee. “You have to enforce conflict-of-interest laws.”

During the 15 months Duque owned the stock, Nextel‘s name appeared in at least five matters before the commission, Chiantelli said.

Duque, however, has long argued that the purchase was an honest mistake. Relying on advice from his investment counselor, Duque said he didn’t realize the Nextel stock posed a problem until a Chronicle reporter asked him about the purchase 15 months later.

Duque, who joined the commission in 1995, testified that he sold the stock within 48 hours. He also disclosed the purchase in economic interest statements filed at the PUC.

But Chiantelli chided Duque, a former banker who lives in Los Altos Hills, for relying solely on his stockbroker for advice. He said Duque should have consulted the state attorney general, PUC legal staff, his telecommunications adviser or another trusted authority if he was unsure whether Nextel was regulated.

“Duque did not do everything which can reasonably be expected of a public utility commissioner to do in order to avoid a conflict of interest,” Chiantelli wrote.

However, Chiantelli added: “The court does not find that Duque was dishonest. This is not a case of bad faith, but bad judgment.”

Duque, 70, whose term expires Dec. 31, probably will remain in office for a few more weeks.

Chiantelli hasn’t issued a final order yet. And if Chiantelli insists on removal, Duque’s attorney said, he will appeal.

“In our view, the law provides no penalty for innocently holding the stock, let alone the harsh remedy of exclusion from office,” said San Francisco lawyer Joseph Remcho.

Indeed, another San Francisco Superior Court judge ruled last August that because of a legal quirk, the Legislature failed to create a penalty for flouting the statute. Chiantelli said he was not bound by Judge A. James Robertson II’s ruling.

If the ruling is finalized and holds up on appeal, the decision will clear the way for Gov. Gray Davis to replace the sole Republican appointee earlier than expected.

Last month, Davis tapped Michael Peevey, a former Southern California Edison executive, to replace the other Republican PUC commissioner, Richard Bilas, who resigned because of health concerns.

The PUC — historically an important if low-profile agency — has grabbed the spotlight in recent years in battles over everything from area codes to energy rates.

Even though Democrats already account for four of the five commission seats, Davis is trying to gain more control after PUC President Loretta Lynch, a once-favored aide, publicly split with him over how to solve the energy crunch.

At a court hearing in December, Duque testified that his stockbroker bought 700 shares in Nextel on his behalf without asking him first. Duque said he wasn’t sure what Nextel did but was concerned when he saw the trade confirmation notice a few days later.

“Just the T-E-L (in the name) tells me it may have something to do with telephone,” Duque said. “We regulate telephone companies.”

But Duque said his stockbroker told him that Nextel was a wireless company regulated by the Federal Communications Commission, so Duque assumed it was all right to keep the stock.

Chiantelli seemed baffled. “Do you in the course of your business as a commissioner for the public utilities rely upon your stockbroker’s advice in regulation of utilities?”

“Is he a commissioner?” Chiantelli asked.

“No,” Duque replied, adding that his broker is a self-employed investment counselor.

Duque said he didn’t think about the matter again until a Chronicle reporter called him in August 2000 to ask him about his Nextel stock. “That was my first red flag,” he said.

The Chronicle first reported the purchase a few days later, and the Foundation for Taxpayer and Consumer Rights filed suit in October.

The foundation estimated that Duque, who is paid $114,191 a year, earned as much as $70,000 in profits on the Nextel stock.

Attorney General Bill Lockyer also ruled in December 2000 that Duque should be removed from office and gave the suit his blessing, but Duque has steadfastly refused to resign.

E-mail Todd Wallack at [email protected].