San Francisco Chronicle

A government watchdog group launched a legal maneuver yesterday to oust one of the state’s five utility commissioners because he invested nearly $10,000 in a mobile-phone company his agency regulates.

The Foundation for Taxpayer and Consumer Rights filed a complaint yesterday with the state attorney general, accusing California Public Utilities Commissioner Henry Duque of violating state law by buying 250 shares of Nextel Communications on May 12, 1999.

Duque sold the stock for about $14,400 in August after a Chronicle reporter asked him about the investment.

At the time, Duque said he didn’t realize the stock posed a problem because the PUC only loosely regulates wireless firms like Nextel.

A spokeswoman for Attorney General Bill Lockyer said his office is investigating the matter. But frustrated by the delay, the taxpayer foundation asked Lockyer’s office yesterday for the green light to file its own lawsuit in state court to remove Duque from office. Duque has 15 days to respond.

“I think this is very serious,” said Pam Pressley, an attorney with the watchdog group. “If public officials are not following the letter of the law, you are going to have a breakdown in (government).”

As The Chronicle reported in August, the California Public Utilities Code bars commissioners from holding “a financial interest in a person or corporation subject to regulation by the commission.”

Nextel, which has 1,300 employees and thousands of customers in California, is registered as a telecommunications utility with the PUC. It has also weighed in on several PUC proceedings ranging from area codes to consumer protection rules.

But Duque’s lawyer, Joseph Remcho, said Duque didn’t violate the law because he sold the stock as soon as he was warned it could pose a problem. “All the rest is technical mumbo jumbo,” he said.

Besides, Remcho says there is “zero penalty” if the attorney general finds that Duque violated the law.

To be sure, the PUC code says commissioners who inherit stock or otherwise “involuntarily” obtain a financial interest in a regulated utility must sell it in a reasonable period of time or their “office shall become vacant.” But the law doesn’t clearly spell out any penalties if a commissioner “voluntarily” buys stock in a regulated firm. Remcho said the law isn’t written well, and no one at the PUC could recall a similar incident.

Regardless, Remcho said he is surprised the taxpayer foundation is pursuing the matter, instead of focusing on other issues like energy deregulation.

“We are in the midst of the most significant electrical generation crisis we have had in years,” Remcho said. “It would seem the foundation ought to have something better to do with its time than harassing a PUC official for a technical violation.”

This isn’t the first time that questions have been raised about Duque’s investments.

In July, one of Duque’s cases was transferred to another commissioner after a lawyer accused him of having a conflict of interest.

At the time, Duque was overseeing a hearing to determine whether apartment buildings or mobile-home parks could resell water to their tenants at a markup, and whether the PUC should regulate the rates.

But a Santa Cruz lawyer involved in the case complained after learning that Duque owned stock in Chateau Communities, one of the nation’s largest owners of mobile homes. Though Duque listed the holding on his financial disclosure forms, he never mentioned the investment to parties in the case.

Also, in late 1998, Duque ruled that the Santa Cruz mobile-home park could tack on a $20-per-month fee to water bills. Although Chateau did not own that particular mobile-home park, some experts say the case could be seen as setting a precedent affecting other parks.

But at the time, Duque said he didn’t even realize Chateau specialized in mobile-home parks. He said he sold the 3,000 shares, worth about $81,000, as soon as someone raised the issue and voluntarily stepped down from the case. A PUC official, however, said the government’s lawyers recommended he be taken off the case.

Sandra Michioku, a Lockyer spokeswoman, said his office is reviewing the foundation’s complaint. She said she wasn’t sure how long it would take.