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Press Release
Sep 29, 2006 - 01:00 AM

Schwarzenegger Veto Allows Utility, Phone Regulators to Hold Stock in Companies They Oversee

Santa Monica, CA -- Governor Schwarzenegger quietly vetoed legislation this afternoon that would have closed a loophole that allows members of the Public Utilities Commission (PUC) to remain in office when they knowingly acquire financial interests in companies they regulate.

SB 204 (Bowen) would have clarified the public's intent that PUC commissioners who voluntarily obtain a financial interest in a utility, telephone, or other PUC-regulated company must immediately forfeit their office.

"Schwarzenegger's last minute veto is a direct repudiation of the most basic good government concept: politicians should not financially benefit from their official actions," said Carmen Balber, consumer advocate at the Foundation for Taxpayer and Consumer Rights (FTCR). "The governor has abandoned even the pretense that he is interested in cleaning up California politics. This veto preserves an absurd loophole that allows politicians who knowingly break the law to go unpunished."

SB 204 addressed a contradiction in the current law, which the courts have interpreted to require a vacancy in the office of a commissioner who obtains a prohibited financial interest involuntarily, but not when that interest is obtained voluntarily. As a result of that decision, former PUC Commissioner Henry Duque was able to hold stock in regulated companies without repercussion. Duque bought and held shares in Nextel Communications, Inc., a PUC-regulated wireless telecommunications company, for a period of fifteen months while he was participating in proceedings affecting the interests of Nextel and other telecommunications firms. Duque was allowed to retain his seat and escape any penalty for his illegal stock trading, which earned him a $70,000 profit.

FTCR brought a court action on behalf of The People of the State of California, with permission from Attorney General Bill Lockyer, to remove Henry Duque from the PUC for his illegal investment. The San Francisco Superior Court ordered him to leave office in April 2002, but a January 2003 Court of Appeal decision reversed that ruling and the California Supreme Court denied review after Duque¿s term of office had expired.

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