Governor in Fight Over Key Appointee

Gov. Arnold Schwarzenegger’s effort to put his stamp on California’s powerful Public Utilities Commission has hit a snag.

Back in December, the governor proposed his first two appointments to the commission, replacing two outgoing members of the five-member board that sets energy and telecommunications policy for the state’s businesses and consumers.

But confirmation of one of Schwarzenegger’s picks, Silicon Valley technology entrepreneur Steve Poizner, has been on hold. Lawyers for various state agencies are combing through Poizner’s financial records, trying to determine whether the multimillionaire’s extensive holdings would create conflicts of interest if he took a seat on the PUC.

State law prohibits officials from voting if they have a foreseeable material financial interest in a company that could be affected directly by a decision in which they have a hand. Figuring out how to structure Poizner’s telecom-heavy financial holdings so he’ll be able to vote on telecom issues has become a major obstacle to his nomination, said Mike Florio, an attorney with the Utility Reform Network, a ratepayer group that regularly appears before the commission.

“No one I’ve talked to can remember anything like this,” he said.

PUC watchers worry that the holdup could leave the commission short-handed at a crucial time. California faces a potential energy crunch this summer, and telecom companies are lobbying to derail a controversial telecommunications consumer protection measure that is now before the commission.

Poizner said he was committed to avoiding even the appearance of a conflict of interest while dealing with telecom and other issues while serving on the commission. Nevertheless, he criticized state conflict-of-interest rules as “old and ambiguous” and said he was still waiting for advice from experts at the state Fair Political Practices Commission and the attorney general’s office.

“All of this is out of my control,” he said.

Much of Poizner’s wealth -- and potential conflicts of interest -- stem from his role as founder of SnapTrack Inc., a cellphone technology company he sold to Qualcomm Inc. for $1 billion in 2000.

According to Poizner’s official statement of economic interest, filed in December 2003 when he ran unsuccessfully for the state Assembly, the Los Gatos resident has millions of dollars worth of investments in a variety of telecom companies, including Qualcomm, Motorola Inc. and Taral Networks, a wireless content provider.

Poizner also has multimillion-dollar stakes in other high-tech companies and a number of venture capital funds. The financial report also lists stock holdings of $2,000 to $10,000 each in SBC Communications Inc., BellSouth Corp. and Verizon Communications Inc. (State financial disclosure forms don’t require office holders to give exact dollar amounts of their holdings.)

Poizner’s financial holdings are so extensive that some administration critics have said that the governor’s office should have cleared up potential conflicts before announcing the appointment Dec. 16.

“I would have thought that this is the kind of issue you would address in the vetting process,” said state Sen. Debra Bowen (D-Marina del Rey), a member of the Rules Committee, which will review Poizner’s nomination if it gets that far.

Most experts suggest that Poizner at minimum needs to create a so-called blind trust -- in which an independent trustee completely controls his financial holdings -- if he hopes to get the commissioner’s post, which pays $114,191 a year.

Indeed, attorneys sorting through Poizner’s finances are “pulling their hair out” trying to design a blind trust that would let Poizner vote on telecom measures, Florio said. Officials at the PUC and the attorney general’s office declined to comment on the matter.

State regulators have been keeping a close eye on the PUC, which routinely deals with high-stake economic issues involving electric utilities and telephone companies. In January, the Fair Political Practices Commission fined former PUC member Henry Duque $18,000 for a series of votes involving Nextel Communications Inc. in 1999 and 2000 that violated conflict-of-interest laws.

Duque at the time owned Nextel stock worth from $14,000 to $36,000. He claimed that he did not know that Nextel was regulated by the PUC at the time he cast nine votes that affected the company.

Poizner’s potential conflicts appear to dwarf Duque’s problems, said Michael Shames, an activist with the Utility Consumers’ Action Network in San Diego: “It’s amazing that he’s even pursuing this position given all his stock holdings in phone companies.”

If he makes it onto the commission, Poizner would be thrust into the battle between consumer groups and telecom companies over the so-called telecom bill of rights, which is designed to address complaints alleging false advertising and confusing billing practices by wireless phone service providers.

The consumer protection rules were adopted by the commission last May but were shelved on a 3-1 vote in January. More than 45 companies had complained that the new rules were too complex.

Schwarzenegger’s other PUC nominee, energy and environmental attorney Dian Grueneich, joined the commission Jan. 20. But the remaining vacancy, if prolonged, could slow deliberations on pending decisions by increasing the workload of the other four commissioners, said Richard Bilas, a former commission president.

A four-member panel is also susceptible to 2-2 voting deadlocks, he added.

Schwarzenegger spokeswoman Julie Soderlund declined to discuss details of the proposed appointment of Poizner. “We’ll swear him in as soon as possible,” she said.