When former Enron de Mexico President Max Yzaguirre was appointed to chair the Texas Public Utilities Commission (PUC) last June, critics charged that his affiliation with his former employer would cause a conflict of interest. Now that Enron Corp. has declared bankruptcy, Yzaguirre’s appointment has come under even more fire, with Texas Gov. Rick Perry’s office in the middle of another controversy.

Perry’s office now has released documents showing that his attorney signed off on the appointment in June 2001 after Perry’s chief appointments official — in a revealing series of e-mails — said the appointment framed the issue as “how can we make this work,” given that Texas law bars utility execs from serving on the PUC for two years after they leave their companies. Yzaguirre was chosen to replace Pat Wood, who was appointed last summer as chairman of the Federal Energy Regulatory Commission by President Bush.

The papers released Dec. 28 included a series of e-mails and handwritten notes concerning the appointment. Initially, Perry’s office withheld the documents from disclosure, claiming rights to secrecy for attorney-client materials and internal deliberations.

The release of the four pages under Texas’ open records act was spurred by a request from Tony Sanchez, who will run against Perry for the governorship next year. Sanchez’s campaign, however, is not the only one to question Yzaguirre’s appointment. Public interest groups have questioned Yzaguirre’s eligibility and now his veracity, based on an amended personal financial statement he filed with the state last month.

In a May 7, 2001 e-mail asking for a review of the Yzaguirre appointment by Perry’s lawyer Bob Pemberton, Dealey Herndon, Perry’s appointments secretary until October 2001, wrote, “Bob, this is a ‘how can we make this work’ issue so look at it from that angle.”

That e-mail is troubling, said Tom Smith, head of the nonprofit government monitoring group Public Citizen. “Any time you’re told, ‘This is something you need to make work,’ you will find ways to overlook” legal obstacles, he said.

Herndon said that her choice of words reflected an “aggressive conflict-of-interest vetting,” conducted “with a focus on how to make the appointments work.” She said, “stated another way, we wanted to know and understand any potential problems clearly and offer the appointee every opportunity to remove any conflict of interest. In some cases, applicants offered to resign positions or liquidate assets in order to serve. In other cases, the conflict of interest prevented appointment.”

The analysis by Pemberton concluded that, despite the two-year restriction under Texas law, no Enron-related companies were the type that would disqualify Yzaguirre from PUC service. Critics at the time faulted the former Enron executive for failing to initially disclose his membership on the board of Enron North America Corp. However, Pemberton knew about that role and took it into consideration, the papers show.

In another troubling development — at least for Yzaguirre’s critics — the PUC chairman amended his financial documents in November 2001, which were filed in the midst of Enron’s collapse. In the amended papers, Yzaguirre expanded the listing of his relationships with companies tied to Enron. He attributed the initial omissions to an oversight, and the governor’s office said the amendments did not affect Yzaguirre’s eligibility to chair the PUC.

However, some are not so sure. “It looks like they were trying to find a way around the law,” said Sanchez spokesman Glenn Smith.

The release of four pages under the state’s open records act marked the latest chapter in a controversy over the appointment of Yzaguirre. Sanchez’s campaign and public interest groups have questioned his eligibility and his candor, in light of the recently amended personal financial statement. Yzaguirre serves as chairman of the PUC at the pleasure of the governor; however, his term will end in 2005.

Rafael Ayuso, spokesman for the Southwest regional office of the Consumers Union, said Yzaguirre will have to overcome his image as an advocate for energy corporations instead of one for consumers. “His votes on critical issues will be the proof of whether the [public’s] perception is warranted or unwarranted,” he said. With Texas becoming deregulated, Ayuso said it was critical that consumers have an advocate on the commission. “Regardless of his actions as commissioner, there will always be a perceived conflict of interest, which we are concerned could limit his effectiveness.”

The PUC’s Terry Hadley said all commission members and employees must divest interests in companies that fall under the commission’s authority. Commissioners’ holdings are subjected to review by the Texas Ethics Commission.

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