The final amount of the settlement fell far short of the $50 million City Attorney Michael Aguirre sought when he filed the suit against Callan Associates in 2005 (See San Diego Accuses Callan of Pay to Play Conflicts ).
Aguirre alleged that the firm recommended the city hire money managers that had paid Callan as much as $500,000 and that out of 339 money managers under consideration for the handling the pension system’s large-cap investments, only the six that the consultant recommended had made the payments.
The city admitted in the settlement that “it found no proof that Callan engaged in ‘pay to play’ practices or any other unfair business practices in connection with the hiring of money managers and no proof that Callan engaged in unfair business practices in connection with the hiring of money managers” within the scope of California’s business and professional codes, the Boston Globe reported.
Callan did not admit to any wrongdoing, saying that it settled to avoid the high cost and negative publicity that a trial would entail.
The city will only get $2.9 million of the $4.5 million settlement, as the two private attorneys working on the case will each be paid $750,000. The city had paid extra costs of about $100,000 according to the Globe.
The San Diego pension system is also entangled in another court battle that accuses five pension officials of neglecting the pension plans of San Diego pensioners by approving a proposal in 2002 that boosted their own income (SeeFive Indicted in San Diego City Pension Case), allegedly making them partly responsible for the fund’s ultimate $1.43-billion deficit.