Federal Charges Dismissed for Former SDCERS Officials

April 8, 2010 (PLANSPONSOR.com) – A federal court has dismissed fraud charges against former San Diego City Employees’ Retirement System officials relating to benefits contributions in 2002.

Judge Roger T. Benitez of the U.S. District Court for the Southern District of California this week signed an order dismissing federal charges against former pension system administrator Lawrence Grissom; former system lawyer Lorraine Chapin; and former board members Cathy Lexin, Teresa Webster, and Ronald Saathoff, the former leader of the city firefighters union.

Prosecutors alleged the five defendants took a wide variety of actions and received a wide variety of benefits when they decided in 2002 to put less money into the pension system than was required. The pension underfunding ultimately produced a $1.4 billion deficit – since reduced – and also caused a variety of financial and budgetary woes.

The indictment contended the five schemed to pass the reduced funding plan so Saathoff could get an additional retirement benefit as a union president. The other four acted, the indictment said, so they could “maintain their positions within the City of San Diego and (the pension program), and seek new employment opportunities.” (See Prosecutors Tack on New Fraud Charges in SD Pension Case)

The indictment also alleged that the five made “material misrepresentations” and misstatements about the proposal and about the overall fiscal condition of the city pension system, and that the group conspired to conceal information from other board members and the public about the declining funding ratio of the pension system.

In January, the California State Supreme Court dismissed criminal charges against five former members of the San Diego City Employees Retirement System board, including Lexin, but concluded that conflict-of-interest charges against Saathoff could go forward (see Charges Dismissed for Five Former San Diego Pension Board Members).

The court ruled that Saathoff was in a different position than the other five because he secured an agreement with the city that allowed him to combine his salary as a union official with his city salary in order to calculate his ultimate retirement benefit, and because that benefit went only to Saathoff, there were enough questions about the deal to allow the case against him to go forward.