Judge Denies Dismissal of SD Pension Fraud Case

November 10, 2006 (PLANSPONSOR.com) - The federal judge in the San Diego pension fraud trial has denied a request by the defense to dismiss the case against five former pension officials but said the language in the indictment against them was vague.

The five officials were indicted in January amid accusations that they neglected the pension plans of San Diego pensioners by approving a proposal in 2002 that boosted their own coffers (See Five Indicted in San Diego City Pension Case ), making them partly responsible for the fund’s $1.43-billion deficit.

According to the San Diego Union-Tribune, US District Judge Roger Benitez said the indictment included vague language, but stopped short of ordering clarification. Instead, he denied another request by the defense to require prosecutors in the case to specify which of the one million documents are considered favorable to the defense. Benitez had agreed in early September tto push the trial date back from February to May 2007 because of the amount of documents that needed to be sifted through (See  Judge OKs More Time for Defense in SD Pension Fraud Case ).

The judge questioned language referring to “others,” and “material information” that was not elaborated on.   Defense attorney Frank Vecchione told the court that the “others” have to be City Council members and city attorneys because they are the only ones who can grant pension benefits, the newspaper reported.

Benitez said he would allow the defense to come up with a judicial order that would require prosecutors to hand over more information about the alleged conspiracy and include their ideas about who else might have played a part. He did not indicate whether he would sign the draft.

The five charged in the case are:

  • Ronald Saathoff, former president of the local firefighters union
  • Cathy Lexin, former human resources director in the city manager’s office
  • Teresa Webster, the city’s former acting auditor,
  • Lawrence Grissom, former San Diego County Employees Retirement System (SDCERS) administrator, and
  • Lorraine Chapin, the plan’s general counsel.

An independent audit of the city’s pension system released in August focused even more heat on the issue when it found that pension officials flouted the law when they approved pension agreements that allowed withholding full contributions to the city’s pension plan and made false disclosures to investors (See Audit: SD Broke Law in Connection with Pension Debacle ).The auditors were hired to look into accounting irregularities and possible fraud by pension system employees.