Law Firm: Confliction of Interest Violations Probable at SD Pension Board

May 26, 2005 (PLANSPONSOR.com) - A law firm has concluded in a report released Wednesday that San Diego's pension board probably violated California's conflict of interest law in 1996 and 2002 by approving proposals to underfund the retirement system.

In the report, lawyers with Luce, Forward, Hamilton & Scripps reported a “significant risk” of board violations of the law’s requirement that they disclose financial interests and not take part in discussions and votes in which they have conflicts, the San Diego Union Tribune reported. “We are not aware of any facts that demonstrate compliance with this requirement,” the report said, according to the newspaper.

City officials hired the firm to examine legal issues – including possible conflicts of interest at the beleaguered and scandal-ridden $3.6 billion San Diego City Employees Retirement System (See  San Diego Pension Debacle Heats Up Again ).

Last week, the San Diego District Attorney’s Office charged six current and former pension trustees, who were public employees while serving on the board, with multiple violations of the state conflict-of-interest law. The private legal opinion was released by City Attorney Michael Aguirre, a day after the City Council voted to waive attorney-client privilege and hand the document over to the District Attorney’s Office.

The report said that under the law, conflicts by some members of the board would have “disabled the entire board.”  

The report also said that a possible legal exception – known as the “rule of necessity” – may not apply.   Under that rule, public officials are allowed to vote on matters in which they have a conflict of interest if their disqualification would make it impossible for a public agency to fulfill its duties.

Aguirre said the report buttresses his position that the board acted illegally, and he called again on the mayor and council to wipe out benefits granted as part of the underfunding arrangements (See  San Diego City Attorney Calls Pension Credit Purchase Illegal ). He said that would trim more than $700 million from a pension system deficit estimated at $1.4 billion or more.

«