Prosecutors Tack on New Fraud Charges in SD Pension Case

October 16, 2008 ( - Federal prosecutors have added new wire fraud and conspiracy charges to the long-running prosecution of five former city of San Diego retirement officials.

A San Diego Union-Tribune news report said prosecutors now allege the five defendants took a wider variety of actions and received a wider 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 defendants include 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.

The newspaper said the new indictment contends 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.”

The new indictment alleges that the five made “material misrepresentations” and misstatements about the proposal and about the overall fiscal condition of the city pension system.

For example, the indictment says the group conspired to conceal information from other board members and the public about the declining funding ratio of the pension system, the newspaper said.

The Union-Tribune report said the expanded charging document also spells out 46 new actions that prosecutors say the defendants took to orchestrate the scheme at the San Diego City Retirement System board—mostly e-mails sent among the five defendants as the proposal moved forward in 2002.

Prosecutors contend the five worked to get the board to pass a new plan that got the city off the hook for the new payment and, as a result, gave city workers enhanced retirement benefits.