San Diego Lawmakers Demand Better Pension Scandal Accounting

June 30, 2005 ( - San Diego City Council members are demanding better accounting for how the city is paying expert advisors for services relating to its beleaguered scandal plagued pension fund.

Local lawmakers have also asked for a timeline on when the plethora of local and national inquiries into the raft of allegations about how the city has handled its deficit-ridden pension might be wrapped up, according to a San Diego Union Tribune news report. Meanwhile, council members okayed spending more than $4.5 million for attorneys, auditors and other experts relating to the pension program – about $1.4 million less than the outside firms have demanded.

Council members cleared new payments for tasks that will be performed through the end of the fiscal year, which is Friday, but cut back on funding to cover anticipated expenses through July.

They called for City Manager Lamont Ewell to arrange for the most prominent of the experts, including a pair of former SEC officials, to appear before them in July to offer a better sense of the work’s status. The former SEC officials come from Kroll Inc., a forensic accounting specialist.  Another group of attorneys is advising Kroll.

The auditing firm KPMG has told the city that it can’t hand over its examination of the city’s 2003 financial statements without more information from investigators. The law firm Vinson & Elkins continues to examine records related to the pension following its September 2004 report on the city’s handling of the pension crisis.

According to the Union Triune report, the council approved the full $1.8 million payment requested for Vinson & Elkins, but withheld some money being sought for Kroll and its attorneys and $100,000 from KPMG. Council members okayed $1.55 million in spending for Kroll and its law firm, Willkie, Farr and Gallagher, and $300,000 for KPMG. Other approved spending included more than $900,000 for a variety of legal services, including counsel for elected officials and city employees who have been questioned by authorities.

The council’s decisions this week came amid three hours of debate that included a barrage of accusations and counter claims, including City Attorney Michael Aguirre criticizing the quality of one prominent firm’s work and Councilman Jim Madaffer firing back at Aguirre for conducting his own public probe (See  San Diego City Attorney Calls Pension Credit Purchase Illegal ).

The Securities and Exchange Commission and the US Attorney’s Office continue to investigate the origins of the $1.4 billion retirement fund deficit, caused by benefit increases and decisions to underfund the system (See    San Diego City Attorney Calls Pension Credit Purchase Illegal ). Six current and former pension board members already face state conflict-of-interest charges in the case (See  San Diego DA Kicks Off Pension Probe ).

Orange   CountyAlso in Trouble?

On a related note, a  California state grand jury has warned Orange County that it could face similar pension problems as San Diego’s, according to news reports.

The grand jury criticized recent county boards of supervisors for raising pension contributions by nearly 300%. The report asserted that the boards appear to be granting overly generous benefits “in light of tight county budgets and the residual effects of the bankruptcy 10 years ago.”