San Diego Pension Board Agrees To Turn Over Documents

August 31, 2005 (PLANSPONSOR.com) - Following a federal court order issued last week that the city of San Diego's pension board turn over internal financial documents to federal investigators, the board has decided to turn the documents over to the city, law enforcement, and securities agencies.

The ordered issued last week did not require the release of the documents to the city (See  Judge Orders San Diego Pension Documents Turned Over to Feds ).   Peter Preovolos, president of the pension board, said he hopes turning over the documents will help investigators complete their work so the board can return to its work, the San Diego Union-Tribune reports.

At the same time it made the decision to turn over the documents, the board hired a consultant to investigate the actions of current and former board members who have been accused of criminal conflicts of interest.   According to the Union-Tribune, the board still did not waive its attorney-client privilege as urged, and one board member said he believed the board can limit the distribution of the documents.

The records will be released to the US Attorney’s Office, the Securities and Exchange Commission, the county District Attorney’s Office and Kroll Inc., the city’s New York-based consultant working to reconcile lingering questions regarding the pension fund, according to the newspaper.

Deputy Mayor Toni Atkins said release of the documents will allow an audit of the system by an outside party that may resolve some questions raised about the system and its $1.4 billion deficit and $500 million in unfunded retiree health costs.   City Attorney Michael Aguirre said the documents are likely to reveal violations of Government Code 1090 concerning conflicts of interest.

A source in the City Attorney’s office told the Union-Tribune that the most eagerly sought document by its office is a legal brief from an outside law firm that reportedlyadvises fund officials that the vote to allow the city’s underfunding of the system to continue, in connection with increased benefits, could be vulnerable to a challenge based on the conflict-of-interest law.

But, board member William Sheffler told the newspaper that Aguirre will not be allowed to view copies of the records because the board retains attorney-client privilege.

Handing over the documents may speed completion of the city’s overdue 2003 financial audit and could help the city re-enter the bond market and borrow money for numerous stalled projects, which it has been unable to do at favorable rates for more than a year because of the investigations and financial problems related to its pension deficit.   In the newspaper report, Sheffler said, “My concern is restoring the trust of beneficiaries in the retirement system.   And if it allows the city to re-enter the bond market and fund the retirement system on an orderly basis, that’s frosting on the cake.”

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