San Diego Pension Mess Boils Over – Again

January 28, 2005 ( - San Diego's pension mess continued to simmer Thursday when the city's retirement board sued City Attorney Michael Aguirre to keep him from controlling the pension system's legal affairs and to get back various legal papers.

A news report from the San Diego Union Tribune said Aguirre’s moves on the vastly troubled San Diego City Employees Retirement System began December 15 when he notified retirement officials he was taking over their legal affairs and dismantling their three-person legal staff. (See  Potential Lawsuits Abound in San Diego Pension Fiasco )

The latest California Superior Court 24-page lawsuit follows testy correspondence between Aguirre and the system’s outside lawyers and comes as federal investigations into city finances and the retirement system are about to enter their second year:

  • The Securities and Exchange Commission is investigating whether city officials committed securities fraud by failing to disclose the nature and depth of the retirement system deficit in financial documents provided to prospective investors in San Diego city bonds. The latest official report puts the deficit at $1.37 billion, much of it due to underfunding and benefit hikes.
  • The FBI and U.S. Attorney’s Office are conducting separate probes of city finances and possible public corruption. Last week FBI agents served federal grand jury subpoenas on city officials after Aguirre disclosed that city treasurer’s office employees destroyed documents and erased e-mails last month.

After Aguirre’s assertion of jurisdiction over the pension system, Retirement Board President Frederick Pierce IV called Aguirre’s actions “illegal, inappropriate and at times outrageous,” according to the Union Tribune. The lawyer fired back, calling the board a “rogue agency” and promising to file a lawsuit seeking to oust the board and place the $3.6 billion retirement system into receivership.

System officials balked at Aguirre’s December 15 more, and on Dec. 17, an Aguirre deputy informed the retirement board that anyone resisting him “will be held accountable under the law.”

Aguirre also issued an opinion that the board acted illegally in seeking to ban from closed sessions trustee Diann Shipione, whose warnings over financial irregularities drew national attention and sparked federal investigations. Last week, in open defiance of Aguirre, the board successfully excluded Shipione from a closed meeting.

According to the newspaper, the lawsuit alleges that Aguirre:

  • exceeded his authority by attempting to take over the system’s legal affairs. Aguirre asserts his action is empowered by the City Charter and the municipal code
  • improperly seized documents from three top city officials
  • failed to return documents taken in those seizures that relate to attorney-client communications between the board and its lawyers
  • improperly showed seized documents to Shipione and her husband, lawyer Pat Shea, an unpaid adviser to Aguirre during his transition to public office.

The lawsuit said unless the court block’s “Aguirre’s course of wrongful and unlawful conduct,” the retirement system will suffer “great and irreparable injury” by being deprived of the legal services of its in-house and outside lawyers.  Aguirre declined to address the specific allegations but termed the lawsuit’s aims “part of their (the retirement board’s) ongoing illegal activity.”