San Diego Puts Suits on Hold to Allow Audit to Proceed

March 11, 2005 ( - Two lawsuits involving San Diego's badly troubled pension system have been put on hold to allow an audit of city finances to be completed and a bond sale put into the market.

A news report from SignonSanDiego, said the city needs the audit to restore its suspended credit rating and to re-enter the bond market, which would help retire the nearly $1.4 billion pension debt and fund needed infrastructure projects.Declared Mayor Dick Murphy: “The completion of the audit is the number one priority of the city of San Diego.” Murphy said the delay in pursuing the two lawsuits would essentially “help freeze things in place,” so the audit could be released.

The news report said that one lawsuit sought to have changes in pension benefits for city employees thrown out because some of the 13-members of the San Diego City Employees’ Retirement System Board of Administration had a conflict of interest. According to the suit, the city struck a deal with the retirement board that allowed the city to underfund its pension system, while at the same time increasing employee benefits.The suit was filed in January by attorney Michael Conger on behalf of the San Diego County Taxpayers Association (SDCTA), resident Lance Abbot and April Boling, former chair of the city’s Pension Reform Committee.

SDCTA Executive Director Lisa Briggs said the group is ready to renew the legal challenge in 90 days if the city’s financial audits are not completed. “Clearly if there is no movement in 90 days then yes, we are back to square one,” Briggs said, according to the news report.

Meanwhile, City Attorney Michael Aguirre announced that a second pension-related lawsuit filed against the city had also been put on hold. Aguirre told reporters the retirement board agreed to a 120-day delay in its lawsuit attempting to block him from taking control of the pension system’s legal affairs. The suit also sought to retrieve documents Aguirre seized from current and former trustees (See Potential Lawsuits Abound in San Diego Pension Fiasco ).

The SEC is investigating whether San Diego violated federal securities laws by not fully disclosing to investors the scope of its pension debt. The debt, coupled with errors and omissions in the city’s financial disclosure statements, has also led to probes by the US Attorney’s Office and FBI (See SEC Demands San Diego Pension Testimony, Documents ).

Board Nominees Withdrawn

In related news about the city’s pension woes, Murphy recently nominated seven people to oversee the fund – but Murphy later announced that Robert Doede, a retired investment businessman who chairs The Bishop’s School’s finance committee, had withdrawn “due to family conflicts.”  Later Murphy announced that Harvey White, who helped found Qualcomm Corp. and was chief executive of Leap Wireless when it filed for bankruptcy in 2002, was no longer a candidate. No reason was given. The city council is expected to consider confirming the nominees at its regular meeting on Monday.

Finally, in a sign that the bitter acrimony that has marked the city’s pension problems until now may be abating, the majority of the City Council and City Manager Lamont Ewell — minus Councilwoman Donna Frye and Aguirre — signed an agreement Tuesday unofficially dubbed throughout City Hall as the “play nice pact,” an accord that would keep most gripes in-house.