SD City Attorney: Stop Pension Payments

June 21, 2005 ( - San Diego City Attorney Mike Aguirre has instructed City Auditor John Torell to stop payments on improved benefits granted to city employees and elected officials in 1996, 2000 and 2002.

According to a news report on The Voice of San Diego, the action represents the first time since the city’s much-troubled pension system exploded into controversy that retirement checks of current city retirees and employees are in jeopardy.

Aguirre’s action prompted city retirement officials to assert they would funnel retiree checks through an outside bank account rather than the city’s auditor, the news report said.

Also this week, Aguirre repeated his prior claims that the 1996 deal that began the city’s historic pension funding is illegal and void, the news report said (See  San Diego City Attorney Calls Pension Credit Purchase Illegal ). The Manager’s Proposal 1 deal – which allowed the city to contribute less than annually recommended to its pension system while at the same time granting enhanced employee benefits – violated local and state laws governing retirement systems that bar a government agency taking on more long-term debt without voter approval.

A later deal in 2002 known as Manager’s Proposal 2 allowed the city to escape the one safety net designed to protect the pension system under the 1996 deal, according to the news report. The safety net called for an immediate lump-sum cash infusion into the system by the city if the pension fund dropped below a certain funding level.

Officials again avoided this payment by crafting a similar deal that granted increased benefits to city workers. The deal resulted in felony conflict-of-interest charges against six current and former pension board trustees. The six pleaded not guilty Monday to the charges.   The case against Cathy Lexin, Ron Saathoff, John Torres, Mary Vattimo, Terri Webster and Sharon Wilkinson contains the first criminal charges in the pension fund scandal

With his latest comments, Aguirre continued his assault on nearly a decade’s worth of pension benefit upgrades at the heart of a pension deficit estimated to be at least $1.37 billion.

Investigators form the Justice Department and the Securities and Exchange Commission (SEC), as well as the District Attorney’s Office are investigating the pension fund with a particular eye toward whether officials properly disclosed the program’s true financial picture.

The legality of benefits has become a central issue at City Hall and on the campaign trail, where a host of candidates jockey to replace the resigning Mayor Dick Murphy. He announced his resignation in April under the weight of the growing pension crisis and a court challenge to his November victory (See  San Diego’s Murphy: ‘The city needs a fresh start’  ).