Tuesday, February 15, 2005 | Perhaps inspired by the bouquets of flowers and pink heart-shaped balloons that bobbed in the hands of delivery boys through the corridors of City Hall on Monday, opposite arms of city of San Diego leadership embraced each other after a week of quarrels to agree on a key step in extracting the city from its financial freeze.

The heralded agreement comes in the form of one person: Lynn Turner. He is the former chief accountant of the Securities and Exchange Commission, and his singular task is to combine a series of separate investigative reports and work with the city’s accountants, KPMG, to release the long-delayed 2003 fiscal year audit.

On hold since last year because of questions surrounding the culpability of errors and omissions in the city’s bond disclosures to investors, the audit must be completed for the city to reenter the financial markets and deal with its fiscal crisis.

All sides share the optimistic view that Turner, a specialist in financial reporting, will play the cupid that ultimately captures KPMG’s hardened heart.

“I think it is the final piece of the puzzle to completing the 2003 audit,” said Mayor Dick Murphy at a morning news conference in City Hall announcing the retention of Turner. The City Council later unanimously approved his hiring.

Although not invited to the press conference, City Attorney Mike Aguirre – whose shaky relationship with Mayor Dick Murphy and the City Council appeared completely shattered last week after accusing many of them of civil securities law violations – held his own media gathering later in the afternoon to support the hiring of Turner.

“We have found the one thing that the mayor, the city manager [Lamont Ewell] and the city attorney can agree on, and that’s hiring you,” said City Councilwoman Toni Atkins to Turner at an afternoon council hearing.

Turner’s task is to combine investigative reports from Aguirre and Vinson & Elkins, the law firm hired to represent the city before the SEC. City officials found out last fall that their self-investigation by Vinson & Elkins wasn’t enough to satisfy KPMG because it didn’t explore possible illegal acts by city officials.

The investigative appendix from Vinson & Elkins is expected in the next three to four weeks, said City Councilman Scott Peters. Officials still couldn’t speculate on when the audit would be complete.

To date, the city has paid $2.26 million to Vinson & Elkins and $1.64 million to KPMG; both contracts have been extended from their original figures. The initial expenses for Turner are expected to be between $250,000 and $300,000.

Turner is expected to independently assess the city’s accounting practices and history, and advise the city on changes that could be necessary for the audit to be certified. Without the audit, the city remains banished to financial Siberia without access to cash to complete short-and long-term projects.

“The lack of the fiscal year 2003 audit is probably the most serious issue facing the city today,” said City Councilman Michael Zucchet. He frequently butts heads with Aguirre publicly. Monday, Zucchet thanked his former campaign supporter; Aguirre applauded and congratulated his frequent foes Murphy and Ewell.

“I’m hoping today’s news will usher in a new era,” Aguirre said.

One big catch in the Valentine’s Day celebration: Officials admit publicly they don’t know what KPMG’s audit will reveal regarding the city’s fiscal standing.

Zucchet and fellow Councilman Jim Madaffer said they spoke directly with KPMG representatives last week, and the two councilmen reported that the auditor approved of Turner’s hiring.

“KPMG believes we are on the right path,” Zucchet said.

KPMG also requested that board members of the embattled San Diego City Employees’ Retirement System waive their attorney-client privilege to help the audit draw to a close. To date, the board has guarded information it believes falls under attorney-client privilege.

Without this information, Turner said the city may need to amend the footnotes of its audit or modify its disclosures.

Aguirre called on Murphy to assert his bully pulpit and make sure that the seven city-controlled members of the new retirement board – to begin in April – agree to this idea before their appointments. The mayor will nominate and the council confirm seven of the 13 new board members.

Please contact Andrew Donohue directly at andrew.donohue@voiceofsandiego.org with your thoughts, ideas, personal stories or tips.

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