Mayor Announces New Pension Board Nominees; Whistleblower’s Name Absent

Monday, February 28, 2005 | The names of Mayor Dick Murphy’s handpicked pension board nominees surfaced Friday without one noticeable castaway: whistleblower Diann Shipione.

Saying it was best to start the new board with a clean slate, Murphy chose not to retain the sole person who warned the mayor and San Diego City Council of the disastrous implications of the Nov. 2002 vote that widened the pension system’s now $1.37 billion deficit by granting improved employee benefits while worsening its historical underfunding.

“We did not offer it to her,” Murphy said at a press conference announcing the nominations, which go before the full council March 7 for confirmation.

Immediately after their names escaped the mayor’s mouth, the seven citizens landed smack dab in the muck of San Diego’s rather hellacious political and financial reality.

As the new majority of the 13-member board, they together will preside over a system that is the chief cause of the city’s financial woes and one of its last obstacles to completing an absolutely essential financial audit.

They are: Robert Doede, a retired investment advisor and former University of Pennsylvania economics professor; Thomas Page, former head of San Diego Gas & Electric Company; Ted Roth, an investment banker, former president of the sputtering Alliance Pharmaceutical Corp. and one of Murphy’s biggest political supporters; William Sheffler, a pension actuary and member of the city’s Pension Reform Commission; Susan Snow, chief financial officer of MAXIM Systems; Robert Wallace, a certified public accountant; and Harvey White, a founder of Qualcomm Corp.

“I’m happy to serve; it will be a daunting task,” said Snow. Reporters wondered why she should would even want to put herself such a position. To that, she said: “I’ve been asked that by my family. We need to be supportive and help this city.”

The purity of San Diego’s long-delayed fiscal year 2003, essential to rejoining Wall Street, rest with auditor KPMG’s access to the pension board documents currently protected by attorney-client privilege. If they are not turned over, the audit could include footnotes that can belittle the audit in the eyes of Wall Street.

The city’s credit rating has essentially been frozen since last September, when it admitted to errors and omissions understating the true depth of its pension debt in disclosure to prospective bond investors. The status leaves the city without access to funds for essential projects such as water and sewer upgrades.

Murphy has publicly requested the current pension board waive this privilege to aid the audit; the board voted 9-to-0 against that notion on Feb. 18.

The mayor said he didn’t make the same request of his nominees, nor did he discuss this idea. He did say earlier this week that he expected his new board to revisit the decision.

“I think it is improper to condition the nomination to any board on some litmus test,” Murphy said.

Snow said she hadn’t done enough research to discuss specifics, as did Roth. He did say he would be willing to make a decision on the waiver if the board were to revisit the vote.

“I think the new board is a board of independent thinkers, but I think it’s safe to say they all want the see the audit finished,” said Mitch Mitchell, vice president of public policy at the San Diego Regional Chamber of Commerce.

The decision to exclude Shipione reportedly has drawn fire from even Murphy’s biggest supporters, who never speak on the record, all the way to his obvious opponents, such as City Councilwoman Donna Frye. Both Frye and Councilman Brian Maienschein nominated Shipione to serve on the board again.

“She seems to be the only person out there with the courage to speak the truth and act on it,” Frye said.

Without Shipione’s warnings, the truth behind the troubled pension plan could still be lingering behind closed doors. But earlier this week, she said in an interview that she wouldn’t want to serve again because she didn’t see significant change coming from the mayor’s office.

“The mayor’s detractors and the mayor’s supporters are watching very closely to see what moves he’s making,” Mitchell said.

The mayor gained the power to appoint a majority of the pension board members thanks to Proposition H, which 64.8 percent of voters approved last November. The measure called for changing the board’s composition, giving the mayor seven appointees who are to have financial backgrounds and no personal financial interests in the retirement system. City Hall’s four unions send one representative each, as do retired employees and the city manager.

The board make-up has been partially blamed for the crisis because the current structure gives a majority to those invested in the system, and creates priority problems for officials who must try to keep different, and sometimes competing, budgets functioning.

Murphy believes the new board, which is scheduled to take over April 15, is part of the solution to fixing the city’s fiscal problems.

“This is another part of my plan to return financial stability to the city’s pension plan,” he said.