Tuesday, March 15, 2005 | A new majority took official control of the embattled 13-member pension board Monday, as the San Diego City Council approved Mayor Dick Murphy’s seven new appointees to a group central to solving the city’s ongoing legal and fiscal crisis.

Most of the public debate at Monday’s hearing focused on the omission of Diann Shipione, the pension board whistleblower who brought the ills of the deficit-laden system to the attention of the public and council in 2002.

Murphy said he sought a clean slate in assigning the seven positions – a power granted to him by Proposition H, which was approved by voters in November.

Clean slate for the pension board

“Those that ring the bell in many cases are not necessarily those that put out the fire,” said Bill Geppert, vice president and general manager of Cox Communications. He and new pension board member Ted Roth are close Murphy allies.

However, most of the everyday public speakers not from the business community expressed a strong desire to keep Shipione on the board because of her past service. Speaker Phil Hart called the failure to appoint Shipione “nothing short of a tragedy and vindictiveness.”

The vote was 8-to-0 in favor of the mayor’s seven nominees, although at least four council members supported Shipione’s nomination. Councilwoman Donna Frye, the most outspoken council supporter of Shipione, was in Sacramento to be honored as “Woman of the Year” in Christine Kehoe’s state senate District 39.

Councilwoman Toni Atkins asked that the hearing continue but the vote be delayed to allow Frye to vote on the issue. Murphy denied the request.

Attorney-client privilege issue

The failure to do so has hindered the city’s long-delayed 2003 fiscal year audit, which has in turn delayed its access to the financial markets. The lack of an audit leaves the city without money to complete mandated water and sewer infrastructure upgrades, as well as library and fire station construction.

The invocating of the attorney-client privilege has also kept closed-session documents from federal investigators. The Securities and Exchange Commission, investigating errors and omissions in the city’s financial disclosures, has scolded the city for its lack of cooperation. In fact, the SEC often cites the willingness to waive this privilege as a reason for easing sanctions against entities under investigation.

City Attorney Mike Aguirre opined that the SEC would look unfavorably upon the treatment of Shipione because it was she – not the city auditor, city manager or city treasurer – that brought the problem to light.

“We have to make the case before the SEC that we are taking remedial steps,” he said, recommending Shipione be nominated in place of Roth. Shipione is the wife of Pat Shea, a close advisor to Aguirre.

The pension deficit is $1.37 billion, and the failure to disclose its magnitude to potential investors triggered the SEC investigation. Meanwhile, the U.S. Attorney’s Office is investigating possible public corruption.

And in a rare scene, Aguirre called up three of the nominees – Roth; Thomas Page, former San Diego Gas and Electric executive; and Peter Preovolos, chairman of a financial management consulting firm – and asked them one-by-one if they had set a higher standard than Shipione when it came to exposing problems in the city.

“You know I have not,” Roth said, adding that he would “pledge to you that I will be equally diligent in fulfilling my obligation.”

Pledge of dedication

“We really need to resolve this for the city,” Atkins said.

The nominees were originally slated to be appointed March 7, but the council’s vote was delayed pending further study of the nominees by the city’s outside audit committee. In the interim, two of Murphy’s original appointees removed their name from consideration. Aguirre also conducted background checks on the nominees but didn’t release them to the public.

Atkins said it was helpful to have the information, though it obviously didn’t have an effect on the voting of the council.

The other four new board members are: William Sheffler, a pension actuary and member of the city’s Pension Reform Committee; Susan Snow, chief financial officer of MAXIM Systems; Robert Wallace, a certified public accountant; and Thomas King, president of San Diego Community Bank.

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