Thursday, July 14, 2005 | Leaders of the embattled pension board have struck back at City Attorney Mike Aguirre, firing off letters to the City Council and to one of Aguirre’s deputies, claiming that the city attorney overstepped his authority and illegally threatened the pension board.

The letters, dated Tuesday, came in response to two lawsuits Aguirre filed last week as part of his attempt to rollback benefit increases at the heart of a pension deficit estimated to be at least $1.37 billion.

And in other pension developments, whistleblower Diann Shipione turned down council attempts to reappoint her to the board, saying the problems within the pension system are beyond repair.

“It’s time for the retirement system to be disbanded,” Shipione said at press conference.

A trio of council members had urged Shipione’s reappointment Tuesday after board member Thomas King resigned only three months into his first term on the board, citing a highly-politicized environment and Aguirre’s lawsuit as his motivation.

Afterward, Councilman Jim Madaffer called for the removal of two other pension board members, President Peter Preovolos and Robert Wallace.

City officials are frustrated by the San Diego City Employees’ Retirement System board’s failure to waive the attorney-client privilege related to a slew of documents sought by the city’s outside auditors, the U.S. Attorney’s Office and the Securities and Exchange Commission.

Without access to the documents, investigations being conducted in relation to the city’s long-delayed 2003 audit won’t be cleared up. As such, the city will remain, as it has since September, essentially barred from capital markets and the cash to do the things cities do – fix roads, build fire stations and replace aging sewer pipes, for example.

Ironically, the City Council appointed a majority of the board members this spring as an attempt to excise the perceived lack of independence of the prior board.

The previous board’s connections to city management and union leadership are cited by many as one of the reasons for the pension deficit, which was brought upon largely because of deals made between city and pension officials that allowed the city to inadequately contribute to the pension fund annually while granting increased benefits for workers.

These deals, as well as the errors and omissions in financial statements, have attracted federal investigators to City Hall.

City officials hope to force Preovolos and Wallace from the board in order to appoint someone who will waive the privilege.

“Waiving the attorney-client privilege is the first step, but (fixing the pension system) is basically a thousand-step process,” Shipione said. She advocates putting the system into receivership or putting the entire city into a Chapter 9 municipal bankruptcy, as suggested by her husband, mayoral candidate Pat Shea.

Part of Aguirre’s legal strategy, begun last week, is to wrest control of the pension system away from its current administrators and board and hand it to a court-appointed receiver. Such experts are often called in to take the reigns of mismanaged entities.

Shea and Aguirre are friends and political allies.

In a letter to Mayor Dick Murphy, the City Council and City Manager Lamont Ewell, Preovolos states that Aguirre lacks the authority to bring his suit without the approval of the City Council.

“It appears that Mr. Aguirre’s aim in filing meritless claims is to intimidate SDCERS board members into resigning in order to destabilize SDCERS and in effect, to create the chaotic situation he and his political cohorts claim has existed for months,” the letter states.

Preovolos could not be reached for comment.

Aguirre noted that his second suit was filed as a cross-complaint to a lawsuit filed by the pension board against him and the city.

A second letter sent by the board’s legal counsel, Lori Chapin, to Deputy City Attorney Chris Morris warns of Aguirre’s misconduct so that “neither you, nor any other attorney in the criminal division compounds Mr. Aguirre’s abuse of his office by filing criminal charges against SDCERS board members.”

Morris is acting chief of the criminal division.

During a special pension board hearing Monday, Aguirre told the pension board that it was acting illegally in going into closed session and warned that he was authorized to bring misdemeanor charges in his capacity as city attorney.

“I think that Aguirre needs to be put on notice that we are listening to his statements and we are prepared to take action against him in response to these sorts of things,” said pension trustee Bill Sheffler, who has also called on his colleagues to resign if they do not favor waiving the attorney-client privilege.

Aguirre brushed off the letters, promised more litigation against the pension system and took some shots at Murphy, whose resignation from office is official on Friday.

“They can write all the letters they want, but at this point they’re going to have to go before a judge and jury and their behavior will have to be evaluated in a court of law,” he said.

The city attorney continued to blame Murphy for appointing both the pension board and for appointing Councilman Michael Zucchet as deputy mayor. Zucchet, who is awaiting a jury to return a verdict on federal corruption charges, is slated to take over for Murphy on Monday and would be in charge of nominating new pension board members.

“Anyone who says what a nice person Mayor Murphy is doesn’t really understand how truly diabolical and twisted his thinking has been,” Aguirre said.

In an interview this week, Murphy defended his pension appointees, saying that independence was the quality sought in a new board and that they needed time to make the tough decision of waiving the attorney-client privilege. He declined to answer questions related to Aguirre.

Please contact Andrew Donohue directly at

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