The Morning Report
Get the news and information you need to take on the day.
Friday, August 05, 2005 | In separate interviews this week, two members of the city’s embattled pension board complained that what might be the most high-profile issue facing them and their colleagues was not even listed as a discussion item on last week’s board agenda.
A third member of the retirement system’s board of administration, trustee John Thomson, told the Voice of San Diego that he too was upset about a policy that appeared to give the board’s president total power to decide what the system’s trustees were permitted to discuss.
Pension trustees Bill Lopez and Bill Sheffler said the board should have at least discussed the ongoing request by multiple federal and local investigators that the board waive its attorney-client privilege.
The comments were sparked by a discussion Lopez instigated at the July 29 meeting of the board of administration of the San Diego City Employees’ Retirement System. At the end of that meeting, Lopez, who represents the city manager, asked board president Peter Preovolos why waiving the attorney-client privilege was not on the board’s agenda and how he could make sure that it was in the future.
After a back and forth between Lopez and Preovolos, the board’s legal counsel told Lopez that the only way he could get around that rule and put an item on the agenda without Preovolos’ blessing was to gather enough votes to actually change the rules of the board.
Lopez then asked how he could get a rule change on the agenda.
He said he has yet to receive an answer.
“Staff is working on that and they are committed to giving me an answer, but regardless I think that if we had a majority of the board that wanted something, the president would defer without any kind of forced parliamentary action,” Lopez said.
Preovolos responded that although he was unsure how, exactly, a rule change would take place, with seven members united, the board members could put any rule change on the agenda they wanted.
Thomson said that he was “shocked” when he learned that only Preovolos had the power to put something on the board’s agenda.
“That doesn’t seem proper to me that any one person could have the sole power to set an agenda,” said Thomson, who represents the city’s firefighters on the board. “I’ve never been part of a board where you couldn’t get something on the board if you wanted to talk about it.”
Thomson said he’s not necessarily interested in putting the board’s waiver of attorney-client privilege on the agenda, but if other board members want to discuss something, they should be able to.
Sheffler and Lopez, who both say they are in favor of waiving the board’s attorney-client privilege, said even though they are not part of the majority, the issue is important enough to at least discuss at every opportunity.
“Although the waiver issue is unresolved, I believe we can make some progress with continued discussion. But if you don’t put something on the agenda you can’t discuss it,” Sheffler said.
Federal criminal investigators, the city’s audit committee and the city attorney, along with the entire city leadership, have formally asked the board to waive its attorney-client privilege and release protected documents. Investigators believe that those documents will allow them to finally determine whether illegal acts occurred as the pension fund headed toward an estimated $1.37 billion-plus deficit.
And, perhaps most importantly, the city’s outside financial auditor, KPMG, demanded nearly a year ago that the city complete a so-called “illegal-acts” investigation to allow KPMG to certify audits of the city’s finances for fiscal year 2003. Without that audit, and one for fiscal year 2004, the city is unable to approach the bond market. Without issuing bonds, many vital infrastructure and refinancing projects have been delayed.
The city attorney and audit committee have argued that such an illegal-acts audit cannot take place until they have access to the pension system’s privileged documents.
Preovolos was dismissive of the notion that the board was coming closer to waiving its attorney client privilege.
Although he voted against waiving the board’s attorney-client privilege in April, Lopez said he has concluded that it is necessary now.
“The bottom line here is we need to satisfy the auditor and reenter the bond market,” Lopez said.
Lopez, Sheffler and trustees Joe Flynn and Mark Sullivan comprise four of the seven votes needed to waive the privilege. Four new appointments to the pension board are expected next week.
Thomson, the firefighter’s trustee, voted no on the waiver in April and said Thursday that he still hasn’t heard direct evidence that the city’s auditors need to see protected pension documents in order to complete their work.
But, he said, the board appeared to be heading “down the road” toward waiving the attorney-client privilege.
“Eventually, I’ll probably be on the other side,” Thomson said.
Sheffler said that was his impression of the board’s tendency as well.
“I think the sentiment of the board is changing with regard to the waiver. Before we had a situation where people were threatening to leave even if we discussed it, and now, those people have all left,” Sheffler said.
At the July 29 meeting, Preovolos did not overtly deny that the board was making plans to approach the state’s Legislative Audit Committee in Sacramento, as reported in the Voice last week. The board, according to a source close to the effort, was planning to request that the legislators approve a state audit of the city’s pension fund. Such a move would most likely produce a waiver of the board’s privilege.
Referring to the Voice story, Preovolos did say that approaching the legislature as described might be “helpful” to the board’s current situation.
“We’ve made no concrete decisions about a number of issues facing this board,” Preovolos said.
However, if the board did have plans to submit a request to the Legislative Audit Committee, it would have had to do so by Aug. 3. Since the board did not discuss the issue at its July 29 meeting, and has not met since, the board would have already made a decision about meeting the Aug. 3 deadline before the Voice story ran July 29.
The Legislative Audit Committee is expected to release a list of the requests it received sometime before its regularly scheduled meeting Aug. 23.
Scott Lewis is a former reporter at The Daily Transcript. You can e-mail him at