Dispute over Pension Benefits, Legal Counsel Moves Toward Trial

Wednesday, August 24, 2005 | The legal battle over who is the rightful legal counsel of the city of San Diego’s troubled pension system appears headed for trial after a hearing Tuesday that narrowed the scope of the case.

The suit was filed in January by the San Diego City Employees’ Retirement System to block City Attorney Mike Aguirre’s attempt to serve as the system’s legal counsel. The San Diego city attorney had served in the role until former City Attorney Casey Gwinn authored a 1998 memo establishing SDCERS’ own legal counsel.

Superior Court Judge Jeffrey Barton issued rulings on a number of fronts, striking down the pension system’s attempts to muzzle Aguirre’s public criticism and granting the system the right to its own legal counsel for the remainder of the proceedings.

Executive Assistant City Attorney Don McGrath said he expects the issue of who is the pension system’s chief legal advisor to be decided in a trial next year.

“Casey Gwinn gave away the farm, and Mike Aguirre’s going to get it back,” McGrath said.

Aguirre’s attempt to declare illegal and void pension benefit enhancements given to city employees in 1996 and 2002 could also be part of the trial. The pension system has filed a separate suit seeking a judge’s ruling; however, officials at the City Attorney’s Office want the two issues to be tried together.

The Municipal Employees Association, the largest union representing city employees, has joined the pension system in its suit. They maintain the benefits were created legally.

MEA attorney Ann Smith said allowing the legal counsel case and the pension benefit challenge to be tried together would drag the case on unnecessarily, expending valuable city resources.

During Tuesday’s hearing, Barton also left open the possibility of allowing the pension system to be placed into receivership. In a receivership, a court-appointed expert takes control of a mismanaged entity. In a cross-complaint to the SDCERS suit, Aguirre and McGrath contemplate receivership as one solution for a system at the heart of San Diego’s legal and political troubles.

The pension system has a deficit of at least $1.37 billion and has attracted investigators from the U.S. Attorney’s Office and the Securities and Exchange Commission. The deficit, which is expected to grow, also threatens to bog down city budgets for the foreseeable future. Aguirre estimates his legal challenge would knock out $700 million to $800 million from the deficit if successful.

Upon taking office in December, Aguirre rescinded Gwinn’s 1998 memo and has asserted his claim as SDCERS’ chief legal advisor.

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