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Monday, October 03, 2005 | Lawyers for the city of San Diego’s beleaguered pension board determined in 2003 that many of the members of the board breached their fiduciary duties and “subordinated” the retirement system’s interest to the interests of themselves, their unions and the city, according to documents released by San Diego’s independent audit committee Monday.

One of the thousands of documents released Monday is a 20-page legal brief submitted to the board of administration of the San Diego City Employees’ Retirement System by its lawyers with the firm Seltzer Caplan McMahon and Vitek.

The law firm told the board that it should attempt to settle a case challenging the 2002 agreement known as Manager’s Proposal II because it was clear that the board had breached its fiduciary duty.

And the opinion offered additional advice.

“… SDCERS should consider filing cross-complaints against the city of San Diego and the labor unions, whose leadership voted for the 2002 proposal, alleging a conspiracy between the city and unions to cause the board members to breach their fiduciary duties to SDCERS members and their beneficiaries,” the March 2003 opinion reads.

Six current and former members of the pension board are facing felony charges for their roles in the 2002 agreement, which enhanced their pensions and those of thousands of city employees at the same time it allowed the city to continue paying less into the pension system than required.

The increased benefits, along with insufficient payments to the pension system, comprise the bulk of the shortfall in the city’s retirement fund, which is estimated at $1.37 billion.

“The city’s enhanced benefits proposal to its unions was expressly contingent on SDCERS’ agreement to reduction in the City’s contributions,” wrote Reg Vitek in the opinion. Vitek is a fiduciary counsel to the board of administration.

“In essence, the City and unions forced SDCERS into precisely the circumstance its fiduciary counsel and actuary considered highly improper: linking benefit enhancement with contribution relief,” Vitek wrote.

The pension board, in 2004, filed a lawsuit against its previous fiduciary counsel, attorney Robert Blum, alleging fraud and malpractice. Blum, after previously warning about the legal problems with the 2002 agreement, changed his mind inexplicably, according to the opinion released to the public today.

– SCOTT LEWIS, Voice Contributing Writer

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