Tuesday, October 04, 2005 | Two fresh federal grand jury subpoenas released Monday show interest in specific communication by current City Manager Lamont Ewell related to the pension system, as well as the interstate mailing activities of pension officials.
The latter subpoena, sent by federal prosecutors, seeks documents and communications from a number of commercial carriers, such as Federal Express and UPS, used by the San Diego City Employees’ Retirement System.
City Attorney Mike Aguirre, who released the documents to the media, said that the subpoena meant that it was likely that federal prosecutors were homing in on evidence to build a case for mail fraud charges against unnamed officials. Prosecutors often use such a charge in criminal cases for jurisdictional purposes, Aguirre said.
“It suggests to me there is real progress being made,” said the city attorney.
The other subpoena delivered to City Hall in recent days seeks information behind a Dec. 6, 2002 memo authored by Ewell that, one-by-one, rebuts the first public concerns raised by whistleblower Diann Shipione.
The memo, addressed to the mayor and City Council, dispels the ultimately prescient concerns that Shipione had aired at a council hearing on Nov. 18, 2002. At that hearing, Shipione had told the council that the agreement they were entering into jeopardized the stability of the pension fund and was possibly corrupt.
Nearly three years later, the pension system has a deficit of more than $1.4 billion and is the focus of numerous local and federal investigations. The deficit threatens to dominate the city’s annual operating budget for years to come and the District Attorney’s Office has brought criminal charges against six current and former pension officials for their roles in the 2002 agreement.
The memo, signed by Ewell, states that there was nothing “improper, irregular or unlawful, and Ms. Shipione’s comments are without merit.”
Aguirre said the memo is evidence that Ewell is hindering the city’s ability to right its problems. The city manager has announced he is leaving at the end of the year when the strong-mayor form of government begins and his duties are assumed by the Mayor’s Office.
“How can we make real progress on this issue when our city manager has been involved in releasing false information?” Aguirre said.
Ewell was out of town Monday and released a short written statement accusing Aguirre of trying to embarrass him and question his integrity. He said Aguirre was upset over a courtroom loss Friday in the city attorney’s attempt to void pension benefits he has declared illegal.
“In my conversations with the US Attorney’s office, the FBI, the SEC, and the District Attorney, I know that they are aware of the truth. So am I,” the statement read. “The city attorney is trying to recreate and misrepresent facts.”
In an interview in May, Ewell said that Cathy Lexin, then the city’s director of human resources and a pension board member, had authored the memo.
He said that he needed to return the memo to the council quickly and simply trusted Lexin to compose the memo.
“I wasn’t fully versed in [the pension system], but I did ask to make sure the facts were as stated, and I was assured that they were factual,” Ewell said. “… There are activities going on all day, every day, so getting a full grasp of every issue is unreasonable. It’s not unreasonable to rely on your staff for information.”
Lexin is one of the six pension officials charged by the district attorney. She resigned from the city in May, a day before being charged.
The U.S. Attorney’s Office, FBI and Securities and Exchange Commission are also conducting probes into possible political corruption and the honesty of the city’s financial disclosures to the public and investors.
In addition to the Dec. 6, 2002 memo cited by Aguirre, Ewell also signed a May 12, 2003 memo to the City Council that sought to allay concerns after a memo had been leaked to the press that showed the pension system headed for a $2 billion deficit by 2009.
In the memo, Ewell wrote that city staff was compiling a “detailed financial analysis” of the pension system – an analysis that was never completed. He used the stock city argument at the time to defray concerns, saying that pension problems existed in many public and private systems and the city’s woes were the result of a decline in the investment markets.
With time, those arguments have been debunked, as San Diego has proven to have pension problems much deeper than most systems. The problems have been determined to be largely the result of increased benefits and inadequate annual payments from the city, not a stock market decline.
The May memo also included as an attachment a yet-to-be published editorial by then-pension board President Frederick W. Pierce, IV, who downplayed the pension concerns as “sensationalism, false accusations and basic inaccuracies.”
Ewell also sat on the city’s negotiating team that put together the controversial benefit enhancements in 2002.
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