Monday, October 10, 2005 | Frederick Pierce, IV, wouldn’t speak to Voice of San Diego last week.
We were interested in talking with him about a few of the 60,000-pages worth of documents that the San Diego City Employees’ Retirement System, or SDCERS, recently released to the public – an information dump that has kept San Diego journalists busy for days.
Pierce is the former president of the board of administration of SDCERS.
We wanted to ask him why, for more than two years, he pressed on with a public relations campaign extolling the management of SDCERS and claiming, despite criticism to the contrary, that a 2002 arrangement between SDCERS and the city was a good one.
We wanted to know why he and the board continued to mount a defense against a lawsuit that came shortly after that 2002 deal, even though it’s clear that even the board’s own lawyers thought the case would succeed.
There might have been a good answer for it.
But Pierce wouldn’t say.
“As you know, I am no longer a member of the Retirement Board and I don’t have any further input on this issue,” Pierce wrote us.
A quick refresher: The retirement board Pierce led has two jobs 1) to send the city a bill every year to make sure it’ll have enough money to invest and pay the pensions for the city’s employees and 2) to invest that money wisely. In 2002, the retirement board was about to send the city a massive bill. The system had lost money and it had reached a low trigger point at which it was required to collect a lot of money from the city to keep the pension fund healthy.
But the city didn’t want to pay the big bill so it approached the retirement board with a proposal that it just not pay it. Instead, it would slowly increase its payments to the pension system. The retirement board isn’t supposed to particularly care about what the city wants or doesn’t want to do. It only has two jobs, remember.
To overcome that, the city offered its employees a pension benefit enhancement and made it contingent on the retirement board agreeing to let the city skirt its big bill. Because the majority of the members of the pension board were representatives of city employees, the city manager rightly concluded that it was a deal they wouldn’t refuse.
The board’s lawyer at the time, a man named Bob Blum, told them it was a good idea to do the deal because if they didn’t they would get sued.
So they did the deal.
And then they were sued.
Sounds like a good time for a new lawyer, right? We found out from the 60,000 pages of information dumped last week that the board hired a new attorney who looked at the case brought against it and determined that the board was in trouble.
The lawyer, Reg Vitek from the firm Seltzer Caplan McMahon and Vitek, told the members of the board that it was clear that some of them had put their own personal interests ahead of the pension systems. That they had put their various unions’ interest ahead of the pension system’s. And finally, that they had put the city’s interest ahead of the pension system’s.
Since they were trustees of the pension system, those were three brutal allegations.
Finally, Vitek asked the board to not allow any of these people to help decide how to proceed with regard to the lawsuit, because they might not have the pension system’s best interest in mind while they were deciding what to do.
Pierce didn’t take that advice. Instead, he and most of the rest of the board mounted a public relations campaign bent on assuring people that the retirement system was OK, that it hadn’t done anything wrong, and that the deficit – which was now ballooning – was the result of uncontrollable stock market volatility.
Of course, every single one of those points was proven wrong. But Pierce didn’t stop.
In April of 2004, when the mayor’s own Pension Reform Committee set up a meeting with the City Council to ask that it make an unprecedented $200 million payment to the pension system “to keep it from bleeding any more” Pierce showed up at the public session unexpectedly. He had rushed there so quickly, upon learning the meeting was taking place, that he was literally almost out of breath.
But he came up with enough oxygen to try to discredit the Pension Reform Committee, claiming that the pension system had made millions in the investment market that year and that the deficit wasn’t nearly as bad as it looked.
Remember, this was all in an effort to do what? Keep the city from giving the retirement system more money?
Of course, he was wrong. The spring of 2004 was a big season for the pension crisis’ development. It was then that the Committee confirmed much of what had been claimed by Diann Shipione, the whistleblowing member of the pension board.
The Committee found that the vast majority of the pension system’s massive deficit was the result of its and the city’s decisions to increase benefits without at the same time increasing the city’s contributions.
And last week we learned that in May of 2004, the pension system’s own lawyers sent Pierce and his colleagues an astounding letter.
Vitek and his associates had determined that several of the members of the pension board likely broke the state’s laws prohibiting city officials from participating in the making of a contract that may illegally benefit them personally.
What did Pierce do? You guessed it. In an editorial written for The San Diego Union-Tribune, Pierce adamantly denied that the board he directed had ever set any of its members own benefits nor had it violated any conflict of interest laws.
In fact, he said, the board had carried out its duties “extremely well.” And despite the fact that his lawyers, we now know, had told him that the increased benefits included in Manager’s Proposal 2 were directly contingent on his board acting the way it did, he told the public the exact opposite.
Pierce worked for two years to convince the public that nothing was wrong with the pension system – all in an effort, it seems, to keep the city from giving its pension system more money.
That’s an odd thing for a trustee of the pension system to do, and we can only imagine that he was forced to actively fight reform of the system or increased contributions to it because to do otherwise would be to admit something had gone wrong.
We can only imagine that’s the case, because he’s not talking publicly anymore.
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