Wednesday, December 07, 2005 | The pension system’s top administrator asserted his Fifth Amendment rights Tuesday in Superior Court and refused to testify in the conflict-of-interest case against six former city of San Diego pension officials.
The ongoing Justice Department investigation into possible political corruption at City Hall continued to mute a number of key witnesses this week in the district attorney’s case, as a number of high-profile city and pension officials have opted out of testifying for fear of self-incrimination.
Meanwhile, only blocks away, City Attorney Mike Aguirre returned to his pre-election self.
The city attorney released Tuesday the seventh installment in a series of reports on the city’s troubled pension system. The report fills in some gaps of his previous reports by using e-mails and legal opinions that were released in September because of a federal court order. The order forced the pension system to relinquish about 60,000 pages of documents, which had been protected by the attorney-client privilege.
The report contained a few new morsels of information, although many of the e-mails and opinions had already been aired in press reports.
He used the release of the report to offer barbed criticisms of a number of council members and the consultants preparing an internal investigation on city practices.
The city attorney’s report and the district attorney’s prosecution focus on the same 2002 pact cut between the city and the pension system. In the deal, known as Manager’s Proposal 2, the pension board allowed the city to forgo a lump-sum payment due to the pension system. At the same time, pension board trustees who approved the deal saw a boost in their personal pensions because of benefit enhancements tied to the board’s action.
The report references a number of legal opinions from the pension system’s attorneys saying the board likely broke the law in approving the deal.
Aguirre has filed two lawsuits claiming pension pacts in 2002 and 1996 were created illegally and, therefore, the benefits associated with those deals are void. The benefits are a key ingredient in a pension deficit estimated to be at least $1.37 billion. The city’s payment into its pension system threatens to crowd its annual budgets for years.
Evidence that surfaced in the pension document dump removes any doubt that the benefits were granted illegally, Aguirre said.
He repeatedly called on the City Council – specifically Scott Peters, Jim Madaffer and Toni Atkins – to stand up publicly and support his efforts to roll back the pension benefits. (Councilwoman Donna Frye has publicly endorsed the city attorney’s plan.)
“We need to take this up to a new level,” Aguirre said on the day of his year anniversary in office.
Aguirre had muted his criticism of the council and pension system considerably since the Nov. 8 mayoral election. New Mayor Jerry Sanders officially took office Monday and Aguirre blanketed him with praise Tuesday.
One of Sanders’ most delicate acts in office will be maintaining his cordial relationships with a City Council and city attorney that have often been at war in the last year.
A spokesman for Sanders played it down the middle Tuesday in the first of what could be many tests in City Hall relations when asked if the council should be supporting the benefit rollbacks.
“The mayor, as you well know, will no longer sit as chair of the council meetings beginning Jan. 3. So he really won’t have anything to do with council meetings,” said spokesman Fred Sainz.
On Jan. 3, Sanders vacates his position as leader of the City Council and effectively becomes the city’s executive branch, responsible for its day-to-day operations and budget.
Peters and Madaffer have dismissed Aguirre’s legal challenge, which was supported by Sanders in the election, as risky and foolish. They have instead chosen a more plodding solution for the pension problem, following the city manager’s plan of land sales, loans and bonds to level out the dwindling fund.
One of the key legal assertions of Aguirre’s report runs parallel to the district attorney’s charges: that six pension officials voted on a contract that offered them pension benefit boosts.
The pre-trial hearing in the case began last week. Upon its conclusion, a judge will decide if the district attorney’s charges merit a full trial.
Pension system administrator Larry Grissom appeared in court for five minutes Tuesday morning, long enough to exercise his constitutional right to not testify in a criminal case in order to prevent information he gives from being used in a criminal complaint against him.
Five other individuals pleaded the Fifth Amendment on Monday, although three former trustees were later compelled to testify at the request of the District Attorney’s Office. Superior Court Judge Frederic Link granted immunity to former pension board members David Crow, Ray Garnica and John Casey and pledged that a 1966 Supreme Court law protected them from being prosecuted in federal court for what they said in the state criminal case.
Garnica was questioned by both prosecutors and defense attorneys for the bulk of Tuesday’s hearing, telling the court that he was not initially sold on Manager’s Proposal 2 but agreed to it after it had the blessing of outside legal and financial experts.
According to his testimony, Garnica felt the retirement system’s fiduciary lawyer Bob Blum also changed his mind over the six months leading up to the board’s final passage of the proposal in November 2002.
“I believe Mr. Blum was not very thrilled,” said Garnica, who served as a volunteer on the board. “I don’t mean to simplify, but I believe he didn’t think the fund was getting anything out of it.”
Defense attorneys later played a tape of a July 11, 2002, pension board meeting during which Blum said that approving the funding proposal presented “some material risk” for the system. The deal’s apparent blessings by Blum, Grissom and Rick Roeder, the system’s actuary, later convinced Garnica to support the proposal, he said.
“I relied heavily on the administrator, the fiduciary, the actuarial as legal advisors. I’m a generalist,” he said.
Also during his hours of testimony, Garnica said he did not feel pressure from other trustees to vote for the proposal and that he requested that the city provide legal protection for the board’s trustees if a lawsuit were to arise from the board’s approval of Manager’s Proposal 2. He said he wished that the trustees who gained financially from the deal disclosed it before the board voted on approving it.
He said he felt that haste of some trustees when voting on a version of Manager’s Proposal 2 in July 2002 made it seem that the dealings were prearranged.
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