Thursday, December 08, 2005 | The actuary whose approval was needed before the city and its pension system struck a now-notorious pension deal in 2002 testified Wednesday that he never actually endorsed it.
Actuary Rick Roeder, who was hired to forecast the funds of the city’s pension system at the time the controversial agreement was being considered, said he did just that. But he said that he never labeled the 2002 proposal as being good or bad.
A number of former pension trustees who have testified in the pre-trial hearing have said they approved the deal, in part, after learning of Roeder’s consent.
Roeder’s testimony is part of the district attorney’s case criminal case against six former city of San Diego pension officials. The case centers on votes by the pension board in 2002 to allow the city to forgo a lump-sum payment into its pension system. A set of pension benefit enhancements for city employees was made contingent upon the board’s approval of the restructured payment plan.
Prosecutors argue six former pension trustees who were also city employees violated the state’s conflict-of-interest law because they voted on a contract that boosted their personal pensions.
“We never approved of Manager’s Proposal 2 at any point, ever,” said Roeder, referring to the oft-used title of the proposal.
Former Assistant Auditor Terri Webster, former Human Resources Director Cathy Lexin, former Treasurer Mary Vattimo, city management analyst Sharon Wilkinson, finger print examiner and white-collar union representative John Torres and firefighter union president Ron Saathoff were charged in May.
Several other former trustees of the San Diego City Employees’ Retirement System have testified they believed Roeder approved of the proposal by the time it came up for a vote in November 2002. A few trustees said they were initially hesitant of the plan, but changed their minds in November partly because it became apparent to them that Roeder had, too.
The Nov. 5, 2002 letter signed by Roeder makes 10 statements about how the 2002 proposal stacks up to a similar funding arrangement approved in 1996, now known as Manager’s Proposal 1. In the 1996 pact, the city agreed that it would make a lump-sum payment into the pension system if its funding level fell below a certain percentage. Manager’s Proposal 2 was essentially a modification on the 1996 deal to help it avoid the lump-sum payment.
Roeder’s letter states that the proposed plan provided “better funding of SDCERS” than the 1996 deal, although it did assert that Manager’s Proposal 1 was a superior deal in many ways. An investigatory report by outside attorneys later hired by the city characterized the letter as a “somewhat grudging approval (or at least statement of non-opposition).”
The actuary testified that he didn’t author the letter. He said the pension system’s hired fiduciary counsel Bob Blum wrote the letter, which is printed on the letterhead from Roeder’s firm. It is signed by Roeder. He said he stood by the veracity of the content of the letter, but was unaware that it would be presented to the trustees on the day the proposal was up for a vote.
“I would have never signed off on it if I didn’t think it was factual,” he said. “Every statement, in itself, is factual.”
The letter was merely a series of statements that he agreed with, but not a qualified fiduciary opinion for the 2002 deal, Roeder said. The letter required the analysis of an attorney, he said.
“Many of the statements we made called for legal conclusions that were outside our realm,” Roeder said. Trustees who have testified in the first two weeks of the case have also pointed to the plan’s approval by the retirement system’s fiduciary attorney when explaining their affirmative vote.
Roeder has drawn criticism for apparently satisfaction with the 2002 deal. City Attorney Mike Aguirre and the city’s outside audit committee have both called on Roeder’s resignation from SDCERS – one of the few opinions the regularly disputing parties share.
Jerry Coughlan, Saathoff’s defense attorney, asked Roeder if he agreed with Saathoff’s assertion in a July 2002 board meeting that the retirement system pays experts such as a fiduciary attorney and an actuary to provide the board with advice. Roeder said he agreed.
“I knew he was relying on outside advisors, including me,” Roeder said.
Roeder tried making the case that he did raise early objections about how the pension board was being put “smack dab in the middle of meet and confer negotiations” because the deal was tied to labor contracts.
“We think we did speak up,” he said.
The two trustees who voted against Manager’s Proposal 2, Diann Shipione and Tom Rhodes, testified that they found Roeder was more receptive to Manager’s Proposal 2 in November after he raised several questions in earlier meetings.
Roeder said he wasn’t asked to make any presentations the board or do any more “number crunching” after the July meeting, so he did not speak up any further. An earlier version of the proposal was passed by the board in July contingent upon the final support of Roeder and Blum.
So was the deal good for the fund or not in Roeder’s mind? After prosecutor Stephen Robinson’s line of questioning produced a slew of nuanced answers by Roeder, presiding Judge Frederic Link bluntly asked the actuary to make the assessment, “yes or no?”
“I can’t make it that simple, judge. I wish I could,” Roeder said.
Several in attendance said they believed Roeder was couching his comments because of a pending malpractice suit filed by some city retirees. The attorney representing the plaintiffs, Michael Conger, has been staking out the courtroom since the case began and was taking rigorous notes during Wednesday’s hearing.
Roeder is expected to take the stand again on Monday because of prior commitments he made for Thursday.
The pre-trial hearing is expected to run into January, at which time the judge will decide if there is sufficient evidence to justify a jury trial.
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