Tuesday, December 13, 2005 | The 2002 pension deal at the heart of the district attorney’s criminal case may have pushed the city of San Diego and its pension system into fiscal calamity, but the presiding judge said Monday that recent woes aren’t important when determining if six former retirement trustees criminally violated conflict-of-interest laws.

Superior Court Judge Frederic Link cut off a defense attorney’s cross-examination of the pension system’s actuary to make clear that the purpose of the criminal case is not to judge whether the board’s actions drove the city to the verge of bankruptcy. Questions surrounding the fiscal prudence of the deal have taken up much of the court’s time in the first two weeks of the pre-trial hearing.

More important to the case, Link said, was whether the defendants had a financial stake in approving an arrangement that excused the city from making a lump-sum payment into the fund while making effective benefit increases.

“What does this have to do with the making of a contract in which they had an interest?” Link asked, referring to the 2002 deal known as Manager’s Proposal 2. “This could have been a wonderful decision or not.”

That year, city administrators faced the prospect of having to infuse a lump-sum payment into its dwindling pension system. The deal, approved by the pension board, allowed the city to forgo this payment.

The District Attorney’s Office alleges that because a set of pension benefit enhancements for city employees was contingent on the pension board’s approval of the deal, six former retirement board members improperly boosted their own pension checks by voting in favor of the proposal.

Nonetheless, the city’s budget has felt considerable strain as it attempts to quell the pension system’s $1.37 billion-plus deficit. The city’s pension dealings, along with errors and omissions found in its financial statements, have drawn federal investigators. In addition, outside auditors have refused to certify the municipal government’s books for 2003. Without audits, the city’s credit rating has been suspended, barring it from borrowing from the public bond markets.

Frank Vecchione, the attorney defending Terri Webster, noted how the pension plan’s financial health improved with good market conditions after the passage of a more clear-cut benefits-for-underfunding deal in 1996, known as Manager’s Proposal 1. Vecchione said the district attorney’s case would have never been brought if the city’s fiscal woes weren’t so well-publicized.

Link asked prosecutor Stephen Robinson if charges were filed to reprimand individuals who helped make a deal that appears to be disastrous to the city.

“In 1996, where were you when everyone was awash with money?” Link said.

The prosecutor said he couldn’t speak for the then-district attorney, but noted that he was a private attorney in 1996.

Robinson told the judge he has been calling witnesses to testify that it was apparent that the defendant’s actions on the retirement board had a bearing on the labor negotiations between the city and its unions where the benefits were created.

“Every witness showed knowledge of the contingency,” he said. “Every trustee that testified was asked that question.”

Six members of the board that were not charged testified that city administrators said the underfunding and the benefit enhancements were linked. Pension actuary Rick Roeder, who concluded his testimony Monday, also said he raised questions as to whether it was appropriate for the SDCERS board to get involved in labor negotiations.

The defendants in the case are Webster, the city’s former assistant auditor; former Human Resources Director Cathy Lexin; former Treasurer Mary Vattimo; city management analyst Sharon Wilkinson; Municipal Employees Association Vice President John Torres and City Firefighters Local 145 President Ron Saathoff.

Defense attorneys are attacking the funding-benefits link, saying that the City Council approved the pension increases before the board finalized its approval of Manager’s Proposal 2. Also, the plan allows the city to unilaterally pull out of the underfunding deal without affecting the levels of benefits, the defense argues.

The defense has also argued that state law says individuals can’t be convicted for approving their own salaries and that some defendants could have profited more from benefits that were in place before 2002.

Observers say that prosecutors only have to establish that board members knew that the benefits were tied to forgiving the city of its sizable bill.

Robert Stern, who authored an anti-corruption similar to the one being enforced by prosecutors, said the defendants have very little leeway for not recusing themselves from the vote if prosecutors can prove that Manager’s Proposal 2 dealt with benefits.

The law being cited is “very draconian,” said Stern, president of the Center for Governmental Studies, a Los Angeles-based think tank. “If you have a conflict of interest, you have to disqualify yourself from voting.”

“Case law shows that the advice of counsel is not a defense and whether or not it was a good deal is not a defense,” Conger said. “All that matters is if the board members participated in the making of, or made a contract, where they had a financial interest.”

Please contact Evan McLaughlin directly at

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