Wednesday, January 11, 2006 | The defense rested its case Tuesday in the pre-trial hearings where six former members of the city’s retirement board face corruption charges, a day after it began calling witnesses to chop away at the district attorney’s claim that the trustees illegally allowed the city to skirt its pension bill in 2002.
Prosecutors and defense attorneys are scheduled to make their closing statements on Thursday and Friday before presiding Superior Court Judge Frederic Link decides whether to move the case to a full jury trial. The judge could also decide to end the prosecution if he believes that a crime wasn’t committed or that there isn’t a probable cause to believe the named defendants committed it.
The District Attorney’s Office is alleging that the former trustees had a criminal conflict of interest when they voted to approve a deal that boosted their future pension checks in exchange for relaxing the city’s pension obligations.
Attorneys for the six defendants argue that the benefits were granted separately from the deal approved by the retirement board. The 2002 arrangement has contributed significantly to the city’s $1.37 billion-plus pension deficit.
While a parade of former pension trustees were called by prosecutors to testify that the pension benefits were contingent on the retirement board cutting the city slack, defense attorneys relied on three witnesses to muddy the district attorney’s claim.
On Tuesday, former City Manger Lamont Ewell testified that he believed that the city originally proposed granting pension enhancements to rank-and-file workers if the retirement board relieved it of its pension bill. However, he said he was unsure if city officials ever agreed to boost benefits without the relief.
The benefits were granted to employees before the pension board voted to allow the city to restructure its pension payments. Ewell said he didn’t know if the city would have reneged on its benefit promise had the pension board not approved the payment relief.
“There was always that possibility, but I assumed they would honor their commitment,” Ewell said.
Ewell, who left San Diego in November to become Santa Monica’s city manager, said the funding relief the city sought from the retirement board was a symptom of the municipal government’s tradition of “not fully funding its operations.”
“One of my biggest complaints was that the city was providing services that we did not fund properly,” said Ewell.
He noted that the $25 million lump-sum payment the city was expected to make that year would have thinned the funding for other city services. (The payment was later estimated to be significantly higher than was assumed at the time.)
“The goal was to find as much funding relief as we could in protecting the integrity of the general fund,” he said, speaking of the city’s day-to-day budget.
Ann Smith, attorney for the city’s white-collar union, testified that the benefit increases for general members were eventually separated from the funding arrangement. The Municipal Employees Association accepted a contract that included the contingency, but the final version of that labor deal did not include the underfunding-for-benefits condition, she said.
All of the defendants except for firefighters union President Ron Saathoff qualified for the benefit increases laid out in the MEA’s contract after 2002. Ewell and Smith both said city offered the enhancements to keep it competitive with the county government, whose workers received a similar boost that year.
Saathoff received a separate benefit boost that year than the other city workers. He was allowed to combine his city salary and his union pay when calculating his future retirement checks – a detail prosecutors say increased his pension by $30,000 a year.
Similar to the district attorney, a federal grand jury handed down indictments related to Saathoff’s benefit on Friday, alleging it was linked to the retirement board’s decision.
Ewell said he didn’t make the connection.
“I recall them being drawn up coincidentally, but I didn’t draw a nexus between the two,” he said.
Ewell also testified that Saathoff received the new benefit to bring his pension on par with the city’s other union presidents.
Closing statements in the preliminary hearing will begin at 10 a.m. on Thursday.
Besides Saathoff, the other defendants in the district attorney’s case are former Treasurer Mary Vattimo, former Human Resources Director Cathy Lexin, former Assistant Auditor Terri Webster, MEA Vice President John Torres and city management analyst Sharon Wilkinson.
Saathoff, Lexin, Webster and two former retirement system staff members were named in Friday’s indictment.
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