Saturday, January 14, 2006 | A Superior Court judge ruled Friday that the district attorney’s corruption charges against six former San Diego city pension trustees are sound enough for a full jury trial.

After nearly four weeks of pre-trial hearings, presiding Judge Frederic Link said there was probable cause to believe that the six defendants named in the prosecution could have had a criminal conflict of interest when they voted for a controversial pension funding arrangement in 2002.

“Was there an agreement made here? I have probable cause to say, ‘Yeah, there was,’” Link said.

The judge’s decision caps the first judicial proceedings in an issue that is poised to fill local court calendars for years. The city attorney has filed two high-profile lawsuits that would essentially wipe away a decade’s worth of employee pension boosts on the argument that they were granted in illegal and corrupt deals in 1996 and 2002.

Additionally, the Justice Department is conducting its own investigation and last week brought federal corruption charges against five former pension officials – including three of the same defendants named in the district attorney’s case.

At issue in both cases is a deal known as Manager’s Proposal 2. In 2002, the city faced the prospect of having to make a budget-busting payment into its pension system. Rather than slash services, the city contemplated an arrangement with the pension board in which the city would be allowed to push its debts into the future and employee unions would be granted increased pension benefits.

Prosecutors from the District Attorney’s Office argued that the deal was criminal because the benefit boosts they were offered were contingent upon their approval of the city’s payment relief.

In his closing arguments Friday, prosecutor Stephen Robinson argued that the defendants received in 2002 increases ranging from a few hundred to a couple thousand dollars a month in future retirement pay.

“If you had influence at some level and then you had a financial interest in it, you’re guilty,” Robinson said.

Link said there was “no parallel factual scenario” for him to use in judging the case, but that the six defendants honored city and union business when they should have been looking out for only the pension system’s interests.

“The thing is that they blended those two hats, and you can’t do that,” he said.

The six defendants are: Ron Saathoff, firefighters union president; John Torres, white-collar union vice president; Cathy Lexin, former city human resources manager; Terri Webster, former assistant auditor; Mary Vattimo, former treasurer; and Sharon Wilkinson, a city management analyst. (Saathoff, Lexin and Webster were also charged in the federal case.)

“It’s sad these folks are here today, but the facts are I still have to follow the law,” Link said.

The Manager’s Proposal 2 agreement, and one like it in 1996, is largely blamed for a pension deficit at the heart of the city’s fiscal crisis.

The city is currently suffering from a pension deficit that is approaching $2 billion. Paying off the funding gap is expected to further strain an already-thin operating budget for the city, as library hours, parks maintenance and other services were cut this year – when nearly a fifth of the everyday budget was used to pay its annual pension bill.

The judge has consistently said that the aftershocks of the city’s past dealings should not bear on the decisions he or, possibly, a jury makes, as the crime being alleged is that the six defendants helped approve a deal that lined their own pockets.

The defense attempted to tear apart the much-publicized argument that the pension enhancements granted that year for city’s rank-and file workers, as well as a one-time benefit for Saathoff, were contingent on the SDCERS board’s approval to underfund the system.

Torres’ attorney, Bob Rose, conceded that benefits were conditioned upon the board’s approval in early versions of the proposal, but argued that the agreements the board actually voted on changed and didn’t ultimately contain the contingency.

Link challenged the defense attorneys’ closing statements much more than the prosecution’s and he appeared to rebuff Rose’s interpretation. The judge said it seemed not to matter to the city what version of the arrangement the retirement board approved, as long as it got relief from the sizable payment it owed.

“(City officials) didn’t have to come up with the balloon payment, and that’s what they wanted,” Link said.

The judge pointed to the testimony of several witnesses from the city government, such as former City Manager Lamont Ewell, who made similar statements.

“The goal was to find as much funding relief as we could in protecting the integrity of the general fund,” Ewell said, referring to the fund that paid for everyday city operations. Ewell was a deputy administrator in 2002, later became city manager, and left the city of San Diego in November for a similar position in Santa Monica.

The pre-trail hearings offered the first time in the three years since the pension crisis hit that city and pension officials were forced to testify about the controversial deal under oath. Among the roster of those that chose not to testify out of fear of self-incrimination were the former city manager and city auditor and the pension system’s then-sitting administrator and chief legal counsel.

Additionally, defense lawyers in the case took aim at the notion that the relief granted to the city that year was a poor decision by the board. Defense attorneys argued that their clients could have voted to revise the 1996 agreement because it was flawed, not because it boosted their future retirement pay as prosecutors allege.

They pointed to the testimony of then-retirement board President Frederick W. Pierce IV, who said he preferred the 2002 deal because it was a better long-term decision for the fund. Pierce said granting the city a one-time holiday on its pension obligation was an appropriate bargaining chip the board used in order to set a deadline by which the city had to start making an actuarially determined payment.

“These trustees have more interest than anyone in this room to a safe, secure retirement system,” said Nick Hanna, who represents Lexin.

It was unknown as of press time if the defense would appeal the decision.

Also Friday, Aguirre announced that a judge had consolidated two lawsuits he is using to challenge pension benefit enhancements granted between 1996 and 2002. Executive Assistant City Attorney Don McGrath said the case should be in the courtroom by summer.

Please contact Andrew Donohue directly at andrew.donohue@voiceofsandiego.org and Evan McLaughlin directly at evan.mclaughlin@voiceofsandiego.org with your thoughts, ideas, personal stories or tips.

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