Wednesday, March 15, 2006 | In his March 7 op-ed entitled “Pension Reforms Are Underway,” board trustee Mark Sullivan commends fellow board members on their efforts to reform the retirement system. According to Sullivan, reform will be achieved through the formation of a Committee that will review the findings of Navigant Consulting, an outside firm retained last August “to conduct an independent investigation into illegal acts and other improprieties that may have occurred with respect to past practices” of the Pension Board.
By now, the public is well aware that the retirement system is crying out for reform due to a $2 billion shortfall in its employee pension fund. Growing at an incredible $200 million per year, the debt threatens to drive the city of San Diego to the financial brink.
Navigant must have had an inkling that sordid things had occurred at the pension board since the district attorney brought felony charges against six former trustees last May, three months before Navigant took on its new assignment. The district attorney charged the six with violations of California’s conflict-of-interest laws for voting on retirement packages in which they personally benefited.
On Jan. 8, shortly before Navigant’s report was released, a federal grand jury returned criminal indictments against the San Diego City Employees’ Retirement System Administrator Lawrence Grissom, its lawyer Lorraine Chapin, and three former trustees including firefighters union President Ron Saathoff. They were charged with multiple felonies, including conspiracy, wire and mail fraud and aiding and abetting. The indictment said the defendants conspired to illegally obtain enhanced retirement benefits for themselves in exchange for allowing the financially strapped city to under fund the pension system.
It was not a surprise when Navigant’s report, released on January 20, concluded that state and federal laws were violated by the 1996 and 2002 agreements, which allowed the city to reduce funding for the pension system in exchange for increased benefits to its members. Recommendations in the $2.5 million report, designed to promote reform and prevent a reoccurrence of past bad deeds, are now the subject of a methodical review by the committee Mr. Sullivan now heads.
With all due respect to Mr. Sullivan’s plodding approach, I believe I can offer some enlightenment on the issue of reform. The seven political appointees on the 13-member pension board should heed Mayor Jerry Sanders’ call and step down. These members are holdover appointees of former Mayor Dick Murphy and a discredited City Council whose actions helped create San Diego’s financial nightmare.
Let us not forget that it was this pension board and these members who spurned a federal subpoena and refused to turn over documents sought by the U.S. attorney. Only after a federal judge threatened them with contempt, did they relinquish the requested items. Mayor Sanders wants to stamp his own imprimatur of reform on the pension board by putting in his own team. That is his prerogative.
Second, the San Diego city attorney is the legally mandated counsel to the pension board. San Diego’s City Charter, as well as those of Los Angeles and San Francisco, places that duty under their respective city attorneys.
In 1998, then-City Attorney Casey Gwinn entered into a Memorandum of Understanding with the Board that allowed the pension system to select its own attorney. Until then the San Diego City Attorney’s Office had represented the employee’s pension system for almost 70 years. To his credit, Gwinn specifically reserved the ability of the City Attorney’s Office to reinstate one of its own if the experiment failed which it undoubtedly has.
Mr. Sullivan and the pension board could exact reform in other ways too. They would do well to rescind the 1996 and 2002 agreements that created the illegal and unfunded benefits. These decisions led to the financial calamity we face today and spurred the federal investigations that are upon us. Undoing these agreements would reduce the pension fund’s liabilities by about $800 million, leaving $1.2 billion in legal benefits that must be funded.
Perhaps a more clarion sign of its commitment to reform will come this Friday (March 17), when the pension board decides whether to pay the legal costs to defend Messrs. Chapin and Grissom in their upcoming federal criminal trial.
The board first visited this proposition during a meeting in January. The motion to indemnify needed seven votes to pass. It failed with five board members in favor, two opposed, and one abstaining. A full complement of board members was not present at the meeting, however.
Firefighter trustee John Thompson was absent and the Municipal Employees Association (MEA) was in the midst of an election to fill the seat vacated by John Torres, who resigned after being charged by the district attorney last May.
Friday’s second whack at indemnity for Chapin and Grissom should see no shortage of sympathetic board members. How much would you like to bet that the board embraces reform and refuses to let taxpayers pick up the duo’s legal tab? Perhaps a prayer to St. Patrick is in order.
Mike Aguirre is the city attorney for the city of San Diego. You can e-mail him at