The Morning Report
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Monday, April 24, 2006 | The two lawsuits challenging the retirement benefit increases doled out by the city of San Diego over the past decade have been whittled down in their scope, but the high-profile cases remain alive, slogging their way through quiet pre-trial hearings.
Several former city employees were excused as defendants in City Attorney Mike Aguirre’s lawsuits last week. Additionally, it’s unclear what authority the city attorney will have in pursuing the flagship case that seeks to halve the city’s mounting pension debt.
Aguirre filed two separate civil lawsuits last summer in an effort to chop an estimated $700 million off the city’s $1.4 billion pension deficit. The city attorney alleges that the benefits are void because they were created as part of illegal and corrupt deals in 1996 and 2002.
The suits, although likely years from final resolution, continue to have an impact on everyday life at City Hall. Last week, Aguirre used their existence to justify an opinion that jeopardized a $574 million borrowing plan central to Mayor Jerry Sanders’ financial recovery package.
The maverick city attorney, who has made city’s pension troubles his primary focus, and his opponents have contrasting views over the meaning of court rulings that have been handed down over the past week.
“This is a victory for us. It identified clearly how to proceed against individuals,” Aguirre said Friday about a ruling that provisionally dismissed six former retirement trustees as defendants in his primary case. (The former trustees are not the only defendants in the case.)
“I’m sure he can find a way to call this a victory, but you could only believe it if you suspend all common sense,” said attorney Bob Rose, who represents fingerprint examiner John Torres, a former retirement trustee who is named in both Aguirre cases.
In the primary pension case, the hallmark of Aguirre’s tenure, Aguirre unilaterally filed the complaint against the San Diego City Employees’ Retirement System on behalf of the city without the approval of the City Council.
The council later considered his lawsuit, but it is still disputed exactly what the council authorized Aguirre to do with his lawsuit.
Attorneys representing the retirement system and the city employees named in Aguirre’s primary case say he needs the City Council’s approval to file cases on behalf of the city. They claim Aguirre never received an OK from the council.
“This guy doesn’t have any proof that he has any authorization from his client to file this thing,” Rose said.
Superior Court Judge Jeffrey Barton ruled Wednesday that six former SDCERS trustees be dropped from the case, although the city attorney has until May 3 to revise the case and attempt to have them reinstated. The six trustees all received pension benefit boosts in 2002 after they approved a deal that allowed the city to continue its practice of underfunding the retirement fund.
Torres, firefighters union President Ron Saathoff; former Human Resources Director Cathy Lexin; former Treasurer Mary Vattimo; former Assistant Auditor Terri Webster and management analyst Sharon Wilkinson were all excused from Aguirre’s primary case, pending the new filing.
The six former and current city employees were also charged in a criminal case filed by District Attorney Bonnie Dumanis for their role in the 2002 deal. The district attorney’s case was sent to trial in January.
Aguirre, who has filed five versions of the case, said he will retry his complaint against the six trustees. He argues that the court still recognizes his authority to bring cases and the City Council signed off on his lawsuit.
At his Thursday press briefing, Council President Scott Peters disagreed with Aguirre, saying the council allowed him to file the case, but only in the name of the city attorney. Barton ruled in January that he would have to bring the case in the city of San Diego’s name.
Defendants said they could not find any record of the council dispensing that authority to Aguirre, but the city attorney said he “would be happy” to provide them with a transcript of the meeting in which the council authorized the lawsuit.
SDCERS tried making the same argument that Aguirre didn’t have the proper authority – which would have stricken Aguirre’s primary case altogether – but Barton did not honor it.
“We’re kind of surprised, frankly,” said attorney Reg Vitek, who represents SDCERS.
Even if Aguirre had to drop his primary case, the city and the retirement system would still square off over the benefits because SDCERS has a case against the city demanding that it recognize the benefits in question.
Additionally, Barton ruled in the primary case that the relief Aguirre was seeking – the voiding of the benefits – could not be provided by the former retirement trustees and, therefore, they shouldn’t be included in the case.
“These people are not even on the board anymore,” said Jerry Coughlan, the lawyer for Saathoff.
The case would then be between the city and the retirement system alone.
The six former trustees also alleged that Aguirre filed the primary case against them after the statute of limitations had expired. They claim they were added to the original lawsuit more than three years after the action in question took place.
Aguirre’s self-proclaimed secondary case to roll back pension benefit increases that were granted in 1996 and 2002 will also be heard in Superior Court – in part, at least.
Initially, Aguirre filed a secondary case in the name of the people of California against eight former city and retirement system officials. He alleged that they had an illegal financial interest in helping approve or craft pension funding deals that provided them with fatter retirement checks in the future, new pay increases or even a brand new job for one defendant.
Last fall, the case was thought to be dead, but Aguirre reworked his argument to keep it alive.
Of the eight defendants that were originally sued, Superior Court Judge Steven Denton has dismissed one: former Deputy City Manager Bruce Herring.
Three defendants – Saathoff, Webster and former SDCERS Administrator Larry Grissom – remain in the case after Denton denied their request to be dropped. The three are each accused to have had a direct financial interest in the 1996 and 2002 deals that were not given to other employees, the judge ruled. Saathoff, Webster and Grissom have two weeks to counter Aguirre’s claims.
Saathoff is being accused of voting for the underfunding arrangements in exchange for a special union president benefit that allowed him to combine his city and union salaries when figuring his retirement checks. A limit that capped an employee’s retirement pay at a certain level was lifted, which supposedly boosted Webster’s pension; and Grissom was allegedly given a pay raise as a result of his influence over the deals, the lawsuit states.
Four other defendants are off the hook if Aguirre cannot convince the judge within two weeks that they had a financial interest in the deals that allowed the city to skirt its 1996 and 2002 pension bills while making effective certain benefits. They are Wilkinson, Torres, Lexin and the retirement system’s former in-house attorney, Lori Chapin.
Please contact Evan McLaughlin directly at