The city of San Diego’s prospects for settling the Securities and Exchange Commission’s two-and-half-year investigation jumped today upon news that the mayor and city attorney had cancelled a planned trip to Washington, D.C. and the City Council will convene a special hearing later this week.
Before the weekend began, Mayor Jerry Sanders, City Attorney Mike Aguirre and Councilman Kevin Faulconer were poised to visit SEC headquarters in the nation’s capital on Monday to kick-start talks over a draft settlement.
The officials instead stayed in San Diego on Monday, indicating that progress had been made on the settlement over the weekend. And Council President Scott Peters called a special closed session hearing for Thursday so that attorneys could brief the council on the status of the tentative settlement, known as a consent decree.
Neither Aguirre nor Sanders offered many details.
“We’re continuing to try and resolve all of our issues with the SEC,” Aguirre said.
The Mayor’s Office released a statement saying that the mayor wouldn’t comment on any aspect of the investigation. “The SEC’s staff has requested complete confidentiality in these discussions; it would be counter-productive to the City’s interest not to honor this request,” the statement said.
Peters also declined to comment on any specifics. “[Aguirre] wants a meeting with us and there’s not much objection,” he said.
Peters and four of his council colleagues – Toni Atkins, Brian Maienschein, Donna Frye and Jim Madaffer – were found by Kroll to have acted negligently in releasing faulty financial information to potential investors. The report found that the city understated its liabilities in its pension and wastewater systems by hundreds of millions of dollars, providing Wall Street with an overly rosy take on its finances.
If the SEC agrees with Kroll’s findings, it’s likely the council members will escape personal punishment. Others might not be so lucky. The Kroll report also found that eight former city staff members recklessly or intentionally committed securities fraud, a judgment that would spur at least civil charges if seconded by the SEC.
A settlement with the SEC would draw to a close one of the many painful chapters in the city’s current crisis. The SEC and Justice Department have been investigating City Hall since February 2004.
In that time, the district attorney and U.S. attorney have each brought separate corruption cases in relation to a 2002 pension agreement made between city and pension officials. The state attorney general has also opened up an investigation into the billing practices under former City Attorney Casey Gwinn.