Tuesday, February 06, 2007 | By ANDREW DONOHUE

The outside audit committee hired by the city of San Diego to rectify its financial and legal woes recommended in a letter Tuesday that the troubled pension system seek a new actuary to reexamine its 2003 and 2004 annual financial reports.

In the letter, the committee expresses concerns that actuary Rick Roeder’s financial forecasting methods and his prior acquiescing to the former pension board’s demands “appear to have contributed to the problems facing” the pension system today.

The pension deficit is estimated to be between $1.37 billion and $2 billion and is at the heart of federal and local investigations into City Hall.

“Our main concern stems from the belief that assumptions and professional judgment used by the actuary in the past raise substantial questions as to the soundness of current and future actuarial valuations,” reads the letter, which is addressed to the San Diego Employees’ Retirement System board.

However, Troy Dahlberg, the audit committee member who signed the letter, said in an interview that at a base level the committee wanted a fresh start at a system home to widespread allegations of accounting slights of hand and board corruption.

“There have been enough allegations surrounding [the pension system], we just think at this time we need a fresh set of eyes to go over this stuff,” he said.

Roeder’s firm, Gabriel, Roeder, Smith & Co., has served as the city’s pension actuary for more than a decade. Dahlberg said new accounting guidelines born out of the corporate scandals of years past recommend that accountants be shifted every five or six years.

Neither Roeder nor any current pension officials could be reached for comment.

City Attorney Mike Aguirre, who has asserted that pension accounting has been too aggressive and could be deflating the pension’s deficit, said Tuesday’s memo raises numerous questions for the city.

If accounting assumptions turn out to be incorrect, the city’s annual contribution to its pension system, its reported net pension obligation in financial statements, and the underlying assumptions of recently struck labor agreements could be misstated, he said.

He applauded the move as a fresh start for the retirement system and continued his call for a complete removal of the system’s current management. Aguirre said he hoped the memo would bring together clashing sides of city leadership to solve the city’s mounting financial troubles.

“It will bring everyone together to recognize we have two options: We can rid ourselves of the illegal benefits and raise revenues to cover the legal benefits or we’re going to end up going into bankruptcy. Those are our two options,” said the city attorney, who maintains that a decade’s worth of pension benefits have been granted illegally and should be void.

The memo specifically cited times when Roeder expressed concerns over pension deals in 1996 and 2002 that allowed the city to contribute less than recommended into its pension system as reasons for their concern.

“The current actuary has raised a number of concerns regarding the actuarial issues for SDCERS. However, at various times it appears that he may have allowed the SDCERS board to compromise his professional judgment,” according to the memo.

Three individuals make up the audit committee: Arthur Levitt, former chairman of the Securities and Exchange Commission; Lynn Turner, former chief SEC accountant and Dahlberg.

They were hired in February to aid the release of the city’s long-delayed fiscal year 2003 and 2004 audits, and work with federal investigators looking into the city’s financial reporting practices and possible political corruption. Federal officials have been investigating the city for 16 months, and the audits have been delayed by allegations of possible wrongdoing by city officials and erroneous information in past financial reporting.

The city remains essentially locked out from the public finance market, leaving it unable to complete short- and long-term projects alike.

April Boling is former chairwoman of the city’s Pension Reform Committee, which studied the pension system for most of 2004 and was asked to craft a solution to the deficit that currently crowds the city’s annual budget.

She said that an outside auditor, Mercer, was brought in to review Roeder’s work in part to give the committee confidence in the numbers they used.

“Mercer came back and essentially said his judgment was fine,” Boling said.

Pension whistleblower Diann Shipione doubted the pension board would follow the audit committee request and said the entire city system needed to be replaced, from senior staff to the majority of elected officials.

Please contact Andrew Donohue directly at

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