Tuesday, February 06, 2007 | Where Do You Think You’re Going?
The city’s retirement board is expected to decide Friday whether to extend administrator Larry Grissom’s 18-year stay at the pension system, at least on a part-time basis.
If approved, Grissom will be hired as an outside consultant to perform the duties he holds now as the pension fund’s top executive while the board searches for a replacement. Grissom is scheduled to retire at the end of the month, and city regulations prohibit the San Diego City Employees’ Retirement System from reentering the workforce after retiring.
He could work up to 90 days in a calendar year under the proposal.
Grissom’s replacement is expected to be hired no earlier than February, and keeping the longtime administrator nearby would allow for a smooth transition, according to a report authored by SDCERS in-house attorney Lori Chapin.
The proposal notes that, if approved, Grissom will be permitted to offer advice to the board, and work on ongoing projects.
“His input is invaluable,” the report states.
Grissom has managed the day-to-day operations of the city’s pension plan during its recent controversies, which have resulted in delayed financial audits of the system’s books and ongoing investigations by the Department of Justice and the District Attorney’s Office.
Grissom recently asserted his Fifth Amendment right to not testify in the pre-trial hearings of a case alleging corruption by former pension trustees.
— EVAN McLAUGHLIN
A Special Meeting Tuesday?
Councilwoman Donna Frye said Thursday that she had been called by the mayor’s office to inquire if she was available to meet in a special session of the City Council Tuesday to discuss a languishing — but crucial — investigation into the government’s finances.
A spokesman for Mayor Jerry Sanders said he had not yet confirmed or officially scheduled a meeting for Tuesday.
The city’s audit committee, headed by the firm Kroll Inc., essentially ceased its probe into City Hall after running through its authorized budget in early November. Audit committee officials have said they will need an additional $9 million to $11 million to finish the investigation.
With the council on break for the holiday period, Kroll was not going to proceed with its efforts until at least January — when the council would possible approve more funding. Some council members this week were startled at Kroll’s demand for more funds and announcement that it would delay the probe until possibly May.
Completing the Kroll investigation is considered vital to the city, which is hoping to someday re-establish its credit rating and re-enter the public bond market.
Frye said she will have many questions for Kroll.
“I’m tired of this,” Frye said. “We’re between a rock and a hard place because on the one hand, if we don’t spend the money then they say we’re trying to stonewall the investigation. But if you spend money, people say you’re spending too much.”
— SCOTT LEWIS
Pumping You Down
The U.S. Attorney’s Office indicted eight Mexican anabolic steroids manufacturers today with drug trafficking and money laundering charges.
The indictments, the result of a two-year investigation, charged a total of 23 individuals for their alleged roles in bringing the drug into the United States. It is legal in Mexico.
Five Mexican nationals are already in custody, four in San Diego, one in Laredo, Texas. If Mexico allows their extradition, the remaining 18 defendants would face arrest and prosecution in U.S. federal court.
Alberto Saltiel Cohen, one of the individuals already arrested, is allegedly the majority owner of Quality Vet, Denkall and Animal Power companies. Prosecutors allege that he uses Web sites claiming to sell veterinary products to distribute 75 percent of Mexican steroids seized in the United States.
Duke’s Pension
A group of House Republicans introduced legislation Wednesday that would strip congressmen of receiving their federal pensions if convicted of certain crimes, including bribery, the Los Angeles Times reported Thursday.
The proposal comes in the wake of revelations that former Rep. Randy “Duke” Cunningham accepted more than $2.4 million in bribes in connection with the granting of defense contracts. Cunningham pleaded guilty and resigned from office.
The newspaper reported that Cunningham is set to receive a congressional pension of $36,000 next year. He would not be affected by the new legislation if it passes.
— ANDREW DONOHUE
Charter Schools Attack
Two charter schools filed a lawsuit today against the San Diego Unified School District by claiming the district has refused to provide them with adequate school facilities as required under California law.
— MARSHA SUTTON
City Attorney to Investigate His Office
The city attorney’s expansive probe into City Hall has now turned inward to his own office after the revelation that the city’s personnel director and auditor were given indemnity by the City Council when it approved a special pension benefit for the union presidents in 2002.
Rich Snapper, the city’s personnel director, testified yesterday in the felony conflict-of-interest case against six former pension officials that the City Council promised to pay his legal fees if issues ever arose surrounding the payment of the controversial benefit. Snapper said in testimony that he raised concerns over the granting of the special benefit, was rebuked by a city councilman and then promised indemnity.
City Attorney Mike Aguirre released a memo Wednesday that was authored nearly two years after the 2002 pension deal. The memo, from former Assistant City Attorney Les Girard to Snapper, memorializes the indemnity. It indicates that the City Council voted 9-0 on May 13, 2002 in closed session to offer indemnity to Snapper and former Auditor Ed Ryan.
Read the Voice’s article on Snapper’s testimony from today’s edition.
However, the closed session report for that day released by Aguirre doesn’t indicate that any votes were taken. He said he will be investigating to see what his staff knew of the indemnification, including why it was granted in closed session and why no record of the vote exists.
Prosecutors from the District Attorney’s Office argue that six former pension officials criminally violated state law when they voted on an agreement that increased their personal pension benefits. Firefighter union President Ron Saathoff, who is among the six defendants, was allowed to count both his union salary and city salary toward his pension as part of the deal — a benefit prosecutors say boosted his future pension by $30,000 a year.
City employees’ legal fees are usually paid for by the municipality when legal issues arise related to their official actions. However, the indemnity was offered to Ryan and Snapper after they voiced concerns over the benefit, according to Snapper’s testimony.
Ryan abruptly retired in 2004 as scrutiny of the city’s finances intensified. Last week he invoked his Fifth Amendment rights not to testify for fear of self-incrimination.
In a press conference today, Aguirre also discussed a document showing that some City Council members first initiated settlement talks for themselves and the city with the Securities and Exchange Commission in 2004. Read the Voice’s article on the memo from today’s edition.
— ANDREW DONOHUE
Replacing the Duke-Stir
A special primary election to replace former Rep. Randy “Duke” Cunningham will be held April 11 if Gov. Arnold Schwarzenegger grants a request made by county officials.
The date will allow election officials to consolidate a run-off election, if necessary, with California’s June 6 statewide primary. If no candidate receives a majority vote on April 11, officials will be able to combine the two elections and save $1.3 million
The special April election is expected to cost $1.3 million as well.
Prominent Republicans were quick to announce their congressional aspirations when Cunningham pleaded guilty to accepting $2.4 million in bribes and announced his resignation Dec. 1.
Sen. Bill Morrow, former State Assemblyman Howard Kaloogian, and former congressman for California’s 49th district Brian Bilbray all expressed interest in the position, while Francine Busby, who lost to Cunningham in 2004, is currently the only Democrat vying for the post.
— SAM HODGSON
Link of the Day
He also said that the San Diego City Charter prescribes that several city workers serve as trustees on the board overseeing the administration of their own pension benefits. The conflict of interest could be unavoidable, he said.
A Curious Joint Appearance
In May 2004, Jay Goldstone — who Mayor Jerry Sanders appointed today as San Diego’s new chief financial officer — partnered with former San Diego Treasurer Mary Vattimo to make a presentation to public officials interested in issuing bonds to the open market.
Vattimo is currently facing felony charges for allegedly violating California’s conflict-of-interest laws when she approved a now-notorious 2002 arrangement between the city’s pension board and city officials.
Goldstone and Vattimo’s presentation at the California State Treasurer’s “Fundamentals of Debt Financing” seminar in 2004 had the title: “How to Make Sense of the Debt Issuance Process and Your Role in the Process – Issuer Perspectives.”
Vattimo had a prominent role in approving and issuing the financial disclosure documents that accompanied some of the city of San Diego’s various bond issuances, which later provoked suspicion because of their inaccuracies. And because of those inaccuracies — especially those concerning the city’s pension system — San Diego has been under investigation by the SEC for nearly two years.
Goldstone was the chief financial officer of the city of Pasadena.
— SCOTT LEWIS
Personal Pension Figures
The City Attorney’s Office has filed an updated complaint in its civil conflict-of-interest case against eight current and former city officials. Upon the demand of a Superior Court judge, the lawsuit contains specific details to the office’s allegations that two top retirement staff members personally benefit from their involvement in the creation of controversial pension deals enacted in 1996 and 2002.
The lawsuit alleges that retirement Administrator Larry Grissom, who is set to retire this month, received a special retirement benefit from the pension board in 1999, as well as the promise of pay increases in 2002 and 2003, in exchange for his work on the agreements.
Voice of San Diego first detailed Grissom’s pay increases, which came at key time in the 2002 agreement’s negotiations, in an October article.
In an interview in June, Grissom denied that the pay increase had anything to do with the enactment of Manager’s Proposal 2.
The lawsuit also alleges that the pension system’s chief legal advisor, Lori Chapin, participated in the creation of the 1997 deal in order to influence the pension board to create the new position she now fills. The suit alleges that she received a pay raise of approximately 25 percent when she received the job. Efforts to reach Chapin immediately were unsuccessful.
— ANDREW DONOHUE
City’s New Money Man
San Diego Mayor Jerry Sanders filled two vacancies on his management team today, appointing Jay Goldstone as chief financial officer and Richard Haas as deputy chief for public works.
Goldstone currently serves as director of finance for the city of Pasadena. He will assume his position as San Diego’s first-ever CFO on Jan. 23. Goldstone’s responsibilities will include preparing San Diego’s annual budget and managing debt, as well as overseeing the city auditor.
Haas is a 26-year Navy veteran, and the county’s assistant director of the department of environmental health. In 1998, Haas retired from the U.S. Navy as a captain in the Civil Engineer Corps. His appointment is effective immediately, because of the departure of Acting Deputy City Manager Larry Gardner.
After meeting with a salary compensation consultant, City Manager Ronne Froman set Goldstone’s annual salary at $194,500 and Haas’ at $168,000.
— SAM HODGSON
Freeway Arsons?
Firefighters extinguished at least two fires that broke out on the eastern side of Interstate 5 at about 8:30 a.m. today. The fires broke out between the Sea World Drive and Morena Blvd. exits of the freeway, between the freeway and the adjacent railway tracks.
The fires burned several palm trees and some small patches of grassland, but did not appear to have damaged nearby structures or vehicles. There was evidence that transients had been living in the area.
A fire dept. spokeswoman said arson investigators have been dispatched and are currently investigating the scene. The investigators were not immediately available for comment.
Firefighters at the scene said it was unusual to have two similar fires break out so close to each other at the same time.
— WILL CARLESS
A Brief Glimpse into the Council’s Mind
The city’s personnel director testified Monday that he raised an objection to the City Council’s approval of a special benefit for the president of the firefighters union because it was not noticed with the other labor negotiations that were being discussed in closed session.
“I was not aware of it being up for discussion and did not think it was appropriate,” said personnel director Rich Snapper.
Presiding Judge Frederic Link cut Snapper off during his testimony of what happened in certain private meetings where labor negotiations were being considered. It was unclear to the judge whether the content of those meetings in 2002 was confidential.
Snapper was given time to call his attorney to confer and will appear back on the witness stand Tuesday. The development, albeit brief considering the judge’s caution, was the first tidbit in the hearings to touch on what was known and said behind the City Council’s closed doors during consideration of the controversial proposal. All previous testimony had focused on the pension system’s dealings.
The 2002 pension deal relieved the city of a funding obligation it had to the fund while making effective benefit enhancement for employees. Six former pension trustees were charged for approving the deal.
— EVAN McLAUGHLIN
Feds Raid 13 SD County Cannabis Clubs
Local authorities and the Drug Enforcement Agency raided 13 San Diego County medical marijuana dispensaries Monday, seizing contraband materials and some patient records, but making no arrests on charges of drug dealing.
The searches took place at about 12:30 p.m. when agents acted on investigative warrants granted for cannabis clubs throughout San Diego and San Marcos. DEA spokesman Misha Piastro said the efforts were especially looking for information relating to drug trafficking.
“We’re not after patients,” he said.
Local advocates were outraged by the unannounced raids, which they said violated federal laws protecting patient privacy.
“The actions of local and federal law enforcement are flying in the face of local voters,” said Laurie Kallonakis, President of San Diego NORML, a nonprofit cannabis advocacy organization.
The searches come over a month after the San Diego County Board of Supervisors rejected implementation of the medical cannabis program approved by voters in 1996’s Proposition 215. The county argues that implementation of the state law would force it to violate federal law.
— IAN PORT
On the Last Day of Council …
The City Council took care of some last-minute housecleaning on Monday afternoon before going on holiday recess, discussing the ballooning bills of its private investigators and finalizing the hire of its first-ever independent budget analyst.
A number of council members expressed concerns regarding the new budget estimations offered by Kroll Inc., the private firm hired to assess allegations of wrongdoing connected to the city’s troubled pension system and its wastewater department.
The firm recently pushed the release date for its report back to May and said it would need an additional $9 million to $11 million to complete it.
“I’d never heard that amount of money nor that date,” said Councilwoman Toni Atkins, who served as the city’s acting mayor, and point person with Kroll, until Mayor Jerry Sanders was sworn in last week.
Officials with the audit committee had originally hoped to wrap up their investigation by October, and then December. Technical glitches and access to documents have delayed their efforts, officials have said. The investigation has essentially been on hold since early November, when issues arose relating to an electronic database for documents.
Sanders said Kroll, which was only authorized to receive slightly less than $4 million, had billed the City Auditor’s Office for an additional $1.4 million more than it was authorized.
Kroll and law firm Willkie Farr & Gallagher staff what’s known as the audit committee, a group of private consultants hired to investigate possible securities fraud and other alleged wrongdoing associated with the pension system and the city’s financial disclosure process.
Lawyers from Willkie Farr & Gallagher have been authorized for $2.66 million, but have billed for $1.9 million more than this figure, Sanders said.
Councilwoman Donna Frye said she wanted to know if anyone had told either firm it was OK to bill for more money than they had been authorized to receive.
The city’s outside auditors, KPMG, say they need the investigation to be completed in order to bless the city’s long-delayed 2003 fiscal year audits. Without the audits, the city’s credit rating and access to Wall Street remain on hold. Its credit rating was suspended by one of the three major credit rating firms after questions arose as to the veracity of its financial statements offered to investors and the public.
The investigation is also said to be necessary to aid the Securities and Exchange Commission’s related investigation.
Also Monday, the City Council formalized its selection of Andrea Tevlin as its independent budget analyst.
The position was created when voters approved the switch to a strong-mayor form of government last November. The switch takes place Jan. 3 and removes the mayor from the City Council, giving him power over the budget and city personnel.
The new position is set up to give the council an independent opinion of city finances.
“I think this is a really important step for the city. So much of the struggles we have faced are result of not being able to get accurate information from the manager’s office,” said Councilman Brian Maienschein.
A number of council members expressed a willingness to return for a special session of the mayor wanted to proceed with the audit committee’s new billing requests.
Sanders said he was regularly speaking with audit committee leader Arthur Levitt, former chairman of the SEC, to work out a solid budget and timeline for the report’s conclusion.
— ANDREW DONOHUE
Judge: Cut to the Chase
The judge presiding over the corruption case against six former pension trustees asked prosecutors and defense attorneys Monday why they are arguing over the financial prudence of the 2002 underfunding deal at the center of the case.
More important to the case, Superior Court Judge Frederic Link said, was whether the defendants had a financial stake in approving the arrangement. The District Attorney’s Office alleges that trustees had a conflict of interest when approving a deal that excused the city from making a lump-sum payment into the fund while making effective benefit increases.
Link asked prosecutor Stephen Robinson why pensioners who sat on the retirement board in 1996 and approved a more clear-cut funding-for-benefits arrangement weren’t charged with having a conflict of interest in that deal. He questioned whether the case was only being brought against the 2002 deal because it has resulted in financial and legal problems that threaten to bankrupt the city.
“In 1996, where were you when everyone was awash with money?” Link said.
Robinson told the judge he has been calling witnesses to testify that it was apparent that their actions on the retirement board had a bearing on the labor negotiations between the city and its unions where the benefits were created.
Pension actuary Rick Roeder resumed his testimony and former pension board President Frederick W. Pierce IV is expected to take the witness stand later Monday.
— EVAN McLAUGHLIN
Pay Day
San Diego County property owners have until the end of today to pay the first installment of their property taxes.
Property owners wishing to make today’s deadline can make payments at an outdoor “tax tent” until 7 p.m. tonight at the San Diego County Administration Center, 1600 Pacific Highway. Other payment centers include county offices in El Cajon, 200 S. Magnolia Ave.; Chula Vista, 590 Third Ave.; San Marcos, 334 Via Vera Cruz; and Kearny Mesa, 9225 Clairemont Mesa Blvd.
Individuals also can make property tax payments online at www.sdtreastax.com or by phoning (877) 829-4732.
— VOICE STAFF
Bee Good
Sacramento Bee columnist Daniel Weintraub, who often looks in on San Diego’s governmental woes, wrote Sunday about new Mayor Jerry Sanders’ haircut and approach to his new job.
Read it, if you would like. (Although registration is required to access the column.)
— ANDREW DONOHUE
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