Saturday, Feb. 24, 2007 | Attorneys representing City Council members in the Securities and Exchange Commission investigation had regular contact with SEC officials in September and later turned in a “White Paper” submission to the commission, according to legal bills released Friday.

The activity came less than a month after the release of an investigative report from Kroll Inc. that sought to assign different levels of culpability in the city of San Diego’s release of faulty financial information to investors in 2002 and 2003. The report said the five current council members who were in office at the time acted negligently, an opinion that, if shared by the SEC, would likely mean the council members can avoid sanctions.

The invoices show that attorneys for Councilwoman Toni Atkins and Councilman Brian Maienschein billed for discussions with Kroll’s lawyers from Willkie Farr & Gallagher on Aug. 3, five days before the release of the report. The attorneys also billed for their attendance at the Kroll presentation at City Council on Aug. 8.

A month later, Atkins’ invoice indicates that the SEC requested a submission from attorneys. The bills show Atkins attorney Sean Prosser had a teleconference with Kelly Bowers, assistant regional director for SEC’s Pacific division, on Sept. 18 and discussed a “White Paper submission and related issues.”

On Oct. 6, Atkins’ attorneys sent e-mails and had teleconferences with the attorneys for other council members “regarding settlement and strategic issues,” her invoices show.

The bills are heavily blacked out, leaving only snippets of detail as to activities of the taxpayer-funded attorneys. However, the information available indicates that, after slowing down before the release of the Kroll report, attorneys for the council members became active again in the late summer and fall months — coinciding with the release of the Kroll report, the SEC’s request and a settlement between the federal regulators and the city as an entity.

SEC officials said they were continuing their investigation into individuals following the broad securities-fraud settlement with the city, reached in November.

Between July and December, the bills show that Councilmen Scott Peters and Jim Madaffer, former Mayor Dick Murphy, Atkins and Maienschein racked up $150,969 in legal costs. However, Peters’ bills for legal work were absent; his office said the release had been delayed. (Councilwoman Donna Frye, the fifth sitting council member in office at the time of the securities issues, is paying for her own attorney. The other four council members use taxpayer funds and must submit their bills to the city.)

The bills were released late Friday; attempts to reach the attorneys and council members were unsuccessful.

Following the submission, settlement and strategy talks, the bills show that the activity then tapered off to near silence in November and December, the last two months for which bills were made available, a sign the SEC probe could be winding down.

For example, in the first four months of 2006, Atkins’ monthly legal bills averaged $69,535. For the four months worth of bills that were released Friday, Atkins’ legal invoices were averaging $11,438 a month. Her December bills, which immediately followed the city government’s settlement with the SEC, amounted to only $1,008.

The SEC made an earlier submission request of council members near the beginning of the year. A PowerPoint presentation was given to SEC officials by attorneys for council members on March 7, according to already released invoices. A second presentation was made to the SEC on April 12.

In an interview last year, Pam Naughton, attorney for Peters and Murphy, explained those presentations by saying that the SEC “is always eager to have information from people who have information. … We have been supplying the SEC with information continuously through this process.”

Sources told voiceofsandiego.org in February 2006 that the SEC had given targets of its investigation a last chance to avoid enforcement action. The notification, known as a “Wells call,” is an informal invitation to a target of the investigation to either begin settlement talks or point out legal or factual flaws in the SEC’s case.

Council members have denied being among the city officials to receive those notifications.

Evan McLaughlin contributed to this report.

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