Monday, Aug. 13, 2007 | When he filed his high-stakes pension case in 2005, San Diego City Attorney Mike Aguirre couched his confidence. His attempt to erase hundreds of millions of dollars from the city’s looming pension deficit was going to be risky, he said.
He cautioned that the litigation was a gamble based on complex, previously untested legal theories that would be fought tooth-and-nail by workers trying to protect their future pensions and elected officials working on their behalf. Aguirre assured that the city’s taxpayers would ultimately be spared from paying for employee benefits he said were illegal, but the fight could consume the better part of a decade, he said.
Two years into the legal fight, the banner cause of his first term, Aguirre’s case has fallen flat.
A Superior Court judge ended the city attorney’s lawsuit Aug. 3 before Aguirre could argue that the benefits were enhanced illegally when they were exchanged in 1996 and 2002 for a cost-saving favor from the retirement board. Statute of limitations in the case expired at least a year before Aguirre filed litigation, Judge Jeffrey Barton said.
The decision marked a key milestone in Aguirre’s ambitious — and some say overreaching — effort. To his critics, the ruling meant the end of a painful chapter in the city’s history during which the city’s own chief legal adviser expended enormous time and money, to no avail.
“It’s time to fold,” said Council President Scott Peters, one of Aguirre’s most vocal critics on a City Council that has often been at odds with the city attorney. “We recognized the (pension) problem, we’ve worked together, and have seen progress. How did that come about? It wasn’t because of litigation.”
But to Aguirre, the judge’s decision to end the civil lawsuit is merely an unfortunate blip on what he views as a crucial fight for San Diego taxpayers, who were tapped for an estimated $900 million by those pension deals. The system is currently running a $1 billion deficit, according to the plan’s actuary.
In addition to challenging Barton’s decision in the court of appeals, where he has so far been largely unsuccessful in pension matters, Aguirre vowed to take other avenues. On Friday, he introduced to the City Council legislation that would void the benefits, a tact he has heralded before but with little reaction. He also said he will explore his legal options in federal court.
“This is not dead,” Aguirre said. “I’m just getting started.”
Continuing the Crusade
That attitude has been typical of Aguirre during his tenure and especially throughout the course of his pension crusade. He’s been unrelenting on issues despite the odds, refusing to concede defeat after unfavorable decisions to the point that he has accused judges incompetence and even corruption. While his foes see the termination of an already drawn-out battle, Aguirre predictably pledges without hesitation to extend the pension saga.
Aguirre chalks up the Superior Court’s ruling to unfavorable circumstances. The courts will side with him, he says, if he can ever get his underlying arguments and not procedural issues to become the focus.
At the core of Aguirre’s claim is that trustees of the San Diego City Employees’ Retirement System had an improper conflict of interest when they approved agreements that reaped higher pension benefits for themselves and fellow city employees. In exchange, the retirement board allowed the city to shortchange the pension fund.
Aguirre also claims the benefits are illegal because they violated state and local laws prohibiting cities from spending more money than they receive in one year — unless two-thirds of the voters approve the overflowing cost.
For Aguirre, getting to those arguments has been difficult. Judges have scratched their heads as to why the City Attorney’s Office — which, as the city’s chief legal representative, signed off on the benefits now in question — is now trying to repeal them. The City Attorney’s Office is under new leadership, but the actions of Aguirre’s predecessors’ still carry weight. Further, the city did not raise objections to the benefits in multiple lawsuits it had settled with retirees and the pension system since 2000 until Aguirre sprang on the scene.
In his decision this month, Barton said Aguirre had one year to file the lawsuit after the pension benefits were struck in November 2002. As a stretch, Aguirre could have possibly made the case that the one-year statute of limitations began running nearly a year later when a retiree sued to recover the underfunding that was part of those deals. The latest possible time the city could have filed was September 2004, the judge said — three months before Aguirre took office and 10 months before he filed the lawsuit.
With two years of litigation on the matter behind him, the city attorney said the biggest challenge now is to find his footing legally so he won’t be tripped up in those procedural issues.
“It’s like being quarterback: You try one way and it doesn’t work and you keep trying until you find a system that gets you to the end zone,” Aguirre said.
Aguirre’s most immediate course of action will be to pressure the City Council to follow the Orange County’s Board of Supervisors by considering legislation that would strip employees of the contested benefits and force them to sue. Some supervisors in Orange County want to roll back pension retroactive increases awarded deputy sheriffs in 2001, arguing they violated the debt-limit law that Aguirre is also using. Aguirre believes this method could vault him over the procedural obstacles he’s had to face.
Lawyers for City Hall’s labor unions and other employee groups have not returned calls seeking comment since Barton handed down his decision 10 days ago.
The Rest of the City
The possibility that a majority of council members will follow Aguirre into a new pension battle is slim. Peters and others have lambasted Aguirre for his pursuit, which they say is preoccupying him from other responsibilities, potentially costing the city millions of dollars in attorney fees, and unlikely to ever succeed because of the experimental theories it is based upon. Others have been quieter in their dismissal of his efforts.
Council members and employee groups have pointed to other gains that the city has made in controlling pension costs. Topping the list are the labor deals the council, led then by former Mayor Dick Murphy, forged with the unions in 2005 that froze salaries and required employees to pay for a greater share of their pension costs.
Aguirre’s critics are quick to note that the progress made outside of litigation has the blessing of Joe Esuchanko, the actuary the city attorney used as an expert witness in the pension case. Esuchanko declared earlier this year that the fund is not at risk of becoming insolvent, despite Aguirre’s claims.
And while Mayor Jerry Sanders publicly backed Aguirre’s pension lawsuit, he has not banked on the possibility of Aguirre prevailing. Instead, he believes the five-year financial plan he crafted last year, which relies heavily on layoffs to cut payroll costs, will make a sufficient dent in the $1 billion deficit. The city will recover without the lawsuit, he said. Sanders was on vacation and unavailable to comment.
Still, the paying down of the deficit threatens to continue to bog down the city’s annual budget for years to come. In recent years, increased annual payments into the system have contributed to tight budgets that have seen cuts in services such as library hours. An Aguirre success in court would offer the city instant relief from hundreds of millions of dollars owed to employees.
Aguirre hasn’t been alone in the court troubles on the pension issue. District Attorney Bonnie Dumanis’ criminal conflict-of-interest prosecution, based on assertions similar to Aguirre’s, succeeded in a preliminary hearing, but her case was sent back for review after the state Supreme Court challenged the lower court’s judgment that an illegal conflict of interest ever existed. The U.S. attorney’s federal prosecution of five former pension officials is also on pause pending the outcome of that review, which is due out by September.
Council members have also bristled at the manner in which Aguirre has tried the case. They complain that he filed the lawsuit without the council’s permission — although they later voted to allow him to try the case in the name of the City Attorney’s Office — and racked up several million dollars in attorney fees for the legal work performed on behalf of the city as well as to the lawyers representing individuals Aguirre has sued unsuccessfully.
As of March, nearly $3 million was racked up in expenses for pension litigation Aguirre filed without the council’s permission, including cases against individual pension officials. Additionally, council members complain the cause has strained his office resources internally. At times during the pension trial, more than a dozen attorneys from Aguirre’s office could be seen working in the courtroom.
The council has tried to rein in Aguirre by requiring that any request to pay outside lawyers for city lawsuits must be approved first by the council. It is a small step for council members who fundamentally disagree with Aguirre’s assertion that he speaks unilaterally for the city on legal matter.
They lament that they will likely not have a role in determining whether Aguirre continues to attack the benefits after Barton’s dismissal of the case.
“If I had advice for Mike, I doubt he’d listen anyway,” Councilwoman Toni Atkins said.
Aguirre dismisses the criticisms, saying four council members who vote in favor of the 2002 benefits — Peters, Atkins, Brian Maienschein and Jim Madaffer — are trying to blunt his efforts to recover money from deals that have become politically embarrassing to them. Although some of their prophecies have turned out to be correct, such as Peters’ assertion that past legal settlements barred the benefits from being unwound, Aguirre said they are all part of an effort to discredit his work and cover up a scandal they played a part in creating.
And whether he is proven right or wrong in the months leading up to his re-election efforts in June 2008 could have little consequence. Political watchers said the incumbent Aguirre has cemented a reputation in the public as being perseverant in his quests against powerful interests, regardless of the outcome of this case.
“It’s not going to be harmful to him,” political consultant Christopher Crotty said. “The reason he has positives is because he’s taking action. The mere fact that there’s action being taken is being perceived as him working to alleviate the problem downtown.”
Crotty added that Aguirre, regardless of the headway he makes on this challenge, will perpetuate the fight any way he can as a strategy that he can take into the next election. Potential challengers will try to point to his record, but it won’t serve much use if Aguirre insists his work is unfinished.
“I don’t think Mike Aguirre will ever admit defeat under any circumstances,” Crotty said. “Regardless of the disposition of that lawsuit or other lawsuits he’s filed or other lawsuits he will file, he will say, ‘I’ve been the one digging out the corruption, I stood up to the power brokers, including the judges and the people who are in the pockets of downtown players.’”
He added, “The resolution is immaterial.”