With today’s news that the SEC has charged and settled with San Diego’s former outside auditor on fraud allegations, one of the best pieces the Union-Tribune wrote about the city’s financial crisis two years ago came to mind.
Matt Hall, one of the U-T‘s City Hall reporters, did a long profile of the auditing firm — Calderon, Jaham & Osborn — that has now been punished. (Though was I the only one who noticed that the meager SEC fine was about as punitive as some of those issued from our own Ethics Commission?)
The SEC fined Calderon accountant Thomas J. Saiz $15,000 for materially misstating the city’s financial condition in footnotes that appeared on city financial disclosures in 2002 and 2003.
Anyway, I figured the U-T would want to remind readers of that piece in light of today’s news. But the paper isn’t doing that so I’ll do it for them.
Hall’s story opened with a bit about Ernie Anderson, a former city official who had warned city leaders against hiring Calderon. It was a great story where Anderson and other staff, for once, were remembered for having prescient foresight.
I called Anderson today to see what he thought about the charges against Saiz.
Anderson, who was the city’s budget director, said that in 1993, the city had pulled together a group of auditors and knowledgeable people from across the region to select an outside auditor. They settled on hiring the firm Deloitte & Touche after determining that Calderon was not up for the job.
Calderon had excellent recommendations from smaller public agencies and looked to be ready to “make the jump” to auditing big municipalities like San Diego.
“We just didn’t think that San Diego should be the guinea pig,” Anderson said.
He said Calderon just appears to have been out of its league.
“The consensus of our group was that they lacked the breadth of experience to deal with a large agency. It’s apparent that the mistakes they made were not necessarily purposeful fraud but acts of inexperience — the exact things we had expressed concerns about to the City Council,” he said.
Hall’s 2005 article implied pretty heavily that Calderon’s political contributions and connections were strong enough to win over the City Council at that time, which included local politicians still very much in the spotlight like county Supervisor Ron Roberts and Congressman Bob Filner.
I asked Anderson about the political angle.
“The sense was that people from Calderon and Co. were in contact with the council and politically active,” he said, “but that’s something we couldn’t consider.