The Morning Report
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As we reported earlier, the Securities and Exchange Commission charged the city of San Diego’s former outside accountant and his firm for underreporting the city government’s pension and retiree health care deficits.
The SEC charged Thomas Saiz and his company, known as Calderon, Jaham & Osborn, with making false and misleading statements in the documents that investors used to gauge the city’s financial health before loaning the government money in 2002 and 2003.
The SEC alleged the Saiz and his accountants made the following false statements in the city’s financial statements:
- The city’s method for funding the pension plan assured that the deficit would never grow beyond a point the fund’s actuary would deem acceptable. The city had information that this was not true, the SEC said.
- The fund’s actuary believed the city’s funding strategy was an excellent method and superior to certain generally accepted accounting principles. The actuary was concerned with the method once funding for the plan fell beyond a certain level, the SEC said.
- The city’s net pension obligation remained at $39.2 million, when it had jumped to $51.9 million between 2001 and 2003.
- That the city had a reserve set aside to find the its net pension obligation, when no such reserve existed.
- That retiree health benefits were paid out of a reserve fund at the pension system without disclosing that the fund was running out of money and that the city would have to begin paying retiree health expenses out of its own budget.
Saiz and Calderon committed fraud in connection with the sale of $260 million worth of municipal securities as a result of those actions, the SEC alleged.
Saiz agreed to pay a $15,000 fine. He and his firm, which has since been sold, agreed to cease and desist from engaging in fraudulent practices, the SEC said.
A phone call placed to Saiz this morning has not yet returned.