The Southeastern Economic Development Corp. board decided tonight in closed session to grant limited legal indemnity to its ousted president, Carolyn Y. Smith, who is being sued by City Attorney Mike Aguirre.
The board offered to defend Smith in the lawsuit “subject to reservation rights.” The agency’s corporate counsel, Regina Petty, explained the legal term to me after the meeting.
“That could mean a wide variety of things under the circumstances. The short answer is it’s not unconditional,” Petty said.
Petty said the board has offered to pay for Smith’s legal defense in the suit, in which Aguirre claims Smith breached her contract and her fiduciary duty to the residents of San Diego by paying herself and her staff hundreds of thousands of dollars in unauthorized bonuses and extra compensation. Petty said the indemnity does not currently extend to any damages Smith would be liable for if she loses the suit, though she did not rule out extending such an offer, if appropriate.
“It is possible that could happen. One of the reasons you do a reservation of rights is because you only have partial information. So, yes, that could happen,” Petty said.
Petty said that in California public employees are generally indemnified for actions or omissions that are within the course and scope of their employment, and that such indemnity could apply in Aguirre’s suit against Smith.
The board did not move forward on a separate matter: A lawsuit that has been brought against SEDC by local activist Ian Trowbridge.
Trowbridge had asked the agency to nullify a termination agreement that it agreed on in a closed session of its board meeting last month. The termination agreement includes a $100,350 severance payment for Smith, and Trowbridge’s lawsuit asserts that it violates state open meetings law because a public body cannot discuss a severance payment in private.
The board voted unanimously to leave the agreement intact, leading Trowbridge, who was at the meeting, to announce: “Then they’re in deep trouble.” He vowed to continue his fight to have the agreement, and Smith’s severance payment, nullified.
Earlier in the meeting, board member D. Cruz Gonzalez had asked the board to continue its entire agenda, citing pressure from the Mayor’s Office, the City Attorney and Councilman Jim Madaffer, who had all fired off pointed memos to the board in the days preceding the meeting, warning the lame duck board not to make any last-minute, important decisions.
Gonzalez said that considering four members of SEDC’s board are likely to be replaced at the City Council meeting of Sept.2, the proper thing for the board to do would be to continue discussion of all the agenda items to its next meeting. Gonzalez’s motion was seconded by board member Rich Geisler.
“I don’t think there’s anything on this agenda that needs to be heard tonight,” Geisler said.
But board Chairman Artie M. “Chip” Owen immediately attacked Gonzalez’s motion.
“To say you’re not going to undertake any of the normal course of business of this board, to me, smacks of breaching your fiduciary duty,” he said.
Owen sternly told the board that they had an obligation to SEDC as a corporation first and foremost, then to the community, and then to the city. Then he turned to Petty, and asked if he had accurately represented the board’s legal duties.
“That’s correct,” she said.
After some more argument between the board members, accompanied by some heckling against Owen from community members who had come to watch the meeting, Gonzalez amended his motion to ask that the board continue everything on the agenda other than the discussion of the three high-profile lawsuits pending against SEDC and the agency’s outgoing president, Carolyn Y. Smith.
That motion passed, with only Owen and board Secretary Charles Simpson voting against it. Smith and Owen smiled broadly.