Former Southeastern Economic Development Corp. President Carolyn Y. Smith won’t be getting a $100,350 severance check from the city of San Diego until “several serious questions have been answered” about whether she is entitled to it, a spokeswoman for Mayor Jerry Sanders told me.
“There are certainly enough circumstances at this point that call into question whether or not the severance payment is appropriate,” Rachel Laing said.
The SEDC board voted to pay Smith $100,350 when it fired her in July in the wake of a bonus scandal.
Since then, five members of the board have been replaced by Sanders and a local activist, Ian Trowbridge, has sued the agency, claiming that the board violated the state’s open meetings law, known as the Brown Act, by it discussing and voting on Smith’s golden parachute in closed session.
Earlier this month, a superior court judge issued a temporary restraining order against SEDC to prohibit it from cutting a check to Smith.
But, last week, the new board voted in open session to void Smith’s termination agreement and severance payment. It then immediately voted to approve the same termination agreement. Because the agreement has now been approved by the board in open session, the Brown Act violation may no longer apply and Trowbridge’s lawsuit may have become largely irrelevant.
Indeed, tomorrow morning Smith’s attorneys will ask the judge to dismiss the case, arguing that the alleged Brown Act violation has now been “cured.”
In the meantime, however, Trowbridge has taken another tack. Yesterday morning, his attorney, Cory Briggs, sent the Mayor’s Office a letter stating that Trowbridge may take legal action against the city if it approves paying Smith the money. The letter reads:
SEDC’s operating agreement with the City and Redevelopment Agency prohibits SEDC from incurring any cost or expense in excess of the approved budget or the approved transfer of appropriations, and further prohibits SEDC from “entering into any contract or agreement whatsoever for the expenditure of funds in excess of the funds provided in [SEDC’s] approved budget.” The operating agreement also limits the City and Redevelopment Agency to reimbursing SEDC’s “eligible expenses.” The severance payment that SEDC’s board of directors illegally approved last Wednesday is not included in any approved budget or approved transfer of appropriations for SEDC, and it is not one of the eligible expenses for which SEDC may be reimbursed.
“It’s incumbent on mayor to make sure that unbudgeted, unapproved payments are not released,” Briggs said in an interview.
SEDC is a city of San Diego nonprofit redevelopment authority, and it gets all of its money via the city, which reimburses the agency for costs incurred. Laing told me she doesn’t believe SEDC physically has $100,350 to pay Smith. And she said the mayor doesn’t want Smith to receive more taxpayer money until the former president’s attorneys prove that she is entitled to it.
She said the mayor wants to know whether Smith is still eligible to the payment considering that an audit released in September found that the agency’s hidden system of bonuses and extra compensation rose “to the level of fraud.”
“Among the questions the mayor has is whether her contract has a provision as to whether the payment stands if fraud is alleged,” Laing said. “We want to at least be given sufficient evidence that this is a required payment.”
The SEDC board in July terminated Smith’s employment without cause, opening the door for her severance package. Her employment contract did have a stipulation whereby the board could fire her for cause in the event of misconduct or fraud and she would not be due a severance.