Tuesday, May 19, 2009 | Back in May 2005, when the first of two pension-related corruption cases was filed against former San Diego pension officials, the mayor was Dick Murphy, the new city attorney was Mike Aguirre and the trial of two city councilmen in the infamous Strippergate case was underway.
Those players are long gone now. But four years later — and counting — eight ex-pension officials charged in a state pension case, a federal pension case, or both, are marking time, still waiting for their day in court.
The biggest reason the two cases have dragged on: A highly unusual intervention by the California Supreme Court in the state case — before the trial even takes place. Likewise, the judge in the federal case has postponed that trial for more than two years while awaiting the state Supreme Court ruling.
There are other reasons the cases have stalled: Complicated facts and voluminous evidence; additional federal charges three years later; extraordinary and precedent-setting legal issues; and outside parties weighing in with formal legal opinions. It’s all added up to years of legal wrangling.
“The judges in both cases are dealing with issues that have never been presented in criminal prosecutions,” said Frank Vecchione, lawyer for Teresa Webster, who is charged in the state and federal prosecutions. “Both cases are interrelated and cases of first impression, creating new and complex issues for the courts.”
It’s been a long four years for the ex-pension officials (or three and a half in the federal case). That’s considered a long time even by federal court standards. Complex white-collar cases are typically slow going, but not this slow.
By contrast, on the federal side, the complex Peregrine fraud case was first indicted in October 2004 and went to trial in April 2007, about 2.5 years later. And, the “Strippergate” corruption case — with hundreds of hours of taped conversations and volumes of documents — was indicted in August 2003 and went to trial to in May 2005. That’s one year, 9 months after indictments. State cases tend to get to trial even faster.
“It’s really difficult for people who have to remain in this limbo for this long of a period of time,” said defense attorney Charles La Bella, a former San Diego U.S. attorney who is not involved in this case. “It’s difficult because you can’t go on to the next stage in your life because you don’t know what’s going to happen.”
The defendants in the state case are Webster plus Cathy Lexin, Ronald Saathoff, John Torres, Mary Vattimo and Sharon Wilkinson. The federal case also includes defendants Webster, Lexin and Saathoff plus Loraine Chapin and Lawrence Grissom.
The state and federal cases share both defendants and facts. In both cases, prosecutors contend that the former pension officials agreed to allow the cash-strapped city of San Diego to continue to put less money into the retirement system in exchange for increased retirement benefits for themselves and other city workers. That 2002 deal contributed to a billion-dollar pension-fund deficit.
In the state case, the alleged crime is conflict of interest — that the defendants illegally voted for their own benefits. The defense says their actions as stewards of the retirement system were legally protected under the state constitution, whether it benefitted them or not.
In the January 2006 federal case the charges are mail fraud and honest-services fraud. Prosecutors say that the five defendants conspired to get the plan passed in 2002 so they could receive the enhanced retirement benefits, and thereby deprived citizens of their honest services; defense attorneys said the two actions — the vote to decrease payments and the getting of the benefits — were unrelated and the actions of the retirement board were protected by California law.
That issue of protection is essentially what the Supreme Court is going to decide. The court granted review in the case in November 2007. Nothing has happened since.
In March 2007, U.S. District Judge Roger T. Benitez told lawyers in the federal case that he was indefinitely postponing the trial. He agreed with the defense that if the state court finds the defendants did not violate conflict-of-interest laws in voting on their own benefits, it could have repercussions for the federal conspiracy and honest-services fraud case. Federal prosecutors said the federal case has nothing to do with the state case.
Also very unusual and time consuming in the state case: There were about 12 briefs filed by outside parties representing dozens of organizations in support of the defense’s position — from the largest public retirement systems in the state plus labor, retirement and law enforcement organizations and municipalities, counties and national organizations. There was even a brief authored by California Attorney General Jerry Brown’s office.
On the federal side, prosecutors successfully challenged the retention of four of the original defense attorneys for conflicts-of-interest, and the prosecutors opposed the appointment of taxpayer-funded lawyers. These matters took months to resolve.
“The (federal) case took a lot of time to get off the ground,” Vecchione said. “There have been unusual procedural roadblocks or detours in this (federal) case that have prolonged it.”
Later, the same federal prosecutors unsuccessfully tried to move the case to another court, alleging Judge Benitez had a conflict of interest — a bold move that the judge said was attempted because he had expressed problems with the government’s theory of the case. Benitez denied the request.
Also adding months to the case, prosecutors alleged new charges in a superseding indictment three years after the first indictment. Defense lawyers said this was to address the judge’s criticism.
At times Benitez himself caused delays. During one meeting almost three years ago, he prematurely required the attorneys to prepare a jury questionnaire. At a subsequent hearing, he took prosecutors to task for failing to file a response to a defense motion, unaware that it had already been filed.
The judge has set a Sept. 15 trial date. But that’s the third trial date he has set.
Vecchione said it’s all part of litigating a complex white-collar case.
“Part of the process is there are hundreds of pages of motions that have to be digested, argued and ruled upon which takes quite a while,” Vecchione said. “And there are hundreds of thousands of documents that have taken an enormous amount of time to attempt to review. … I don’t think it works as an advantage or disadvantage to either side. I just think this amount of time was necessary.”
Even the latest motions hearing, which was going to involve a marathon discussion of more than 23 defense pleadings containing 5 to 10 legal issues each, was postponed from May 1 to May 22.
Among the many issues pending is the same one before the California Supreme Court: The defense’s request that the judge dismiss the case because the actions of the defendants as pension officials are protected under California law.
“We look forward to proceeding with trial on Sept. 15,” is the only thing lead federal prosecutor John Owens would say.
Kelly Thornton is a San Diego-based freelance writer. Please contact her directly at email@example.com with your thoughts, ideas, personal stories or tips. Or set the tone of the debate with a letter to the editor.