San Diego City Officials settle fraud lawsuit

The City's financial crisis came to light in 2004 when the City found errors in its financial statements. Shortly thereafter the City's credit rating was suspended, Mayor Dick Murphy resigned and San Diego became known as the “Enron by the sea.”

Three of the five defendants, Former City Manager Michael Uberuaga, Former Auditor Ed Ryan, and Deputy City Manager Patricia Frazier agreed to pay fines of 25-thousand dollars each. Former Treasurer Mary Vattimo paid 5-thousand.

They each admitted to misleading investors but not to wrongdoing. The SEC (Securities and Exchange Commission) said these officials failed to disclose the City's pension debt but Pamela Naughton, Lawyer for former Mayor Dick Murphy and Council Member Scott Peters says otherwise, “Clearly, there's no question in the disclosure documents that the pension under-funding of the actuary's ratios was disclosed right for the bonds, as was the total amount of under-funding.”

Naughton said the message of this case is that once the publicity ball started rolling, everybody started screaming corruption, corruption making prosecutors, law enforcers and the SEC feel obligated to pursue these people.

It so happens that every Judge and every court, and there were several, agreed with Naughton's conclusion. Then why the settlement?  The answer is, a couple of defendants are retired, they're done with their careers and they don't want to go thru a lengthy 6 month trial, a trial at their own expense.

Former City Attorney Mike Aguirre has a little different perspective, “What the SEC said was San Diego was dishonest about its finances because it didn't want to make any of the hard choices, it didn't want to raise money sufficient to pay for the benefits and it didn't get rid of the benefits.” Which caused the pension debt to grow and then escalated when the recession brought massive losses to the system's portfolio.

Aguirre says those sins of the past continue to be revisite, “The council members are approving projects and expenditures of money with reckless abandon. They're building a library right now knowing that they have a 30-million dollar gap.” He says it's the underlings shouldering the blame for decisions made by elected officials, “They look around and say you know what, none of the council members got in trouble for what they did.”

Ultimately its the taxpayers of San Diego who are paying for bad management and they will continue to pay with higher taxes, cuts in services or perhaps both.

Categories: KUSI