Monday, September 10, 2007
C.A. Denies Bid to Halt Trial of Ex-San Diego Officials
By KENNETH OFGANG, Staff Writer
Prosecutors presented enough evidence to send six former members of the City of San Diego’s retirement board to trial on criminal conflict of interest charges, the Fourth District Court of Appeal ruled Friday.
Div. One denied a writ of mandate sought by John A. Torres, Ronald L. Saathoff, Cathy Lexin, Terri A. Webster, Sharon K. Wilkinson, and Mary Vattimo. San Diego District Attorney Bonnie Dumanis is accusing the six of voting on a proposal to restructure the city’s pension plans in spite of knowing that their own benefits would be increased as a result.
The decision comes two weeks after the same court ruled that the same defendants could recover the attorney fees they spent to defend themselves in two related civil suits brought, but eventually dropped, by the city attorney.
The prosecution is part of the fallout from revelations that the city’s retirement plans are massively underfunded. Recent news reports say the plans are underfunded by as much as $1 billion.
Saathoff, Lexin, and Webster have also been named in a federal fraud indictment.
In the state case, prosecutors contend that the vote to continue the underfunding of the pension system was linked to a package of enhanced retirement benefits for city workers, including the defendant board members. Lexin was the city’s human resources director; Vattimo was the city treasurer, Webster was the city’s assistant auditor and comptroller, Saathoff was a city fire captain, Torres worked for the city police department crime lab, and Wilkinson was a city management analyst.
The board, like retirement boards in a number of other localities, consists of a combination of city officials, employee representatives, and public members appointed by the city council.
Following a preliminary hearing, San Diego Superior Court Judge Frederic Link found there was sufficient evidence of a conflict of interest, as proscribed by Government Code Sec. 1090, to bind the defendants over for trial.
The judge cited testimony that a majority of the board members, including the six defendants, agreed to an arrangement, negotiated by the city and its employee unions but opposed by a minority on the board, to set aside a “trigger” provision that would inhibited the ability of the retirement plan to incur further unfunded liabilities.
Under the earlier agreement between the city and retirement system, the city’s contributions to the system were scheduled at what was initially less than an actuarially determined rate.
The schedule provided for stepped-up payments until the city’s contributions reached the full actuarial rate. Under the trigger provision, however, the city would have been required to begin paying the full actuarial rate immediately if the funded ratio of the system dropped below 83.2 percent.
At the time of the agreement, the system was over 92 percent funded. But when the system’s earnings fell precipitously beginning in 2001, the city was faced with the possibility of having to make a balloon payment in excess of $25 million to reach the full actuarial rate, at a time that employees were seeking increases to bring their benefits in line with those of employees of other governments.
The city proposed to increase benefits, but to reduce the trigger to 75 percent. Saathoff, however, representing the city’s firefighters, proposed to keep the trigger where it was, but to phase in the triggered increase in contributions over a five-year period, a position which was ultimately agreed to by the city and the unions and approved by the board.
After Link bound the defendants over for trial, they moved to set aside the information under Penal Code Sec. 995. Judge Roger Krauel denied the motion, reasoning that even though the trigger was not changed, the defendants voted on the issue at a time when they knew the city’s position to be that it would not increase benefits if the trigger were not relaxed.
As the defendants would have been recipients of any such benefit increase, Krauel wrote, it was illegal for them to vote on the issue.
The defendants sought a writ of prohibition, which the Court of Appeal summarily denied a year ago. The California Supreme Court, however, stayed the trial and sent the case back for a decision on the merits.
Justice Gilbert Nares, writing Friday for the Court of Appeal, said there was enough evidence to meet the standard of probable cause, that “a reasonable person could harbor a strong suspicion” of the defendants’ guilt.
Nares rejected contentions by the defendants, and by the California State Association of Counties, the League of California Cities, and several public employee retirement plans, who filed amicus briefs supporting the defendants, that at least one of two exceptions to Sec. 1090 applied.
The justice agreed that pension benefits are “salary” within the meaning of Government Code Sec. 1091.5(a)(9)—which says that a public official’s receipt of a salary does not disqualify the official from voting on a contract “unless the contract directly involves the department of the government entity that employs the officer or employee”—but said that provision does not permit employee representatives on retirement boards to vote on their own benefits.
Since each representative must be employed by a particular department in order to receive the benefit, the jurist reasoned, a representative is voting on a contract that “directly involves” his or her department and is not exempted by Sec. 1091.5(a)(9).
Nor, the justice wrote, can the defendants take succor in Sec. 1091.5(a)(3), which allows officials to vote on proposals to provide public services that will be generally available to the citizenry, even if those officials are among the beneficiaries.
Pension benefits for city employees are not “public services” within the meaning of the statute, Nares said.
The case is Lexin v. Superior Court (People), 07 S.O.S. 56400.
Copyright 2007, Metropolitan News Company