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Federal Jury Indicts Five Pension Fund Officials

A federal grand jury Friday indicted five San Diego pension fund officials on 20 counts of fraud and conspiracy to commit fraud. The allegations come after a two year FBI probe into city finances. KPBS Legal Reporter Amita Sharma has the story:

The five current or former officials are Ron Saathoff the powerful head of the city firefighters union. He sat on the pension board and proved to be a lynch-pin in the alleged conspiracy. Then there are former city employees Cathy Lexin and Terri Webster who also sat on the pension board. Larry Grissom was the city official who administered the fund. And Lori Chapin is a an attorney for the pension system. All five are accused of abusing their public positions by plotting to increase pension benefits including their own while deliberately engineering a deal in 2002 whereby the city underpaid the pension system.

Assistant U.S. Attorney Shane Herrigan.
Harrigan: "As charged in the indictment, the defendants breached that fiduciary duty to the retirement system and deprived the citizens of San Diego of the right to their honest services. These defendants engaged in this criminal conduct for their personal, professional and financial gain."

Herrigan said that scheme put San Diego city retirees and residents at risk.

Herrigan: "Permitting the city of San Diego to avoid making the full contributions to the retirement system, that resulted in the serious underfunding of the retirement system, jeopardizing both the pension system and the financial stability of the city."

What's more, the agreement to dodge the full contributions was part of a quid pro quo and not everyone on the pension board knew of the deal, according to Herrigan.

The indictment alleges that to persuade the retirement board to allow the city of San Diego to allow a multi-million dollar balloon payment to the retirement system, the defendants fraudulently concealed material information from their fellow board members including a substantial personal benefit for the defendant Saathoof.

That benefit included a 25,000 annual boost to Saathoff's retirement benefits and an increase of thousands of dollars in benefits for the other four defendants.

Meanwhile, Mayor Jerry Sanders reacted to the indictments with sober disgust.

Sanders: "I think I speak for all citizens of San Diego when I say that I'm sick and tired of individuals appointed to serve the public trust, taking advantage of that trust. In this city that's happened for way too long and our citizens are paying too steep a price."

There is no date yet on when the five defendants will be arraigned in federal court. The term of the grand jury in the case expires this month. Federal prosecutors refused to say whether the investigation into the city's finances will continue or whether the probe revealed evidence that San Diego city councilmembers were aware of the scheme alleged in the indictment. But sources say that a second grand jury is likely to be empaneled to continue probing city hall. And that these indictments are likely only part of the first round.

Amita Sharma, KPBS News.








Manager's proposal two.
It continued a dangerous practice

Assistant U-S Attorney said the defendants had an obligation to conduct the business of the retirement board in a fair and honest manner.


Indict-1 As charged in the indictment, the defendants breached that fiduciary duty to the retirement system and deprived the citizens of San Diego of the right to their honest services. These defendants engaged in this criminal conduct for their personal, professional and financial gain,


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