Wednesday, November 4, 2009
A legal scandal that rocked the city of San Diego for years has finally made it to California’s highest court.
The California Supreme Court today considers whether six former San Diego city pension board members should stand trial for conflict of interest. Public employee pension boards throughout the country are watching the case carefully, as it could affect the makeup of pension boards nationwide.
The issue is whether the six San Diego pension board members voted to allow the city to underfund its pension plan in return for higher pension payouts. Defense attorneys argue it was not a "quid pro quo," and the defendants are not guilty of conflict of interest.
The votes resulted in a billion dollar pension deficit that the city then hid from investors.
Harvey Leiderman is a pension attorney who filed an amicus brief with the California Supreme Court. He does not want what happened in San Diego to result in changes that would prevent anyone with a financial interest from sitting on public pension boards. He says it’s interesting no similar cases have been filed since the San Diego case in 2007.
“What that tells me is that this is, in fact, what the district attorney in San Diego characterizes as a highly unique and extreme set of circumstances that does not replicate itself in other situations,” says Leiderman.
He says the state constitution requires that half of the members of public employee retirement boards are people with a financial interest in the decisions they make. State law currently exempts people who vote on salaries from the conflict of interest laws.
“We hope that the Supreme Court will harmonize those provisions, and demonstrate that the kind of behavior that is alleged by the district attorney in this case is not generalized to the proceedings of these boards,” says Leiderman.
The California Supreme Court has 90 days to decide whether the San Diego defendants must face trial.