SEC Files Civil Complaint in San Diego Pension Case
The Securities and Exchange Commission filed a civil complaint Monday against five former San Diego city officials, alleging they committed fraud by concealing a ballooning shortfall in the city pensi
The Securities and Exchange Commission filed a civil complaint Monday against five former San Diego city officials, alleging they committed fraud by concealing a ballooning shortfall in the city pension fund.
The complaint said the officials knew the city was underfunding its pension obligations and failed to disclose the extent of its problems to bond-rating agencies or to the investors who bought city bonds in 2002 and 2003.
The complaint mirrors allegations against the nation's eighth-largest city, which were settled in November 2006 after the scandal helped force the mayor's resignation.
The latest complaint filed in federal court in San Diego seeks unspecified civil fines against Michael Uberuaga, former city manager; Edward P. Ryan, former auditor; Patricia Frazier, former deputy city manager for finance, Teresa A. Webster, former assistant auditor and comptroller; and Mary E. Vattimo, former treasurer.
The complaint claimed the officials knew the city's unfunded pension liability - the gap between the value of its pension assets and its obligations to retirees - was expected to soar to about $2 billion in 2009 from $284 million in 2002. The officials failed to tell investors about its commitments in five bond sales, the complaint said.
An attorney for Webster, Frank Vecchione, denied that his client acted inappropriately or intentionally misled investors.
"The time has come to put the misperceptions and misrepresentations regarding Ms. Webster and these bonds to rest," he said. "We intend to do so."
Attorneys for Uberuaga, Ryan, Frazier and Vattimo did not immediately respond to phone messages.
Uberuaga resigned in April 2004, two months after the scandal erupted. The others resigned in 2004 and 2005.
The complaint is the latest turn in a fiscal meltdown that has severely hampered the city's ability to borrow money and ruined its image for managing its money well. The scandal led to Mayor Dick Murphy's resignation in July 2005.
San Diego's pension liabilities soared after the City Council decided in 1996 and again in 2002 to avoid payments to the pension fund and, at the same time, enhance retirement benefits.