US - San Diego City Attorney Michael Aguirre (pictured) has accused the mayor and most members of the city council of securities law violations for failing to disclose pension deficits on bond documents.
Aguirre accused Mayor Dick Murphy and the City Council of “authori[sing] bond offering documents and related disclosure offering documents, for the bond offerings...while they recklessly disregarded facts indicating a risk that the disclosures might be misleading.”
These accusations appear in a second interim report released by the City Attorney’s Office recently.
At issue is the US$1.4bn deficit in the $3.6bn San Diego City Employees' Retirement System. The fault is largely attributed to underfunding and unfunded benefit increases. This information has an impact on the value of bonds issued by the City of San Diego.
The Securities and Exchange Commission, the US Justice Department and the Federal Bureau of Investigations are currently investigating the City for securities law violations.
Mayor Dick Murphy strenuously denied Aguirre’s conclusions and accused the City Attorney’s Office of conflicts of interest in conducting the investigation.
“Mr. Aguirre’s allegations are untrue, irresponsible and defamatory,” he said in a statement. “Mr. Aguirre is not the SEC. This is only Mr. Aguirre’s opinion. The City Attorney’s Office has no jurisdiction to investigate federal securities law violations. That province is left exclusively to the SEC. The City Council and I properly relied on the advice of the securities law experts who were hired by the City Attorney’s Office. The experts and the City Attorney’s Office advised us that everything that needed to bedisclosed was disclosed.”
The City Attorney also said that city officials in 2001 reported that the pension plan’s funding ratio was 97%, when in fact it was 89.9%, and that the city did not disclose that the funding deficit would possibly trigger a $159m “balloon payment” to the fund to fill the deficit.
Aguirre’s report exculpates Council Members Tony Young, elected 4 Jan 2005, and Michael Zucchet, elected in 2002 and not a council member during the time when relevant decisions were made.
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