Posted on 10/22/2005 10:54:20 PM PDT by NormsRevenge
Trustees of San Diego's embattled retirement system yesterday urged consultants they hired two months ago to get their report out first on how the pension fund came to be saddled with a deficit of at least $1.4 billion.
Navigant Consulting, a Chicago-based company that advises public agencies, is at least the fifth firm examining decisions made in 2002 to underfund the system while also increasing employee benefits.
The teams of consultants appear to be competing in a race to see "who will be last" to finish their work, said pension board President Peter Preovolos. He added that one of the city's outside experts told him their tasks will not be completed by year's end, as the City Council had hoped.
The pension system's special fiduciary counsel, C. Frederick Reish, said the auditors, accountants and lawyers looking into the pension issues seem to be trying to delay release of their reports so each can review or critique the others' work. Navigant is trying to finish by January, Reish said.
The overdue audit of San Diego's 2003 financial statements cannot be issued until its consultant, Kroll Inc., offers its opinion on the crisis. Without the audit, the cash-strapped city, crippled by falling credit ratings, can't resume borrowing in the municipal market.
The discussion of Navigant's role during a morning meeting of the retirement fund's board revealed further fissures in the uneasy relationship between the city and its pension system.
"I believe we're going to be attacked by Kroll regardless of what we do, but that's because they have a different agenda than we do," said William Sheffler, another board member.
Kroll is leading the city's independent probe into the pension problems, which have drawn the attention of federal and local investigators. They are looking into possible bond disclosure violations and allegations of corruption.
The Kroll group assigned to the case, led by a former chairman of the Securities and Exchange Commission, was to appear before the City Council on Monday, but the firm requested a postponement to solve technical glitches related to a review of city e-mails.
Kroll also had been scheduled to request $3 million more in payments for its staff and the attorneys guiding them.
The additional money would have brought the total city funds requested for Kroll to $9.2 million, making it the highest paid of the consultants working on the pension issues.
Initially, Kroll worked along with Vinson & Elkins, a Houston law firm hired in 2004 to represent San Diego before the SEC and prepare reports addressing the city's dealings with the pension fund.
Vinson & Elkins, dogged by criticism that its role as the city's legal adviser made it impossible for its two reports to be unbiased, ended its contract with San Diego last month, after billing the city $6.3 million.
The city and the pension board, as a standard practice, also retain outside auditing firms to examine their financial statements. That work has been delayed as the criminal and regulatory investigations continue.
KPMG is preparing San Diego's 2003 audit; Brown Armstrong Accountancy Corp. is the pension system's auditor.
Troy Dahlberg, a forensic accountant from Kroll, said the e-mail problem could be figured out in one week.
Kroll told the council last month that to finish its job by December – making the KPMG audit possible by January – the other consultants had to make their deadlines.
He acknowledged yesterday, however, that a delay to next year is not out of the question.
"It appears that it's possible based on data glitches, we may not be able to have our work completed by the end of the year," he said.
He denied, however, that Kroll will not announce findings until the other investigators complete their work.
"We are going to do our report in a thorough and complete manner and do everything we can to get it done," he said.
City Attorney Michael Aguirre, a critic of the pension board and City Council, said the competing interests have led to "a chaotic investigation."
Kroll has "misled the city worse than we've misled our bond investors," Aguirre said. "We've got to come up with another plan."
Reish, the pension system's fiduciary counsel, said Navigant plans to issue only a final report, without preliminary drafts that the board and staff could help shape.
Navigant also will communicate with pension officials only through Reish to promote as much of an appearance of independence as possible. Reish's Los Angeles firm handled the contract with Navigant to add another layer of separation.
Navigant, which has assigned 15 people to the project full time, will conduct up to 100 interviews, Reish told the board. The team already has talked to Lawrence Grissom, the pension administrator, and Lori Chapin, the system's in-house counsel.
The firm has sought interviews with City Council members and the six former pension board members facing conflict-of-interest charges connected to the 2002 underfunding vote. Two of the former board members refused to cooperate, on the advice of their attorneys. Reish declined to name them.
Navigant is charging the system between $225 and $675 an hour for the inquiry.
The pension system also hired a new actuary yesterday, Cheiron Inc. of McLean, Va.
Actuaries examine a complex slate of variables, from demographic projections to investment returns, to determine how much money a fund needs to pay an employer's benefits.
Gabriel, Roeder, Smith & Co., the system's longtime actuary, has been accused of giving the fund faulty advice, allegations the firm has denied.
The parasites that comprise public employees just don't seem to realize that they can't suck too much blood out of the host or they both die. Good job, auto workers and other unions.
We're some $two-billion-plus in the hole as it is, why would we want to borrow more money? Even better, who on Earth would be stupid enough to loan money to San Diego now well before the Feds are done investigating, before we have a new mayor, before we see if the rest of the City Council is indicted?
The accountants are picking the corpse clean...
And this is a bad thing because?
Good thought. Allow me to transfer it for your continuing edificaton:
We're some $twenty-two-billion-plus in the hole as it is, why would we want to borrow more money? Even better, who on Earth would be stupid enough to loan money to San Diego California now...
CA: 'Borrow and spend' state's answer to budget (earns them lowest bond rating in U.S.)
San Francisco Chronicle ^ | October 23, 2005 | Tom Abate
Posted on 10/23/2005 8:11:31 PM PDT by calcowgirl
(snip)
• "Five years ago, California had about $26 billion of tax-supported debt," ... "Today, it's about $54 billion."
• As Standard & Poor's noted in January, "through 2005, nearly $30 billion of debt will have been issued to help cover state operating expenditures."
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