Posted on 02/14/2005 9:07:16 PM PST by NormsRevenge
SAN DIEGO – The San Diego City Council unanimously agreed today to spend $250,000 to hire the former chief accountant for the Securities and Exchange Commission to help in federal investigations of the city's finances.
Lynn E. Turner, now a senior adviser with Kroll Zolfo Cooper, would be retained to review investigative reports by the law firm Vinson & Elkins and the City Attorney's Office, and make recommendations to the City Council.
The city's goal in hiring Turner is to secure an audit of San Diego's 2003 finances, which was held back by the outside accounting firm KPMG pending further investigations into municipal finances.
Turner will also be asked to provide the council with a review of the city's internal controls related to reporting and disclosure practices.
At a news conference prior the council meeting, Mayor Dick Murphy said securing the audit is "critical to the city's financial future," and hiring Turner would be the "final piece of the puzzle" in obtaining the review.
"I think today's action is a positive step to getting our long-awaited audit," Councilman Jim Madaffer said at the council meeting.
The SEC is investigating whether the city violated securities laws by not fully disclosing to investors the scope of a $1.37 billion deficit in the San Diego City Employees' Retirement System.
Underfunding of the pension system and financial irregularities in disclosure documents related to the issuance of municipal bonds has also led to inquires by the FBI and City Attorney's Office.
Vinson & Elkins was hired to look into reporting practices and to represent the city in the SEC investigation. The Houston-based law firm issued a 268-page report in September suggesting that incompetence, not criminality, was behind omissions in past city financial disclosures.
KPMG rejected the report, saying it did not go far enough to address potential unlawful activities by city employees, and refused to issue its audit of the city's 2003 financial statements.
A second Vinson & Elkins report is pending.
San Diego needs the audit to restore its suspended credit rating in order to float bonds to pay for delayed infrastructure projects.
Turner told the council KPMG is looking for someone "independent" to step in to help resolve their concerns.
"They are looking for someone independent of all the people drawn into the investigations and allegations," Turner told the panel. "That's the role we are going to play."
City Manager Lamont Ewell told the council he spoke with KPMG and they were "very pleased" with the recommendations to have Kroll, and specifically Turner, assist the city.
Joining Murphy at the morning news conference were Ewell and City Council members Madaffer, Michael Zucchet and Scott Peters.
Zucchet said "the lack of the city's fiscal 2003 audit is probably the most serious thing facing the city today."
"Without it we obviously do not have the ability to borrow money," he said. "We do not have the ability to communicate effectively to the public or the financial markets the precise financial condition of the city."
Zucchet said he and Madaffer spoke with KPMG executives last week about the status of the audit. He said they were assured that hiring Turner would help in obtaining the financial review.
"What was clearly given was bringing in Mr. Turner will resolve any unanswered questions," Madaffer said.
In addition to receiving the Vinson & Elkins reports, Turner will be asked to review investigative documents by City Attorney Michael Aguirre.
After taking office in December, Aguirre announced his own inquiry into city finances. He issued two subsequent reports.
The first alleges that a committee appointed by Mayor Dick Murphy to review San Diego's finances knowingly understated the condition of pension fund.
The second suggests Murphy and some members of the council committed violations of securities laws when they authorized bond offerings and related disclosure documents to investors they "knew to be false."
Aguirre has said he initiated the investigations to satisfy KPMG and to secure the release of the 2003 audits.
At an afternoon news conference, Aguirre said it was his idea to hire Turner and applauded the mayor and council for moving forward and opening the dialogue with his office.
"I believe they are beginning a dialogue with the City Attorney's Office that may bring about a resolution."
Zucchet mirrored Aguirre's optimism.
"It is difficult to not be optimistic that we are at least somewhere near resolution," he said.
Help me. When I see SEC, I think of SouthEasternConference. I wondered what football had to do with this.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.