Posted on 10/08/2005 10:41:47 AM PDT by NormsRevenge
A private attorney for the city of San Diego's pension fund was shocked when he found out about a plan to boost retirement benefits for a labor union president, and he said that alone could squelch the 2002 deal with the city to continue underfunding the pension system.
An in-house lawyer for the retirement system recounted the San Francisco attorney's reaction to the special perk for the union official in an e-mail two years ago.
"This, obviously, is huge," Sheila Leone, the in-house lawyer, wrote of the attorney's reaction on March 24, 2003.
Leone said the attorney, Robert Blum, told her he had never been informed of the union president's benefit, though Blum had advised the system throughout 2002.
Blum also told her he believed its existence "could invalidate the entire" agreement, she wrote.
Leone's e-mail is one of 60,000 documents released this week following public records requests filed by The San Diego Union-Tribune and other media outlets.
The materials were released by the pension board last month to satisfy subpoenas served by federal investigators investigating the city's pension decisions and financial practices.
A group of city consultants conducting an independent inquiry for the City Council and City Manager Lamont Ewell also received the records.
Leone's e-mail recounts a meeting with Blum and his colleague Constance M. Hiatt, and contains a number of accusations against pension administrator Lawrence Grissom and former pension board member Ron Saathoff.
Grissom, who did not return multiple phone calls Thursday and yesterday regarding Leone's account of his remarks, has said he will retire in December. He has been with the pension system since 1987.
Calls to Saathoff, his attorney, Jerry Coughlan; the pension system's general counsel, Loraine Chapin – a recipient of the March 24 e-mail – and other pension officials also were not returned.
The benefit allowed Fire Capt. Saathoff, president of San Diego City Fire Fighters Local 145, to begin counting pay for union work as part of his city salary, which, upon retirement, would boost the value of his pension checks by $2,530 a month.
The presidents of the Municipal Employees Association and the San Diego Police Officers Association had been given the benefit several years earlier, according to Judie Italiano, head of the MEA.
The new benefit for Saathoff was contained in a plan known as Manager's Proposal II. The pension board ratified it in November 2002 after being told by city officials that pension increases agreed to in that year's labor negotiations could only be granted if the system allowed the underfunding to continue.
Plan OK'd days later The City Council approved the plan days later, which allowed the city to continue the 6-year-old practice of failing annually to fully fund the system. It now has a deficit of at least $1.4 billion, despite the recent stock market rebound and two years of double-digit investment returns.
The pension system, following in the footsteps of a private attorney representing retirees, filed a malpractice suit against Blum and Hiatt, of the firm Hanson, Bridgett, Marcus, Vlahos & Rudy.
The suit was settled this year for nearly $15 million, which was covered by the attorneys' insurance.
Leone wrote in her e-mail that Blum and Hiatt were told by Grissom that the system's litigation counsel, Seltzer Caplan McMahon Vitek, planned to sue them for malpractice. Leone said she suspected Blum and Hiatt were going to be "much more careful because of it."
"I am simply at my wits end," Leone wrote. "How many ways can I say 'don't discuss this with anyone?' . . . It's a real betrayal of the system."
Leone concluded that the pension officials "are miserable clients."
"We are not only ignoring advice, we have taken active steps to damage our client's position," she wrote.
Leone said Blum also told her that Grissom instructed him to "kill the manager's proposal" in June 2002.
Five months later, things changed.
"For whatever reason, Larry changed his mind," Leone wrote. "Then, according to Blum, there was enormous pressure to 'make it happen.' . . . Blum's opinion changed because it's what Larry wanted – not by the way a solid legal defense."
Gary Lincenberg, a Los Angeles attorney who represents Blum and Hiatt, declined to comment on specifics of the e-mail or to confirm whether the statements attributed to his clients were correct.
Attorney Michael Conger sued Blum and Hiatt and, in another suit, forced a settlement last year to end San Diego's underfunding of the pension system.
Conger said Blum's evaluation of the city's plan in November 2002 omitted nearly 50 objections presented to the board that June.
In e-mail The actions recounted in the e-mail, from Grissom's alleged influence over Blum to staffers defying legal advice, are damning, Conger said. "This is the smoking gun," he said of the Leone e-mail. "It shows there really is a deep conspiracy within CERS to cheat the system for personal gain."
Lincenberg said Blum's evaluation of the underfunding changed only because his questions had been answered by city and pension officials.
The "legal and fiduciary concerns were sufficiently addressed," Lincenberg said.
Italiano of the Municipal Employees Association said she is certain all the benefits granted in 2002 are legal, despite concerns expressed by Blum and the pension system's other outside counsel. She said she has received the presidential benefit since 1997.
"We are going to fight like hell to make sure the benefits are paid because promises were made that they were going to be paid," Italiano said.
City Attorney Michael Aguirre said yesterday the "enormous pressure" cited in the Leone e-mail, along with other documents, indicates that some City Council members conspired with the retirement board to approve benefits that he maintains were illegal.
Aguirre also pointed to one of a number of potential long-term pension funding schedules contained within the records and said it shows the system could have a $5.5 billion deficit in 16 years, even with the city paying in $605 million a year.
This year's general fund totals about $850 million.
Aguirre said he has staff members combing through the trove of documents and hopes to release a legal analysis by Nov. 18.
He said he will decide then whether to sue council members. He said he would not file suit if it interferes with the ongoing investigations by local and federal agencies.
'Playing both sides' Among the statements in Leone's e-mail is that one of the system's litigation attorneys, Reginald Vitek, accused Grissom of "playing both sides of the fence" and that Vitek feared the administrator was not informing him of other special deals that were in place. Leone wrote that Vitek said Grissom claimed " . . . 'there's a lot more side deals' than that concocted by Ron."
The presidential benefit clause said to have shocked Blum was also connected to "Ron." All are apparent references to Saathoff.
Saathoff faces conflict-of-interest charges that were filed this year by District Attorney Bonnie Dumanis in connection with his 2002 decision to approve the underfunding deal. Five other current and former board members were also charged.
Many of the documents turned over to the city and investigators portray two years of correspondence and reports that examine staffers' and lawyers' growing concerns over the financial, legal – and perhaps, criminal – consequences of the vote.
Leone sent her March 24 e-mail nearly three weeks after Seltzer Caplan attorneys issued an opinion concluding that pension board members had "breached their fiduciary duty" in submitting to the city's plan.
The attorneys also suggested that top pension employees such as Grissom advise the board to "nullify this agreement." Grissom, in an interview earlier this week, said he had "no recollection" of that recommendation being made to the board.
In another e-mail, by Grissom to a Seltzer Caplan attorney, the administrator appears to change his mind regarding the propriety of the city's proposal.
In the Sept. 12, 2003, missive, Grissom writes that "bad things began to happen . . . greed happened" in the city's plan for the pension, and that "there was very little justification" for approving it.
http://www.signonsandiego.com/news/metro/pension/images/051006leoneemail.pdf
PDF is not coming up for me for some reason.
PDF does come up, it is kind of fuzzy ,,
watch out for a adobe acrobat reader update dialog box below the other screens if it hangs.
Not sure. Our state gubamint is not the only entity in this state in need of reform and more open gubamint process.
And take it from me, it takes a lot to "shock" an attorney.
75,000 volts would do the job...
All of them. They are the Democrat parasite nests represented by the blue dots on the famous county-by-county, blue/red post-election map.
If there was enough current...
San Diegans must defeat Frye and her plan to appease unions by bailing out pension fund fiasco with new tax money.
Agree. ...Why should the poor(er) San Diegans, fund Public (upper-tier) Unionist/Pension Lawyer malfeasance?
It's never discussion in those terms because the reporters are bias for the unions. Also, they see the multiple city council votes, contract negotiations and voter's reelecting the council time-and-again as justification for the outrageous pension benefits.
I have read, I think, that Houston, Texas is in the same boat and my well be ready to walk the plank.
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