Posted on 09/27/2005 5:23:47 PM PDT by NormsRevenge
SAN DIEGO – The City Council unanimously agreed Tuesday to begin the process of negotiating a possible settlement with the Securities and Exchange Commission over alleged violations of federal securities laws. The city is being investigated by the SEC and other agencies for errors and omissions discovered in its financial disclosures to potential investors related to the debt-ridden pension system and wastewater rates.
A settlement with the SEC would not protect individuals under investigation for alleged wrongdoing, but would shield the city from prosecution, city officials said.
City Attorney Michael Aguirre said the vote "reflects a real change on the council," and represented a "huge victory for the people of San Diego."
"Today marks a major turning point in this long, disastrous episode in San Diego history," Aguirre said after the vote.
Aguirre said if San Diego ultimately enters into some kind of settlement with the SEC, he doesn't expect the city to face fines.
The council was not prepared to immediately enter into a consent decree with the SEC, as was proposed by Aguirre last week.
A consent decree would acknowledge that San Diego violated certain securities law provisions, a move Aguirre has said would help the city avoid potential lawsuits and return to the bond market.
"I think it's important to continue to work with and cooperate fully with the SEC as we have been doing," Deputy Mayor Toni Atkins said. "Still, the SEC may believe this is premature until Kroll concludes their internal investigaion, or the review of that investigation.
"I do believe we should be ready to go," she said.
Kroll, which is acting as San Diego's audit committee, was retained to substantiate internal investigations into the city's finances.
The New York-based risk-management firm's work is needed before the outside accounting firm, KPMG, will agree to certify a long-delayed audit of San Diego's 2003 financial statements.
Without the audit, the city can't restore its diminished credit rating and return to the bond market to pay for overdue infrastructure projects.
John Hartigan, an attorney for Morgan, Lewis and Bockius, hired to represent the city before the SEC, said the "seminal" event to the SEC completing its investigation is the issuance of the audit committee's report.
Hartigan said the course San Diego is on "reflects a desire by the city to move quickly to right itself and get on with the business of the city, including seeking access to the public finance markets again.
"While they will be desirous, and hopefully responsive, to the need to expedite this matter, I think they will also have steps they need to complete before they are prepared to react to the circumstances," he said.
Hartigan said the city's remediation efforts and actions would likely reflect positively with the SEC.
"At this stage, from our perspective, we hope to initiate a dialogue with the SEC to determine what more can be done to cooperate with them to finalize their investigation," he said.
Councilwoman Donna Frye said the best thing the city could do right now is to come to some sort of agreement with the SEC.
"Anything our city can do to start wrapping up some of these investigations, or issues that are facing us, again the better," she said.
Agreements that led to increased retirement benefits that were not funded is also the subject of an investigation by the U.S. Attorney's Office. The city's pension fund now has a shortfall of at least $1.4 billion.
SanDiego just approved a huge payoff to the ACLU to go after the BSA - maybe thse lawyers will refund their fees? (Choak! GAG! Hurl!)
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.