Posted on 02/01/2006 6:28:09 PM PST by NormsRevenge
SAN DIEGO – Three former pension trustees, an ex-pension administrator and the system's attorney pleaded innocent Wednesday to federal charges that they concealed details on the pension fund from other trustees.
Indictments were returned Jan. 6 against Ronald Saathoff, president of the San Diego City Firefighters union; Cathy Lexin, the city's former director of human resources; Terri Webster, the city's former acting auditor; former pension administrator Lawrence Grissom; and current pension general counsel Loraine Chapin.
Each faces one count of conspiracy to commit mail and wire fraud, four counts of wire fraud and 15 counts of mail fraud.
Some of the counts carry a maximum sentence of 20 years in prison, while others carry a five-year term, prosecutors said.
The defendants are accused of deceiving fellow trustees by concealing material information on the pension fund, including that Saathoff was due an additional $25,000 in his retirement package if the so-called "Manager's Proposal 2" was approved.
To encourage Saathoff to support that proposal, Lexin, Webster, Grissom and Chapin helped design and implement the "presidential leave retirement benefit," which would increase Saathoff's benefits, the indictment alleges.
According to court documents, the defendants never revealed to all of the retirement board trustees that Saathoff would receive the presidential leave benefit in exchange for his support of "MP2."
The defendants also concealed considerable other material information from the retirement system board trustees, including crucial data about the system's financial status, the indictment alleges.
Federal prosecutors allege that all five defendants enjoyed enhanced retirement benefits because of their involvement with "MP2."
By concealing information from fellow pension board members, the defendants deprived San Diegans of their right to honest services, according to the indictment.
Attorneys for all of the defendants told U.S. Magistrate Judge Leo Papas that they would post $25,000 personal appearance bonds within a week to ensure their clients' future court appearances.
A motions and trial-setting hearing was scheduled March 20 before U.S. District Judge Roger Benitez.
Lexin and Webster told Papas they wanted the court to appoint attorneys for them. The judge scheduled a March 2 hearing on that issue.
Papas encouraged the two defendants to submit detailed documents on their finances before ruling on whether they are entitled to permanent court- appointed counsel.
In addition to the federal charges, Lexin faces two civil lawsuits filed by City Attorney Michael Aguirre and a state conflict-of-interest charge, and is under investigation by the Securities and Exchange Commission, said her attorney, Nicola Hanna.
The financial ability to defend oneself against such charges is beyond the ability of any former city employee, Hanna told the judge.
The attorney said the conflict-of-interest trial in state court could take several months.
Webster's attorney, Frank Vecchione, said the estimated expense of his client's legal fees was "immense."
Webster, Lexin and Saathoff are charged in the state conflict-of-interest case with former pension board members Sharon Wilkinson, Mary Vattimo and John Torres.
Arraignment on that case was delayed Wednesday until Feb. 16 to give attorneys time to plan their next legal moves.
Torres' attorney, Robert Rose, unsuccessfully urged Superior Court Judge Frederic Link to let him off the case. The lawyer said Torres hasn't paid him and has racked up at least $250,000 in legal expenses.
In the state case, the former trustees are each charged with one felony conflict-of-interest count for voting for "MP2," allegedly with the knowledge that the city intended to grant them increased benefits in return.
All six face a maximum of three years in state prison if convicted, according to prosecutors.
During a four-week preliminary hearing, former San Diego City Manager Lamont Ewell testified that the enhanced benefits were always contingent on a new agreement with rate relief.
Link ruled on Jan. 13 that there was probable cause to believe a crime was committed and ordered the defendants to stand trial. No date has been set.
The judge said then that the law under which the defendants are charged prohibits public officials from participating in a contract in which they have a financial interest. The statute was intended to eliminate temptation and any appearance of impropriety, he said.
The defendants knew the city of San Diego wanted rate relief for its contributions to the pension fund and knew it was contingent on increased benefits for trustees, Link said last month.
He said there were numerous defenses that could be raised at trial, such as mistake of fact and mistake of law, including poor legal advice the defendants were given in negotiating "MP2".
The pension board in 1996 voted to underfund the pension system and receive benefits in much the same way as six years later, the judge said.
In closing arguments at the preliminary hearing, Saathoff's attorney, Jerry Coughlan, said the defendants voted for "MP2" because it was a better agreement than the existing 1996 agreement with the city.
Lexin's attorney argued that it made "no sense" that the defendants would attempt to undermine the pension system for the "sake of a few bucks." Hanna said Lexin and others were told the 2002 pension agreement was a good deal.
Analysts have estimated the city's pension deficit at more than $1.4 billion. Mayor Jerry Sanders said in his Jan. 12 "State of the City" address that the deficit could be closer to $2 billion.
Now that's gall! Leave my bloated pension alone, the taxpayers can pay instead.
It's a prime example of folks from different city departments working together. ;-)
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