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Saturday, May 18, 2024

SEC Levels Charges Against Five Former City Officials

The Securities and Exchange Commission filed securities fraud charges April 7 against five former San Diego city officials, including former City Manager Michael Uberuaga and former Auditor and Comptroller Edward Ryan, for their roles in filing inadequate financial disclosures in 2002 and 2003.

Revelations of the non-disclosures in bond documents spurred extensive investigations into the city’s finances, and resulted in an ongoing financial crisis that has decimated the city’s credit and prevented the city from issuing public bonds since 2004.

The SEC charged the former officials for failing to disclose to investors the full story involving a $1.4 billion deficit in the city’s employee pension fund, as well as a $1.1 billion deficit in its retiree health plan fund.

The complaint filed in federal district court in San Diego on April 7 names three other defendants: former Deputy City Manager for Finance Patricia Frazier; former Assistant Auditor and Comptroller Teresa Webster; and former City Treasurer Mary Vattimo.

Uberuaga served as the city manager from 1997 to 2004 under then-Mayors Susan Golding and Dick Murphy.

According to the complaint, the five former officials knew that the city had been intentionally under-funding its pension plan and that the under-funding would grow from $284 million in its 2002 fiscal year to an estimated $2 billion by 2009.

Rosiland Tyson, acting regional director for the SEC’s Los Angeles office, said in a press statement: “Despite knowing of the city’s substantial pension and retiree health care liabilities, these five former San Diego officials failed to disclose what they knew to municipal securities investors. Their actions not only jeopardized the investors, but also compromised the interests of the city’s citizens and its current and future retirees.”

The SEC previously entered into an order sanctioning the city for committing securities fraud by failing to disclose to the public important information about the pension and retiree health care obligations in the sale of bonds in both 2002 and 2003. The city agreed to cease and desist from future securities fraud violations and to retain an independent consultant for three years to oversee the disclosure activity.

The SEC also previously settled a civil injunctive action for fraud against the city’s former outside auditors, Thomas Saiz and Calderon, Jaham & Osborn.

, Mike Allen


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