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Thursday, Sep 28, 2023

SEC Reaches Settlement With Former City Auditor

The accounting firm and principal owner that prepared the audits for the city of San Diego in 2002 and 2003 settled civil fraud allegations by the federal Securities and Exchange Commission on Dec. 10, the agency said.

The SEC complaint filed against the accounting firm of Calderon, Jaham and Osborn and its principal, Thomas Saiz, alleged that the parties failed to comply with generally accepted accounting principles and failed to obtain sufficient information in preparing false and misleading financial reports for five different bond offerings by the city from 2002 to 2003.

Without admitting or denying the SEC allegations that were filed in U.S. District Court in San Diego, the parties agreed to the entry of final judgments enjoining them from violating anti-fraud provisions of the federal securities laws. Additionally, Saiz, who is still practicing in San Diego, agreed to pay a civil penalty of $15,000.

R. James Schnieders, representing both the firm and Saiz, said the SEC complaint was resolved without proceeding to trial, and declined to comment beyond what was contained in the settlement.

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The SEC complaint alleged that disclosures made in footnotes in the city’s financial reports prepared by CJO were incomplete. The agency also alleged that while the financial reports disclosed that the city was under-funding its annual contribution to the employee pension fund known as the San Diego City Employees’ Retirement System, the disclosure contained misleading information.

According to the complaint, “Saiz and CJO knew or were reckless in not knowing that the disclosure was false and misleading as a result of information Saiz received from his audits of the city and its pension plan, and his review of the city’s bond offering documents.”

Since 2003, the city has been embroiled in a financial crisis stemming from the under-funding of the employee pension fund that led to a deficit of more than $1.4 billion as of 2004.

The SEC previously entered an order sanctioning the city for committing securities fraud in filing false and misleading financial reports in 2002 and 2003. To settle the action, the city agreed to cease and desist from future fraud violations and to retain an independent consultant for three years.

To resolve a host of federal and civil securities allegations from the SEC and the U.S. Department of Justice, the city has spent millions on consultants and attorneys in the past four years. In the meantime, the city has been unable to issue any new bonds to pay for a slew of planned capital projects, including the replacement of old water and sewage pipes, and the construction of new libraries and parks.

, Mike Allen


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