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Monday, Apr 15, 2024

Aguirre Alleges Securities Laws Violated

In his second interim report on city finances, delivered after-hours on Feb. 9, City Attorney Michael Aguirre turned up the heat further by accusing Mayor Dick Murphy and the City Council of civil violations of federal securities laws, and hiding significant facts about the city’s anemic pension system from the public and investors.

In a 91-page report, the newly elected Aguirre said that the mayor and council failed to report the sorry state of the pension system, which now has a deficit of $1.4 billion, and an additional $1 billion in unfunded retiree health-care costs.

He said he found “substantial evidence” that “the mayor and City Council authorized bond offering documents and related disclosure offering documents while they recklessly disregarded facts indicating a risk that the disclosures might be misleading.”

While he let 4th District Councilman Tony Young and 2nd District Councilman Michael Zucchet off the hook, because neither was in office at the time of the alleged violations, Aguirre was especially critical of both Murphy and 1st District Councilman Scott Peters, who, he said, “have the most relevant training for understanding the underlying complex facts and circumstances” of the city’s finances.

But Aguirre did concede that the evidence in his report was made available “only because the mayor and City Council made the honorable decision to waive the confidentiality privileges held by the city.”

“They did this knowing that it would put them at risk,” Aguirre added.

Murphy called the allegations “untrue, irresponsible and defamatory.”

“Mr. Aguirre is not the SEC (Securities and Exchange Commission),” he said in a prepared statement. “This is only Mr. Aguirre’s opinion. The City Attorney’s office has no jurisdiction to investigate federal securities law violations.”

Murphy said that he is “fully cooperating” in the ongoing investigations by the SEC and the U.S. attorney’s offices, which have been looking into city finances.

The mayor said that he had relied on advice of securities law experts hired by the city attorney’s office.

“The experts and the city attorney’s office advised us that everything that needed to be disclosed was disclosed,” said Murphy.

He added, “Why would anyone hold city office if they are liable for following the advice of the city attorney?”

Murphy further accused Aguirre of “serious conflicts of interest in conducting this self-styled investigation.”

“The city attorney’s office was an integral participant in the work on the bond issues themselves. So it cannot be in a position to investigate itself,” the mayor said.

He added that Aguirre’s office represented city officials and city offices in the SEC investigation, and that the “same office cannot now be investigating the same City Council members for the same thing.”

The mayor referred back to January 2004, when omissions in the bond documents were brought to the attention of the City Council.

“The city took immediate action,” Murphy said. “The city voluntarily corrected the previous disclosures to ensure their accuracy. This disclosure was prior to any investigation.”

In September, Murphy added, the City Council adopted new procedures recommended by Vinson & Elkins, which had issued a detailed analysis of the city’s disclosure practices that month.

“San Diego now has the toughest disclosure rules of any city in America,” said Murphy.

Peters, in a prepared statement, accused Aguirre of “political grandstanding,” conflicts of interest, and “lawyering by press conference.”

Aguirre, through his office, said only, “The report speaks for itself.”


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