The Securities and Exchange Commission has filed securities fraud charges against five former San Diego officials who failed to adequately disclose problems with the city's municipal bonds in 2002 and 2003.
The SEC accused the former officials of not disclosing funding problems with San Diego's pension and retiree health care systems, violations that placed the city in financial jeopardy. The SEC filed its complaint in a San Diego federal district court against former city manager Michael Uberuaga, former city treasurer Mary Vattimo, former auditor and comptroller Edward Ryan, former deputy city manager of finance Patricia Frazier, and former assistant auditor and comptroller Teresa Webster.
According to the SEC's complaint, the five former officials knew the city had been intentionally under-funding its pension obligations to increase pension benefits but defer the costs. The unfunded liability was projected to increase from $284 million at the beginning of fiscal year 2002 to an estimated $2 billion by 2009. The liability for retiree health care was an estimated $1.1 billion.
The SEC previously entered an order sanctioning the city for committing securities fraud. The city agreed to cease and desist from future securities fraud violations and to retain an independent consultant for three years. The SEC also previously filed a settled civil injunctive action for fraud against the outside auditors for the city and its pension system, Thomas J. Saiz and accounting firm Calderon, Jaham & Osborn. Saiz and the firm consented to the entry of a final judgment permanently enjoining them from violating the antifraud provisions of federal securities laws. Saiz also paid a civil penalty of $15,000.
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