San Diego City Attorney Releases Proposed SEC Consent Decree

SAN DIEGO - San Diego City Attorney Michael Aguirre revealed to the public on Tuesday his proposed consent decree, which he submitted on September 9th to the federal Securities and Exchange Commission (SEC).

Aguirre made the proposal to bring to a close the SEC’s 19-month civil investigation into the city’s securities disclosure practices, and to minimize the penalties the city might face in future litigation. The SEC is one of the five federal and local agencies investigating the City of San Diego concerning its financial practices.

The 49-page document, which acknowledges that the city violated anti-fraud provisions of securities laws, was released after Aguirre requested that the City Council move discussion on the matter from closed session to open session.

“I am releasing this document because I want the public to be informed about the reasons that I am advocating this type of settlement with the SEC,” said Aguirre. “In the settlement agreement, the city admits its errors and omissions in the offer and sale of certain city bonds. This type of consent decree is standard procedure and will help bring to a close the SEC’s investigation of the city.”

Deputy Mayor Toni Atkins agreed to re-schedule discussion of the proposed decree for an open City Council meeting, but warned that public discussion of this sensitive issue might have to be curtailed to protect the public’s interests.

“The intention was to hold it in the appropriate session,” said Atkins. “There will not be a lot we can discuss in open session.”

The City Attorney originally presented the council with the draft decree on September 2, 2005. If the SEC accepts Aguirre’s proposal, the City Council must still approve the settlement. The draft decree points out remedial steps that the city has already taken and calls for additional reforms to be supervised by the SEC.

So far, the City Council has shown little support for Aguirre’s proposed decree. “It’s his document,” said Councilman Jim Madaffer. “I had nothing to do with it.”

Under the terms of Aguirre’s proposal, city officials would be on their own to deal with their individual problems with the SEC. “The agreement separates from the city the issue of any alleged wrong-doing by individual city officials, allowing them, in consultation with their personal defense attorneys, to resolve any individual issues directly with the SEC,” said Aguirre. “We want to make peace with the SEC.”

Aguirre has stated publicly that the city should not have to suffer severe penalties because its officials have cooperated with authorities, and that the city has endured budget hardships waiting for its recent annual financial statements to be audited. He also noted that many of the officials who were in office as the $1.4 billion pension deficit developed have since left, including former Mayor Dick Murphy and former City Manager Michael Uberuaga, among others.

The City Attorney first proposed the SEC settlement agreement on August 16, 2005 when he announced his 15-point plan to resolve the city’s legal, accounting, and financial crises. Until recently, however, the legal plan hadn’t been docketed for public discussion by the City Council.