The San Diego City Employees' Retirement System's $1.4 billion unfunded liability is the result of "reckless and wrongful mismanagement involving any number of city and pension board officials," according to a report released today by an independent audit committee chaired by Arthur Levitt, former SEC chairman. The San Diego City Council commissioned the audit committee in early 2005. Other findings in the 266-page report include that the board breached its fiduciary duties by agreeing to allow the city to underfund the $4.1 billion pension system.
"The evidence suggests that San Diego city officials fell prey to the same type of corruption of financial management and reporting that has afflicted municipalities such as Orange County and such private sector companies as Enron, WorldCom and any number of other public corporations," Mr. Leavitt said in prepared remarks for today's city council session.
The report recommendations include: creating a permanent three-member audit committee; strengthening the role and accountability of the city's CFO; increasing the pension system independence, accountability and transparency; appointing a monitor to oversee implementation of recommendations; and reducing the size of the pension system board from 13 to nine, with five appointed by the mayor. Currently, the mayor has no appointees on the board.
The city council is considering the recommendations at today's meeting.
