If you try to nail Scott Peters down on the City Council's role in San Diego's pension-system crisis, you'd better be prepared, or he'll make you question your understanding of something you thought was common knowledge. Peters, the council president, is a lawyer by trade, and that's just the kind of thing lawyers do-especially lawyers taking advice from other lawyers.
In a phone interview last Thursday morning, Peters had me questioning whether or not the City Council had, several years ago, released documents related to the sale of bonds that contained misleading financial information. It's the most basic fact of the city's whole pension debacle. It's why the U.S. Attorney and the Securities and Exchange Commission are investigating City Hall. It's why the city can't borrow money. It's why the city paid $20 million for a report by an outfit called Kroll that was supposed to cost $250,000. It's why Mike Aguirre is a household name. And Peters had me doubting it ever happened. Like it was all some crazy dream.
Peters and I were engaged in some kind of Laurel-and-Hardy-esque comedy routine without either one of us knowing it, but, in the end, the miscommunication says something about how the council president's thinking these days. The operative word is "defensive."
The way I see it, San Diego's four highest-profile political leaders are Peters, Aguirre, Business Re-Engineer Jerry Sanders and Rebel Leader Donna Frye. Sanders, Aguirre and Frye are mad as hell at Kroll. They think the company has taken advantage of a city in peril for its own financial gain. But no more, they say. They, and others, want that goddamn $20 million report, and they want it now. And for $20 million, it had better cure the sick, feed the hungry, shelter the homeless and broker peace in the Middle East.
But Peters' hair isn't ablaze. His undies aren't in a bunch. Nothin' stuck in his craw. When Frye urged her colleagues to demand that the Kroll representatives appear before the City Council and explain why the report hasn't been delivered, Peters noted, amid his trademark calm, that the guys from Kroll have a standing invitation to come talk to the council whenever they have something to say. But he nevertheless agreed to summon the trio via official correspondence.
So I called Peters to find out why he wasn't riding shotgun on the "Get Kroll" bandwagon.
"In general, I'm not a yeller and a screamer," he began, sounding genuinely pleased to have been asked. "We've been stuck on this path for some time, and we've got to see it to its conclusion, and we're very near to the end.
"I will clear out as much time on any day that they want to be here, but I want them to come with their report. I don't want to have a meeting every week to yell about how we don't have the report-it just doesn't make any sense to me."
If you ask Aguirre, he'll tell you Peters isn't out for Kroll blood because he's conspiring with Kroll to delay the report's release.
"Absolutely not," Peters said. "No one wants this report released more than I do."
Noting that Aguirre has suggested the Kroll document would be a whitewash, Peters said, "I'm really concerned about unwisely undercutting the value of this report. We're spending $20 million on it; it's going to be very useful when it's done."
Peters said he's looking forward to seeing the recommendations within the report and learning what Kroll thinks about the remediation the city's already implemented. "I actually want to use the product that they give us to make some productive decisions about where San Diego government moves from here, so I don't think it's productive or beneficial to start discrediting the whole process at this point."
As often happens when you're talking to someone at City Hall, Peters honed in on Aguirre, saying it's really the city attorney's fault the city had to bring in Kroll in the first place. This is how Peters sees the story:
In 2004, shortly after the city admitted it had released bond documents containing erroneous information about the financial health of the pension system, the city hired the Vinson & Elkins law firm, which was already representing the city in talks with the SEC, to investigate events related to the pension system that led to the disclosure. The V&E report was completed in September, but a month later, KPMG, the company the city hired to audit its 2003 finances, informed the city that it wasn't satisfied with the investigation and said it couldn't finish its audit until it was. City officials and representatives from KPMG and Vinson & Elkins sat down and hammered out a work plan that would satisfy KPMG. In November 2004, Aguirre was elected, and by January, he was producing his own investigations, the second of which found evidence that city officials broke federal securities laws.
"And that," Peters said, "gave KPMG the excuse to say, "Whoa, whoa, whoa, hold on here. I'm not going to issue any audits with all this going on-someone's gotta tell me who's right. Is it Vinson & Elkins or is it Mike Aguirre? And that's how we got Kroll."
Peters argues that if Aguirre had been able to contain himself, Vinson & Elkins would have completed the second phase of its work, KPMG would maybe have been satisfied and finished its audit and the city would once again be able to borrow money at reasonable interest rates. But Kroll had to come in and reconcile the V&E and Aguirre reports. (He said former City Manager Lamont Ewell, who preceded Peters as Aguirre's favored target, brought in Kroll's Lynn Turner because he wouldn't take any "chaff" from Aguirre.)
Meanwhile, Aguirre continued to publicly make allegations, and the city and V&E parted ways with the second phase of its work incomplete, and Kroll became an investigator, not just a reconciler.
"There's one entity that's not cooperating and has never cooperated with Kroll," Peters charged. "Clearly, that did not make the process go any faster. If you asked Kroll who was the person who didn't turn over documents, it was Mike Aguirre. Even recently, Mike Aguirre said, "Kroll's report will be a whitewash because they don't have the documents that they need because I haven't turned them over.' This is the kind of stuff he gets away with."Aguirre says it's "untrue" that he's been uncooperative, and he said Peters took his comments out of context and twisted them around.
Peters said he thinks he knows why Aguirre is undercutting the report before he even sees it: because the city attorney knows the report won't conform to his own claims about who did what.
It's Kroll's version of who-did-what that everyone's waiting to see-who, if anyone, deliberately lied to bond investors about the health of the city pension system, and who, if anyone, participated in a deal that enhanced retirement benefits for municipal employees and worsened the overall condition of the pension fund.
And this is where Peters lawyers up and hunkers down.
I prefaced a question by mentioning the alleged pension deal-Peters quickly commented that he doesn't "buy it"-and the misleading bond disclosures. But I don't think I ever got around to the question because he felt the need to play Stan Laurel to my Oliver Hardy. (Or was it the other way around?)
Because I was simply bringing up what I called "faulty" disclosures, which, the way I had understood it, were, as a matter of routine procedure, authorized by the City Council as part of the bond-issuance process, I was taken aback when Peters stopped me cold and challenged me to tell him exactly what "faulty" disclosures the City Council had authorized.
We danced awkwardly around for a while, me stumbling and stammering and him suggesting that reporters generally don't dig deep enough. "What's frustrating about this is that, really, it's hard to get people to focus on the details of this, and it's easy to accuse people of wrongdoing. That takes one sentence. It takes paragraphs to explain how things are different," Peters said.
But it wasn't until I listened to the interview a second time that I realized we'd been having two different conversations at once. I was talking about simple facts I thought were indisputable; he was talking about culpability.
I talked to Peters again on Tuesday morning and offered my two-conversations theory. I asked him what was going through his mind during the first interview. "I thought you were accusing me of securities fraud," he said.
Peters acknowledged that his lawyer has him acting cautiously and that he's probably "hyper-sensitive" to questions that hint, even ever so slightly, that he might have misbehaved amid his responsibility to the public.
Indeed, at one point in the initial interview, Peters commented that it seemed as though I was trying to get him to admit to breaking the law.
Not exactly, but I did want to know if he was worried about what Kroll would say about him. "No," he said. "I don't know what it'll say about me, but I'm concerned about getting all the facts out about what happened, and if I bear some responsibility for it, so be it."
And after we'd danced the Bond Disclosure Ballet, I did ask him, partially out of frustration, "Did you, as a member of the City Council do anything wrong, either willfully or accidentally, back in 2002 and 2003?"
He paused briefly and answered, "Every day I do something wrong."
"What have you done wrong today," I asked.
He paused again. "Yesterday I was late for my breakfast with the mayor," he said. "I felt really bad about that."