At Friday's meeting of the beleaguered San Diego City Employees' Retirement System (SDCERS), pension trustee Mark Sullivan said he was "a little disappointed" that a new report probing the city's pension mess failed to look at "criminality issues."
That was before he had an opportunity to read the 300-plus-page report compiled by Navigant Consulting-a firm hired by the SDCERS board to investigate the circumstances that led to a deficit in the retirement fund estimated at between $1.4 and $2 billion. It contained the following:
"Retirement Administrator Larry Grissom had an obligation to determine the facts and circumstances of special benefits being given to board members and failed in his legal duty to fully disclose this information to the board."
The statement, written by John Adler, a lawyer who specializes in employment-law issues, refers to Grissom's obligation to inform all members of the SDCERS board about special presidential benefits offered to pension trustee Ron Saathoff in 2002.
For Sullivan, a San Diego Police sergeant, that statement provides an opinion as to whether someone broke the law that he was looking for. "This very statement alone is basically their opinion that he failed in his legal responsibility, which means that it could be civil, criminal or both," he told CityBeat. "This is exactly what I wanted."
The statement is also similar to language in a federal indictment of Grissom and four other SDCERS officials made public three weeks ago. According to the indictment, "Defendants Saathoff, Grissom, and [Loraine] Chapin, and others, fraudulently concealed from SDCERS Board Trustees material information concerning defendant Saathoff's purchase of service credits that enhanced defendant Saathoff's retirement benefits."
Interestingly, Adler says he never read the indictment and based his legal analysis on his knowledge of employment law and materials provided to him by Navigant's investigators. That's evidence for Sullivan that the Navigant report was not a whitewash, as some pension-board critics, including City Attorney Mike Aguirre and pension whistleblower Dianne Shipione, have suggested, but "means they came to the same conclusion as the feds and lends credibility to the report."
But here's where things get sticky: Unlike the U.S. Attorney's indictment, Adler says his opinion isn't an allegation of criminality but rather an opinion as to whether or not Grissom had "an obligation under state employment laws to inform the SDCERS board, or some other person or entity, about the substantial pension benefit increase" for Saathoff.
"Nobody asked me to render an opinion as far as whether there were any criminal laws broken or whether there was any violation of law that would fall into an indictable offense," Adler says.
So if Sullivan didn't get what he wanted, then what exactly did he get?
Aguirre, who's long angled to assume the legal reins at SDCERS, says he reads Adler's statement as "alleging that his behavior fell below the legal standard" and believes it's part of a "desperate effort" by the pension board to hang Grissom out to dry while protecting Chapin, its indicted legal counsel, who he says was given a pass in the Navigant report.
"How in the world could you have the grand jury that not only says she was involved but involved in such a way that it actually violates federal law and have Navigant conclude that she wasn't involved at all?" he asked.
Pension board President Peter Preovolos, who as of Monday hadn't read all of the report but pointed to Adler's opinion as evidence that the report was "sober," declined to say whether that opinion meant that Grissom had broken the law. Preovolos said he asked for Adler's opinion after rumors started floating that SDCERS employees might be indicted.
"I just didn't know what the role of the board was in regard to an employee who might be indicted," Preovolos said. "So what would be the prudent behavior of a board like SDCERS if it had an employee that was indicted? What could it do and what should it do?"
It turns out Sullivan wasn't the only one who didn't get what he wanted, as Adler never made any recommendations or gave any advice on those topics.Which leaves the question of whether or not Grissom violated the law when "he failed in his legal duty to fully disclose this information to the board," open to interpretation of a jury of his peers.