Scott Peters was NEVER investigated by the Securities and Exchange Commission (“SEC”) and he did not use taxpayer funds to “defend” himself.  In 2004, the City of San Diego’s own City Attorney, Mike Aguirre, urged the SEC to find that the City of San Diego did not make full disclosures when offering five bonds/notes to the public in 2002 and 2003.  He refused to represent a number of senior city officials, including council members, in dealing with the issue.  The City Council, including Scott Peters, disagreed with Mr. Aguirre’s position, and believed that his representation was a clear requirement of the city charter.  Instead, he advised the city to hire private attorneys, and the City Council had no choice.

The Securities and Exchange Commission reviewed thousands of documents and interviewed dozens of witnesses. Each council member had to individually respond to numerous subpoenas for records and testimony in order to assist the SEC with its due diligence. As President of the City Council at the time, Scott took the lead in ensuring that the City was as responsive as possible to each and every request made of the City Council and City staff, thus his attorney fees were higher than the others.

The enforcement agencies, including the SEC, stated in writing that Scott was not a target or subject of any of their investigations.  Scott was never a defendant and was never a target of the SEC’s review, nor were any other members of the City Council.

The SEC did charge six city employees who were pension board members with civil violations of the securities laws.  Some of these cases were settled out of court.  After years of litigation against the remaining pension board members, the SEC acknowledged its lack of evidence and dismissed its case against the defendants in the case.

The District Attorney and U.S. Attorney also filed criminal charges against the same employees.  All of these cases were ultimately dismissed by the courts. The United States Supreme Court, the United States District Court, and the California Supreme Court all ruled that no criminal laws were violated by any member of the Pension Board.

On numerous occasions, the City Council requested that the City Attorney provide the representation needed torespond and provide the SEC with the information it needed; but he declined to do so and insisted they retain outside independent counsel at taxpayer expense.  Had the City Attorney performed these duties, outside legal fees would have been significantly less.

The City Council and senior staff worked hard to fix the problems that they and outside agencies had discovered.  At the end of their work, the SEC’s own outside monitor, Stanley Keller, said that San Diego’s financial reforms were a model for other governments to follow. 

Local attorney, Frank T. Vecchione, who worked for years on the litigation surrounding the San Diego pension system and is one of the most knowledgable experts on the issue, sent a striking letter recently the Brian Bilbray campaign. 

The letter, which you can read by following this link, is remarkable because Mr. Vecchione does not now and never did represent Scott Peters, nor is he affiliated with the campaign.  Yet Mr. Vecchione was so alarmed by recent efforts to slander Scott Peters and the rest of the San Diego City Council that he felt compelled to write.  

Here’s a sampling:

I recently received some materials and mailings disseminated by your campaign which are negative “hit” pieces directed at Scott Peters. I understand negative campaigning is part of politics. However, the allegations continued within the material which your campaign has directed at Scott Peters is so rife with misinformation and blatant falsehoods that I consider it appropriate to respond. I am not responding on behalf of Scott Peters, but out of deep concern that the false allegations that were used to ruin many good people’s lives, and were proven untrue, are now rearing their ugly head again in your campaign materials. 

…No court has ever found the action taken on MP2 to be illegal. In fact, courts have uniformly found the opposite - the action taken was legal. No member of the City Council, including Scott Peters, was ever charged criminally with regard to MP2 or the “underfunding”. Scott Peters was never the subject of an investigation regarding fraudulent activity or criminality. These allegations are false. 

…I thought you would appreciate an accurate recitation of the facts to assist you in understanding that you are relying on misinformation, which serves no one in the democratic process, and may reflect poorly on your campaign. 

Read the full letter from Mr. Vecchione. 

The issue of unfunded city pensions is not singular to San Diego. Cities across the country have had to grapple with the issue in recent years as investment funds suffered losses and revenues fell as a result of the recession. In 2002, the vote known as MP2 that Scott Peters took part in resulted in about 3% of San Diego’s underfunded liability.

Scott was not part of the City Council that started the pension underfunding, which began in the 1980s. But he was on the City Council that ended it. In fact, Scott Peters is the only candidate who has actually enacted pension reforms.  As a result of these reforms and budget discipline over the past 10 years, the most recent actuarial report on the pension system projects the deficit to reach zero in approximately 10 years.

Scott does not claim that he was able to completely fix all the problems — they were 30 years in the making. But he did take significant steps to right the ship and set the city on the course that prompted the SEC’s monitor, Stanley Keller, to call San Diego a model for financial reforms for other cities to follow.

The text below, “Pension Overview,” was written by Vladmir Kogan, a Ph.D. candidate at the Dept of Political Science at UC San Diego. He was a co-author of the book: Paradise Plundered: Fiscal Crisis and Governance Failures in San Diego. 2011. 

It presents a fair and objective summary of San Diego’s pension underfunding history from an academic — not political — perspective.

He also explains that the vote, known as “MP2,” that Scott Peters took resulted in only about 3% of San Diego’s underfunded liability.

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1. Banned pension underfunding and since 2004, every year has paid the full bill.
2. Ended some of the most unpopular benefit programs for new employees in 2005, like DROP and the 13th check.
3. Required our employees to pay a higher share of the cost of their benefits, saving the city money and lowering the pension deficit.
4. Hired the first Independent Budget Analyst, so that the City Council would have its own check on management, with its own information and professional analysis.
5. Created an independent audit function so that the auditor that audits management is not reporting to management.
6. And Scott Peters negotiated, with labor and the mayor, a new pension system for our new employees, with more modest benefits that still provided a retirement, but will save the city over 22 million dollars each year. And none other than Carl DeMaio said it was great progress.

After all that San Diego has accomplished, it’s pretty amazing to be criticized by a Washington politician responsible for today’s federal budget mess.

The SEC did not “rule” that the city violated securities laws. The City settled the action with the SEC without paying any fines, but it agreed to pay for the SEC to have a securities disclosure expert monitor the City’s progress over a three-year period. That monitor, Stanley Keller, later said that the changes that the City of San Diego made in its financial disclosure practices, while Scott Peters was Council President, made it a model for other cities to follow.