Original pension investigator coughs up some cash

Four years ago, the city of San Diego hired the law firm Vinson & Elkins to investigate the who, what, when, where and how of the employee-pension underfunding and the seeming quid pro quo of benefits for employee unions in exchange (for a background on all this, check out CityBeat‘s “Pension Scandal for Dummies” issue). The report that came back was widely considered a white wash, and the auditor the city hired to assess its books, KPMG, expressed deep concern about whether a conflict of interest resulted from the fact that Vinson & Elkins represented the city in its dealings with the Securities & Exchange Commission as well as investigating the underfunding (anything other than a positive report would hurt the city’s credit rating). The end result was that the city paid V&E $7 million, and owed another $1.1 million, for a report that was pretty much invalid. The city then had to hire another firm, Kroll, Inc., to do another investigation. Kroll ultimately needed two years and $20 million to generate a report.

Meanwhile, City Attorney Mike Aguirre sued V&E and several other contractors to recover the money spent on the initial report. The city’s already settled with Callan Associates, an investment consulting firm, for $4.5 million (for giving bad advice) and the auditing firms of Caporicci & Larson ($900,000) and Calderon, Jaham & Osborn ($750,000). In each of these cases, the company’s insurance protection paid the settlement in full.

Pending City Council approval on Tuesday, San Diego will accept a settlement of $3.25 million in cash, plus $1.1 million in forgiveness of outstanding bills, and no admission of wrongdoing from Vinson & Elkins.

If the settlement is approved, the money will go into the general fund. Aguirre hopes the City Council will use some of it to restore the $1.4 million cut from his budget.

“These settlements more than offset the cost of the continuing pension litigation,” Aguirre said this morning, referring to his ongoing battle to rollback millions of dollars in pension benefits promised to employee unions. Aguirre, who is up for re-election in November, has been long criticized for the expenses incurred in his thus-far-losing battle.