The six say the city promised to cover their legal defense

By Kelly Thornton, Watchdog Institute

Friday, February 4, 2011 at 5:41 p.m.

The law

Governments can choose to cover legal fees for criminal prosecution of employees if the employee acted within the “scope of his employment,” “without malice,” in the “apparent interests of the public entity” and if “the public entity determines that such defense would be in the best interests of the public entity.”


November, 2002: The board of the San Diego City Employees Retirement System voted to allow underfunding of the pension, after the City Council adopted the indemnification resolution.

July 2005: The former pension board officials were charged with violating state conflict-of-interest laws in connection with that underfunding vote.

July and August 2005: The defendants asked the city to pay their legal costs in the state criminal case. The City Council denied the request.

January 2010: The state Supreme Court found all but one plaintiff had committed no crime, as their actions benefited all city employees equally. The charges remained against former fire union chief Ronald Saathoff, who had received a separate and special benefit, but District Attorney Bonnie Dumanis dismissed the case against him in May.

Six former San Diego pension officials whose criminal cases were ultimately dismissed are suing the city for more than $5 million in attorneys’ fees.

Their lawsuit says they are entitled to defense costs in the state conflict-of-interest case, in part because the City Council indemnified them in 2002. The city was ordered to pay these same officials $2 million in 2007 for their lawyers’ fees in two pension-related civil actions.

“The city reneged on its promise” to defend employees against claims or lawsuits arising from their public service, the suit says. “Even when, after five years of litigation, all six employees were ultimately cleared of any wrongdoing … the city once again refused to honor its obligations.”

The six were charged for their role in 2002 decisions by the pension board to ease requirements for city funding of future pensions — portrayed by prosecutors as a quid pro quo for sweetening of employee benefits including their own. The decisions led to a massive pension-funding deficit that still contributes to a chronic city budget crisis.

The Supreme Court found, for the most part, there was no conflict for the pension board members, as all city employees benefited equally.

If the former officials win the legal-fees case, the cost of pension-related litigation would top $10 million, making it the most expensive of all the city’s legal battles in the last decade.

The city has spent at least $5.4 million so far to provide legal representation for itself and current and former city officials who were questioned or targeted by investigators, according to a data analysis by the Watchdog Institute, an independent reporting center based at San Diego State University.

The City Attorney’s Office vowed this week to fight the civil suit.

“The city does not believe this claim is supported by the law and will vigorously defend it,” said Gina Coburn, spokeswoman for City Attorney Jan Goldsmith. “With few exceptions, the law requires the city to defend employees who are sued in civil cases arising out of their job, but not employees who face criminal prosecution.”

The ex-pension officials emphasized that they voted to allow the underfunding of the pension in the course of doing their jobs, with full knowledge and blessing of the council and city attorney.

“People want to blame us — we didn’t sue ourselves, we didn’t prosecute ourselves,” said Frank Vecchione, lawyer for former assistant city auditor Terri Webster. “We all tried to have these cases dismissed without even being filed. Now our clients, after having their careers ruined, are stuck with horrendous attorney fee bills. I think the law’s clear. The city has to pay for their employees.”

In addition to Webster, the former defendants suing for attorneys’ fees are Cathy Lexin, the city’s former human resources director; John Torres, a retired San Diego Police Department fingerprint expert and former vice president of the city’s largest union; Mary Vattimo, former city treasurer; Sharon Wilkinson, a former city analyst.; and Ron Saathoff, former fire union chief.

The city has already done legal battle over pension-related attorneys’ fees. In that case, the same former pension officials sued for fees to defend themselves in two civil lawsuits filed against them over pension matters.

A Superior Court judge concluded in January 2006 that the officials were entitled to fees and costs in the civil cases because their actions “were done within the scope of their duties as members of the (San Diego City Employees Retirement System) board of trustees.”

The city appealed, lost and ended up paying $2 million for the plaintiffs’ legal fees, plus about $300,000 to fight the lawsuit, Vecchione said.

Vecchione said he is relying on the ruling in that lawsuit to bolster the current case. The crux of the latest lawsuit is that the city signed a binding agreement to pay legal fees, if necessary, for pension officials at the time of the 2002 vote to underfund the pension. There was no distinction made in the agreement between civil or criminal cases.

Much hinges on how the court interprets the indemnification agreement and the California government code.

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