How much money do the volunteer members of the city’s pension fund make in their professions, and where does it come from? California law requires that public officials disclose the amounts and sources of income derived from business entities and trusts. The specific identity of each source must be reported each year on the officials’ personal financial disclosure forms if a single source exceeds $10,000.
But Del Mar investment advisor Herbert W. Morgan — who became a retirement board member on May 4, after being nominated by San Diego mayor Jerry Sanders and confirmed by the city council — has declined to reveal the names of individual income sources for his company, Efficient Market Advisors, LLC, saying on his June 9 disclosure form that he “cannot disclose client names for violation of privacy.” Morgan is CEO and chief investment officer of the firm, which he lists as being valued at over $1 million, with income greater than $100,000.
An attachment to Morgan’s filing, titled “Explanation for Nondisclosure of Economic Interests,” says that Efficient Market Advisors has nine clients that pay more than $10,000 a year to the firm, which is 95 percent owned by Morgan and his wife Mary. “To the best of my knowledge none of those customers will make, participate in making or in any way attempt to influence a governmental decision,” the statement, dated June 2, says. “Eight clients are individuals. To the best of my knowledge, none of the clients has any interest financial or otherwise related to [the retirement fund]. One client is an institution. The institution does not have any business or desire to do business with [the retirement fund] or the City of San Diego.”
Morgan also says in the statement that his firm is an “SEC Registered Investment Advisor, subject to SEC Regulation S-P designed to protect the privacy of consumer financial information,” implying that federal law forbids him to reveal the sources. But is that enough to meet the legal requirement for full disclosure?
After an inquiry by a reporter last week, Roman Porter, executive director of the state’s Fair Political Practices Commission, requested a copy of Morgan’s disclosure filing from the city clerk’s office for review. “We are currently looking into the issue of whether or not the client identities were properly withheld,” he said Monday.
Reached by phone this week, Morgan said he would abide by the FPPC’s ruling but would have to resign from the board if required to disclose his clients’ identities.
Morgan, a Republican who headed California Small Business Leaders for McCain during last year’s presidential campaign, isn’t alone in withholding income sources. The retirement board’s former assistant general counsel Sheila Marie Jacobs filed a leaving office statement last December 19 in which she declined to disclose individual sources of income greater than $10,000 for the law office of her husband, Bradley Jacobs, asserting that “the names of my husband’s clients are privileged.”
On the other hand, William Sheffler, an actuary who left the retirement board in March of this year, disclosed a list of 17 clients, each the source of income greater than $10,000 to his firm, Sheffler Consulting Actuaries, Inc. They included Bartell Hotels, Cameron Brothers Construction, Pacific Rim Mechanical Contractors, Inc., the San Diego County Cement Masons Pension Trust, Southern California Floor Covering Pension Trust, Southern California Gunite Workers Pension Trust, San Diego County Teamsters Pension Trust, and the Joint Council of Teamsters Welfare Fund.
In addition to Efficient Market Advisors, Morgan lists a corporation, Morgan Financial Enterprises, which he values at between $10,000 and $100,000 as a source of income between $10,000 and $100,000. Its source of income is a real estate partnership, Talmadge Brothers LP, which owns “undeveloped residential land in Big Bear lakes” valued at greater than $1 million.