SDCERS' Independent Fiduciary Counsel Resigns

Harvey L. Leiderman and his San Francisco-based law firm, ReedSmith, have resigned as independent fiduciary counsel to the San Diego City Employees' Retirement System. "I am not at liberty to disclose the reason we voluntarily resigned," says Leiderman. "It's important that we resigned voluntarily." He and his firm were involved in several controversies. In May, they advised SDCERS that reduced benefits for new City employees negotiated in 2005 would not be effective until February of this year. Thus, these new hires would have the of the old, juicier benefits for almost two years. A second law firm gave exactly the opposite advice, saying the effective date of the reduced benefits would be July 1 of 2005. Mayor Jerry Sanders sided with the ReedSmith pronouncement and blamed City Attorney Michael Aguirre for the benefits being extended. "I can't confirm or deny" whether that was the issue, says Leiderman. Also, he won't comment whether the voluntary resignation had anything to do with the mispricing of purchase of service benefits.


I thought the City has asked for declaratory relief action from the Superior Court on the issue? Guess it hasn't ruled yet? Geez, how long should this take? As for me, it seems the past practices show City Ordinances are the controlling "document" or vehicle. Since Mr. Aquirre chose to ignore the Council's will and NOT amend the proper Ordinance(s) promptly the benefits should be granted and it suggests ReedSmith correctly intrepreted the law. I can see how this would not make Mr. Aquirre happy. Wonder if he threatened that firm too? I have carefully observed and listened to Mr. Leiderman at SDCERS board meetings. He speaks in concise, clear, and calm plain english terms. It's disappointing to learn we will no longer hear him, and the voice of reason.

Response to post #1: The case you allude to is still in court, to my knowledge. ReedSmith came up with the opinion that the old, hyper-generous benefits would be in place until Feb. '07. Another law firm said otherwise, and made a good case that the new, lower benefits became effective mid'05. Was Sanders trying to buy off labor once again and then blame Aguirre? That has always been my theory. Since he can count on the U-T to distort everything in his favor and against Aguirre, Sanders can get away with this kind of blatant dishonesty -- his main quality. I do not believe that Aguirre threatened ReedSmith. Best, Don Bauder

Response to post #1: Yes, City Ordinances ARE the controlling documents. But that means that purchase of service credits must be calculated by the actuary to be cost-neutral to the City at the time of purchase AND have a clause in the purchase contract enabling SDCERS to correct the inevitable overcharge or undercharge that will result in experience. Done properly, i.e. on a true cost-neutral basis, nobody would purchase such credits. Because the basic pension ordinances already required cost-neutrality, the City Attorney should never have added §24.1312.1 to the Code. He was right first time. He should have stuck to his guns and never acknowledged the legitimacy of §24.1312 (if indeed he has), which purported to create a purchase of credits benefit and went on to say: "the amount the Board determines to be the employee and employer cost of that Creditable Service." §24.1312 should have been repealed because it created an illegal benefit and allowed the SDCERS board to participate in that creation, in breach of the basic plan documents.

Response to post #3: Pat Flannery runs an excellent blog. I find it interesting that he says if the purchase of service credits had actually been cost-neutral, nobody would have bought them. I do not know if Aguirre has acknowledged the legitimacy of 24.1312. Best, Don Bauder

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