Wednesday, Aug. 9, 2006 | A culture of obfuscation and denial so corrupted San Diego’s financial management that its meltdown reached the historic levels of such poster children of governmental and corporate malfeasance as Orange County, Enron and WorldCom, according to a long-awaited report released Tuesday.
The report likely cements San Diego’s collapse as one of the greatest in modern municipal history, stating that eight former city staff members likely committed securities fraud in acting with “wrongful intent” to withhold important information from the investing public – a finding that could foreshadow potential enforcement actions from the Securities and Exchange Commission.
Mayor Dick Murphy and a number of current and former City Council members acted negligently in approving false financial statements released to investors, the report states, a finding that would put their behavior on the bottom rung of the three levels of potential securities fraud.
In all, the report paints the picture of a culture premised upon “non-transparency, obfuscation, and denial of fiscal reality” that repeatedly sought to delay the impact of tough decisions, ignored pertinent advice time and again, and failed to inform investors of the consequences of its actions.
“It seems to us that no one in city government viewed himself or herself as accountable for the accuracy of the city’s financial disclosures,” said Arthur Levitt, the former SEC chairman who led the group of private consultants – known as the audit committee – in the probe that took 18 months and cost the city $20.3 million.
In light of the findings, it is unlikely that the SEC, which has been investigating City Hall since February 2004, would pursue any enforcement action against any current or former politicians unless it had unearthed distinct evidence.