The San Diego City Employee's Retirement Pension Fund was the source of a multi-year scandal and has been an ongoing financial concern for the city of San Diego, California.
The San Diego City Employees' Retirement System had been underfunded in some form for more than a decade. In 2001, as a result of years of sharp increases in pension benefits combined with decreases in pension funding and a decrease in the value of investments, the fund fell below certain funding targets.
Diann Shipione, a former trustee of the San Diego, California Employees' Retirement System pension board, is credited with exposing unlawful underfunding of the pension fund to the media.
In 2002 Shipione, as a pension board trustee, raised concerns to the San Diego Mayor and City Council about a proposal that would essentially reduce money going into the retirement fund and increase money going out of it. In 2003 she raised additional concerns that an announced $500 million City of San Diego bond sale prospectus had material omissions about the pension fund.
City officials and other pension board members made efforts to discredit and sideline her. At one point they bought an ad in the San Diego Union-Tribune that scoffed, "Chicken Little Would Be Proud." In a continued effort to remove her from the retirement board, the Mayor and a City Council majority voted to ban investment advisors from the board; Shipione was the only investment advisor on the retirement board. Eventually the City Council rescinded its vote to ban investment advisors after the national press picked up coverage on the matter. Later, the City Council decided to terminate the remaining terms of all members of the board and have the entire board replaced. Despite calls for Shipione to be appointed to the new board, she was not.
Conflict came to a peak on November 19, 2004 when she was ordered to leave a closed session board meeting of the trustees. A plan to place her under citizen's arrest and have police remove her was almost implemented, but she left as ordered. The other board members voted to file ethics charges against her, ask for her removal as a board member, and ban her from future meetings. The San Diego Ethics Commission later dismissed the complaints levied against her by the pension board.
Meanwhile, the United States Securities and Exchange Commission had begun investigations into the city's municipal bond disclosures regarding its pension and retiree health care obligations.
The scandal had widespread fallout in the city's political and financial situation.
By 2005, several city officials had resigned, including the City Auditor, City Manager, City Treasurer and newly reelected Mayor Dick Murphy. Murphy was replaced in a special election by former police chief Jerry Sanders. Mike Aguirre, an advocate for pension reform, was elected city attorney. In addition, the scandal led to a voter approved proposition for complete change in the constitution of the pension board.