Washington, D.C., Oct. 27, 2010 – The Securities and Exchange Commission today announced that four former San Diego officials have agreed to pay financial penalties for their roles in misleading investors in municipal bonds about the city’s fiscal problems related to its pension and retiree health care obligations.

It’s the first time that the SEC has secured financial penalties against city officials in a municipal bond fraud case.

The SEC settlement with the four former city officials requires the approval of U.S. District Judge Dana M. Sabraw in the Southern District of California.

The SEC filed charges in April 2008 against former San Diego City Manager Michael Uberuaga, former Auditor & Comptroller Edward Ryan, former Deputy City Manager for Finance Patricia Frazier, and former City Treasurer Mary Vattimo. The SEC alleged that the officials knew the city had been intentionally under-funding its pension obligations so that it could increase pension benefits but defer the costs. They also were aware that the city would face severe difficulty funding its future pension and retiree health care obligations unless new revenues were obtained, benefits were reduced, or city services were cut. However, despite this extensive knowledge, they failed to inform municipal investors about the severe funding problems in 2002 and 2003 bond disclosure documents.

“Municipal officials have a personal obligation to ensure that investors are provided with complete and accurate information about the issuer’s financial condition,” said Rosalind Tyson, Director of the SEC’s Los Angeles Regional Office. “These former San Diego officials are paying a price for their actions that jeopardized the interests of investors and put the city’s current and future retirees at risk.”

The four former officials agreed to settle the SEC’s charges without admitting or denying the allegations and consented to the entry of final judgments that permanently enjoin them from future violations of Securities Act of 1933 Section 17(a)(2). Under the settlement terms, Uberuaga, Ryan, and Frazier each pay a penalty of $25,000 and Vattimo pays a penalty of $5,000.

The SEC’s charges against a fifth former city official – Assistant Auditor & Comptroller Teresa Webster – are still pending.

The SEC litigation was handled by John M. McCoy III, David J. Van Havermaat, and Catherine W. Brilliant.

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