Following the release of the 265-page Kroll, Inc. report last week, which found that the city of San Diego’s dire financial straits were caused by years of “reckless” mismanagement from a number of past and present city and pension board officials, questions arose as to whether or not District 3 Councilmember Toni Akins and other city officials would face indictment charges by the U.S. Securities and Exchange Commission (SEC).

Longtime gay rights activist Al Best, who was the first openly gay candidate to run for San Diego City Council, told the Gay & Lesbian Times last week that before he was advised against it, he was considering calling a press conference to ask for the resignations of Councilmember Atkins and state Senator Christine Kehoe, who served on the City Council from 1993 to 2000.

The Kroll investigators found that the city violated the law in 1996 and 2002 when it did not completely fund its pension system, which now has a deficit of $1.43 billion.

Former Mayor Dick Murphy, Council President Scott Peters and Councilmembers Atkins, Donna Frye, Brian Maienschein and Jim Madaffer were among the elected officials named in the report. Murphy and the five council members were found to have violated pension and sewage laws, as well as improperly handling financial statements and bond disclosures having to do with both the pension fund and wastewater treatment.

“I think what you’re likely to see is that there’s going to be a major issue about whether a case will be brought against Toni Atkins,” City Attorney Mike Aguirre told the Gay & Lesbian Times. “Not a criminal case; I don’t anticipate that. But I do anticipate that the SEC may bring a civil case [against Atkins].”

Aguirre said had Atkins “embraced reform immediately” and not tried to use law firm Vincent & Elkins and risk-management firm Kroll to disrupt the City Attorney’s investigation, she could have argued that she had “made a mistake and tried to correct it.” Instead, Atkins will have to explain why she was supportive of Scott Peters’ efforts to obstruct any effort to hold the council members accountable, Aguirre said.

“I think that one of the factors that could be taken into consideration is that she did not perform well afterwards and continued to try to cover up the original wrongdoing,” Aguirre said. “I think that had she taken a different course and tried to actually clean everything up, I think she would be able to argue that she recognized she made a mistake and tried to correct it, but in her case – as in the case with [Brian] Maienschein, [Jim] Madaffer and certainly [Scott] Peters and [Dick] Murphy – after it was clearly discovered they had done something wrong, they tried to get out of it by spending millions on Kroll, millions of dollars on Vinson & Elkins, millions of dollars on their own personal attorneys, and that’s going to be something that will work against her.”

Atkins said she does not agree with Aguirre’s assessment that she tried to cover up the original wrongdoing.

“Getting the city back on track by satisfying the SEC and our outside auditors has been my highest priority ever since the city’s financial problems began to come to light. It still is,” she said.

Atkins said the council was not well served by the professionals and experts they hired to advise and provide them with accurate information.

“I certainly would never have done anything that would hurt the city had I known that would happen,” she said. “Nevertheless, I profoundly apologize for any errors I might have made and am fully committed to redoubling my efforts to fix our system and restore the fiscal health of our city.”

In an Aug. 8 statement, Aguirre said the Kroll report, which cost taxpayers $20 million, largely mirrors conclusions the City Attorney’s Office came to more than 18 months ago in its interim reports, but fell short of the office’s findings as to culpability.

“What essentially has occurred here is that San Diego taxpayers have been bilked out of $20 million by big-league East Coast operators,” Aguirre said in the statement.

Originally, the Kroll report was estimated to cost $800,000, but costs increased to $20.3 million. Aguirre said the increase in cost was a “political payoff” to Kroll investigators.

Atkins disagreed. “This is an entirely irresponsible characterization of the situation. There was no payoff,” she said. “Getting this report done so we could get the city on the road to fiscal recovery has been the most important challenge facing the council. Do I wish the report hadn’t cost us so much? You bet. But when Kroll told us we needed to spend the money to get the job done, there weren’t any viable alternatives.”

Atkins said she supported the council’s decision to have an outside investigation instead of an internal review.

“All of my council colleagues and I have been committed to learning all of the facts associated with the city’s current financial crisis and to taking the steps needed to restore the city’s fiscal health,” she said.

Atkins said whenever a government employee is involved in a legal matter that involves events that occurred while that employee was carrying out his or her duties, state law requires any attorney’s fees associated with that legal matter to be paid by the government. Atkins, who said the City Attorney’s Office advised council members to retain their own attorneys, said through June of this year, attorneys working on her behalf have received $507,479 from the city.

When asked if she believes she or any other council members will be indicted, Atkins said: “That is a question that is very serious and I would not want to speculate on it.”

Aguirre criticized and questioned the report findings that elected city officials acted only with negligence in their bond-disclosure duties to investors; that employee pension benefits – while illegal – must still be paid; and the San Diego City Employees’ Retirement System (SDCERS) should continue to keep a board-appointed legal counsel.

“SDCERS appointing its own legal counsel is how we got a $1.4 billion employee pension deficit,” Aguirre said. “The elected city attorney is the chief legal advisor to the SDCERS board – that’s the way it was for 75 years before a 1997 agreement changed that safeguard.”

Aguirre said to recommend the payment of illegal benefits is “preposterous,” and that in October a jury will decide on whether these pension benefits must be paid by the city of San Diego.

“Meanwhile, we are expecting that the U.S. Securities and Exchange Commission will determine whether the acts of elected city officials were negligent, reckless or committed with willful intent,” he said.

Mishandling of the pension fund occurred primarily through the approval of Manager’s Proposals I and II, the Kroll report says. Manager’s Proposal I violated state and local law by enabling the city to reduce contributions to the fund, which contributed to weakening its stability, and Manager’s Proposal II “was unlawful for a number of reasons” and didn’t offer tangible benefits for city retirees, according to the report.

With regard to the sewage system, the report states the city allowed homeowners in the city of San Diego to be overcharged on their monthly water bills, with the overcharge used to “subsidize the City’s industrialized water users.” It says the city “knowingly failed to comply with federal and state requirements” put in place to protect consumers from such situations. Former Councilmember Ralph Inzunza is also implicated in this portion of the report.