The city sued a Houston law firm yesterday, seeking at least $10 million in damages for work that allegedly failed “to protect the city's interests,” according to documents filed in San Diego Superior Court.
Attorneys with Vinson & Elkins, based in Houston, represented San Diego before the Securities and Exchange Commission, while also conducting an inquiry into the city's handling of its finances.
That relationship came under scrutiny as critics, including City Attorney Michael Aguirre, questioned whether the firm could be expected to pursue a serious investigation if it might implicate a client in wrongdoing.
Aguirre announced the suit yesterday, less than 24 hours after promising, but refusing to reveal, a significant legal development.
The city has retained two private attorneys, Dan Stanford and Bryan C. Vess, to handle the case.
Stanford and Vess brought a tentative end to another suit this week, agreeing to a settlement with two former city auditors that could result in a $1.1 million payment to the city.
The lawsuits are two of several related to city decisions in 1996 and 2002 to increase employee pension benefits while delaying making the full annual payment owed to the retirement system.
Questions about those decisions have dogged San Diego since 2002. The questions revolve around whether the city made the benefit boosts contingent upon approval of the underfunding, and if officials, including the City Council, deliberately misled lenders about the pension and other debts.
Federal investigations into the issues continue.
In a statement released yesterday, Vinson officials said an Aguirre report that preceded the lawsuit “contains many inaccuracies and misstatements.”
The firm performed “competently and professionally,” according to the statement, and none of its work “harmed the city in any way.”
“None of the claims made by Mr. Aguirre can be justified,” it said.
The firm, after being hired to handle talks with the SEC, billed San Diego more than $6 million, 40 times the amount originally agreed to by the city, according to the lawsuit.
In the 24-page complaint, the city accuses the firm of failing to prepare the work plan required under its contract, and failing to update San Diego officials about the growing number of partners and associates assigned to the project.
In addition, Vinson & Elkins neglected to analyze important city documents and missed flaws in the work of other outside attorneys, the suit says. The developments, according to the suit, have left San Diego in limbo, waiting for the firm's replacement to complete an investigative report that has been delayed since last year.
Jennifer Vigil: (619) 718-5069; jennifer.vigil@uniontrib.com
