SAN DIEGO – Mayor Jerry Sanders was set to go to San Francisco this week to sell the Standard & Poor's rating agency on the city's regained creditworthiness, but the trip was called off.

Instead, Sanders was in town Monday as word spread that the federal government had charged five former city officials with issuing $262 million of fraudulent bonds.

The effect of the charges on the city's effort to regain trust on Wall Street will depend on how well Sanders can make his case that those facing charges are part of a culture that no longer occupies City Hall.

Aides called the cancellation of the San Francisco meeting a coincidence, saying they wanted more time to polish their presentation.

But they wondered how the charges – and the feud the charges renewed between Sanders and City Attorney Michael Aguirre – might hinder efforts to rebuild a battered credit rating.

Only the analysts know for sure.

“Obviously we'll know the facts once we meet with the rating agencies and once they take action,” Chief Financial Officer Jay Goldstone said.

A rescheduled meeting with Standard & Poor's is on tap for next Wednesday.

The accused former officials are city manager Michael Uberuaga, auditor Ed Ryan, deputy auditor Terri Webster, treasurer Mary Vattimo and deputy city manager Patriricia Frazier. The Securities and Exchange Commission charged them with recklessly covering up growing pension and retiree health liabilities in bond offerings in 2002 and 2003.

While Sanders says the city has turned the page, Aguirre said problems persist at City Hall because the mayor continues to surround himself with officials who worked closely with the quintet facing the SEC's civil charges.

“Many of their progeny still remain in the city, and that is why you have such resistance to cleaning up the corruption in San Diego,” Aguirre said.

Sanders countered that none of the accused ever worked in his administration. Rather, he said, he has put “all-new leadership in place.”

While Aguirre won't say exactly whom he is talking about, an August 2006 report by Kroll Inc., a New York risk-management firm, indicates that several members of Sanders' management team failed to sound any alarm about a failure to clue bond investors and rating agencies into billions of dollars of ballooning liabilities.

The report also shows that Aguirre hasn't entirely cleaned house himself. His staff includes Michael Rivo, one of the top deputy city attorneys who Kroll said kept quiet about his knowledge of the city's pension troubles.

Yesterday, Aguirre said Rivo works in the office's domestic violence unit and “has nothing to do with financial or disclosure issues whatsoever.”

Sanders has retained at least four officials who had varying roles in the city's bookkeeping, bond disclosures and pension underfunding deals in 2002 and 2003, the years under investigation by the SEC.

Lakshmi Kommi, now the head of the city's debt-management department, and Elizabeth Kelly, now a program manager in that department, were two of the people responsible for drafting the presentations to rating agencies under Uberuaga.

Kommi said that the city's outside bond attorney's requests for more disclosure were “Draconian” and amounted to “very intensive work and she could not imagine needing to do that amount of work every year,” according to a summary of her interview in the Kroll report.

Elmer Heap, one of Sanders' deputy chief operating officers, played a part in underfunding the pension plan in 2002 as head deputy city attorney. Despite receiving an e-mail from Webster that year about “a quid pro quo arrangement” to continue the underfunding, he and Rivo “apparently raised no concerns” about “the precise illegality that was to come,” the Kroll report said.

Darlene Morrow-Truver, a finance manager in the city wastewater department, worked as audit division manager and served as Webster's deputy briefly when Webster was promoted to auditor after Ryan's resignation.

A summary of Morrow-Truver's interview in the Kroll investigation says she “appeared to have a lot of faith in Webster's integrity, though it also seemed that the two had a close relationship.”

Sanders defended his retention of these employees, saying that Kommi and Morrow-Truver were “further down” in the organization and that Heap supervises parks and recreation and other areas unrelated to core finances.

Peter Henning, a former SEC attorney who is a law professor at Wayne State University in Detroit, said more infighting by elected officials is “probably the bigger issue,” when compared with the new SEC charges.

He said the question for the analysts is fairly straightforward: “Is San Diego going to get beyond the finger-pointing and rebuild its finances?”

Sanders said the infighting is a problem as well, responding to Aguirre's comments about the “progeny” of the accused still working at City Hall.

“I don't think it's good for the city. I don't think it's good for the citizens,” Sanders said. “It's going to cause us at the very least to have to pay more in intest on badly needed infrastructure that should be bonded out.”