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April 20, 2006

More troubles for V&E?

As noted earlier here, the venerable Houston law firm of Vinson & Elkins has received its fair share of bad publicity for its role as primary outside counsel for the social pariah, Enron. Probably the severest criticism for V&E was its role in handling the investigation into the allegations contained in Sherron Watkins' memo to former Enron chairman and CEO, Ken Lay. V&E's investigation found no wrongdoing, and Watkins and the Enron Task Force contend that V&E whitewashed the matter to help Lay hide severe problems at the company.

Now, according to this Bond Buyer News article, the San Diego city attorney is prepared to file a lawsuit against V&E over an investigation into the city's pension debacle that the city attorney alleges was mishandled. San Diego's pension problems were revealed in early 2004 when the city announced that it had about $1.2 billion in unfunded pension liabilities — now estimated to be between $1.4 billion and $2 billion — due to a number of factors, including the underfunding of annual contributions and the creation of expanded retirement benefits, some of which may not have been legal. The city hired Vinson & Elkins to review the city’s pension problems and disclosure practices and to recommend improvements.

Vinson & Elkins wrote two reports. The initial one was completed in the fall of 2004 and detailed how the pension problems occurred over time. It also recommended a series of major steps for the city to take to improve its pension reporting and disclosure practices. The second report was completed in July 2005 and concluded that at least six former officials and San Diego city council members may have violated the federal securities laws by failing to ensure pension problems were disclosed in bond documents.

San Diego City Attorney Michael Aguirre has contended that the Vinson & Elkins reports, for which he says the city was billed about $6 million by the law firm, were “a whitewash” (heard that before?) that failed to hold city officials fully accountable. Aguirre conducted his own investigation of the pension debacle after the issuance of the V&E reports and his conclusions regarding the former officials were much harsher than the V&E conclusions:

“Both [Vinson & Elkins] and Kroll [another participant in the investigation] are exploiters of vulnerabilities of the city,” Aguirre said. “Instead of helping the city do what it was required to do, they coordinated their efforts to help the people that were under investigation escape responsibility because that’s where the money was.”

This investigatory work is getting a tad expensive for V&E, don't you think?

Posted by Tom at April 20, 2006 08:20 AM

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