Diann Shipione

Diann Shipione (a vice president at UBS Financial and wife of businessman Pat Shea) is a former trustee of the San Diego, California City Employees' Retirement System pension board, credited with exposing unlawful underfunding of the pension fund ^[1] and omissions in municipal bond sales.

Situation Background

The San Diego City retirement system had been underfunded in some form for more than a decade.^[2] As a result of years of sharp increases in pension benefits combined with decreases in pension funding ^[3] and a decrease in the value of investments^[4] in 2001 the fund fell below funding targets.

Escalating Conflict

In 2002, Diann Shipione, a pension board trustee, raised concerns^[5] to the San Diego Mayor and City Council about a proposal that would essentially reduce money going into the retirement fund and increase money going out of it.^[6]

In 2003 she raised additional concerns that an announced $500 million City of San Diego bond sale prospectus had material omissions as a result. ^[7]

The pension board, among its efforts to discredit her,^[8] at one point bought an ad in city's major newspaper, the San Diego Union-Tribune, that scoffed, "Chicken Little Would Be Proud." ^[9] Then, in what smacked of political vengeance, the Mayor and a council majority voted to ban investment advisers from the pension board. Shipione, whose tenacious whistle-blowing had made her persona non grata at City Hall, was the only investment adviser on the pension board.^[10]

Conflict came to a peak on November 19, 2004 when she was ordered to leave a closed session of the trustees, and a plan to place her under citizen's arrest and have police remove her was almost implemented, but she left as ordered.^[11] The other board members voted to file ethics charges against her, ask for her removal as a board member, and ban her from meetings.^[12] Shipione was vindicated when the San Diego Ethics Commission dismissed the complaints levied against her by the pension board.^[13]

Fallout

The investigations already had a life of their own, however, and once details came to light the tables were turned, producing many quick changes to the political landscape. The situation led to the resignation of the City Auditor, City Manager, City Treasurer ^[14] and newly reelected Mayor Dick Murphy, by way of an unflattering article in the New York Times. (Note that the financial scandal is unrelated to the replacement of three of the city council members resulting from bribery allegations, but which increased the magnitude of the change.) The entire board was restructured and replaced by the voters in 2004, Shipione among them.^[15] There had been an effort to ban financial professionals from the new board ^[16] (not enacted), and despite calls for Shipione to be appointed to the new board, she was not.

After the Scandal

The City of San Diego was the target of two federal investigations ^[17] following revelations in January 2004 that financial documents used to secure bonds had been filled with errors and omissions.^[18] In 2005 the San Diego Regional Chamber of Commerce awarded Shipione the Catalyst for Change award.^[19] Shipione's husband, attorney Pat Shea, who received both an MBA and law degree from Harvard in 1975, unsuccessfully ran for mayor in 2005, stating that the City should go into a Chapter 9 bankruptcy to address its financial problems.^[20] In April 2006, the League of Women Voters awarded Shipione the Civic Service Award for public policy.^[21] In November 2006, the SEC entered an order sanctioning the City of San Diego for committing securities fraud by failing to disclose to the investing public important information about its pension and retiree health care obligations in the sale of its municipal bonds in 2002 and 2003. To settle that action, the City agreed to cease and desist from future securities fraud violations and to retain an independent consultant for three years to foster compliance with its disclosure obligations under the federal securities laws.^[22] In 2007 the SEC filed a civil injunctive action for fraud against outside auditors for the city and its pension system. The auditors consented to the entry of a final judgment permanently enjoining them from violating the antifraud provisions of federal securities laws and paid a civil penalty.^[23] In 2009 Shipione was admitted to the Harvard Kennedy School of Government Master's program in Public Administration.^[24] While at Harvard she remained active in the national public pension debate^[25] and participated in two separate Governmental Accounting Standards Board^[26] official Invitations to Comment ^[27]regarding potential changes to pension accounting and financial reporting standards. ^[28]

References

1. ^ "Shipione defies city to protect innocents". San Diego Union-Tribune. 2004-02-06. http://legacy.signonsandiego.com/news/metro/pension/20040206-259-shipione.html. 
2. ^ Revell, Janice; Levinstein, Joan; Neering, Patricia (2004-05-31). "The $366 Billion Outrage". Fortune Magazine. http://money.cnn.com/magazines/fortune/fortune_archive/2004/05/31/370713/index.htm. 
3. ^ Bauder, Don (2009-06-20). "Whistleblower Shipione heads to Harvard". San Diego Reader. http://www.sandiegoreader.com/weblogs/financial-crime-politics/2009/jun/20/whistleblower-shipione-heads-to-harvard/. 
4. ^ "SEC Charges Five Former San Diego Officials with Securities Fraud". SEC. 2008-04-07. http://www.sec.gov/news/press/2008/2008-57.htm. 
5. ^ Shipione, Diann (2002-12-04). "San Diego steers a dangerous course by underfunding workers' pension plan". San Diego Daily Transcript. http://www.sddt.com/Search/article.cfm?SourceCode=20021204tzc. 
6. ^ Shipione, Diann (2003-04-09). "The City Retirement System - Underfunding Makes It A Disaster Waiting To Happen". San Diego Union-Tribune. http://legacy.signonsandiego.com/news/metro/pension/20030409-704-thecityr.html. 
7. ^ Broder, John M. (2004-09-07). "Sunny San Diego Finds Itself Being Viewed as a Kind of Enron-by-the-Sea". New York Times. http://www.nytimes.com/2004/09/07/national/07diego.html. 
8. ^ Navarrette, Rubin (2011-02-25). "The Trouble With Public Pensions? Ask San Diego". CNN. http://edition.cnn.com/2011/OPINION/02/24/navarrette.pensions.wisconsin/?hpt=Sbin. 
9. ^ Ritter, John (2004-10-24). "San Diego now 'Enron by the Sea'". USA Today. http://www.usatoday.com/news/nation/2004-10-24-sandiego-_x.htm. 
10. ^ "Tawdry Display:Pension Board Changes Would Snag Critic". San diego Union-Tribune. 2004-07-21. http://legacy.signonsandiego.com/news/metro/pension/20040721-667-tawdrydi.html. 
11. ^ "Citizen's Arrest of Shipione Weighed". San Diego Union-Tribune. 2004-12-16. http://legacy.signonsandiego.com/uniontrib/20041216/news_1n16pension.html. 
12. ^ "Shameless vendetta". San Diego Union-Tribune. 2004-12-15. http://legacy.signonsandiego.com/news/metro/pension/20041215-148-shameles.html. 
13. ^ "Shipione: Ethics charges were effort to silence critics". San Diego Daily Transcript. 2005-12-29. http://sandiegosource.com/news/article.cfm?SourceCode=20051229tba. 
14. ^ "Ex-city officials charged with fraud". San Diego Union-Tribune. 2008-04-08. http://www.signonsandiego.com/uniontrib/20080408/news_1n8sec.html. 
15. ^ "Sanders calls for benefit rollbacks, Shipione's return". San Diego Union-Tribune. 2005-05-10. http://legacy.signonsandiego.com/news/metro/pension/20050510-296-sandersc.html. 
16. ^ Weinberg, Neil (2004-08-16). "Trust Us". Forbes Magazine. http://www.forbes.com/forbes/2004/0816/052_print.html. 
17. ^ Ritter, John (2004-10-24). "San Diego now 'Enron by the Sea'". USA Today. http://www.usatoday.com/news/nation/2004-10-24-sandiego-_x.htm. 
18. ^ "Whistle-blower was right, but feels no vindication". San Diego Union-Tribune. 2006-01-07. http://legacy.signonsandiego.com/news/metro/pension/20060107-9999-1n7diann.html. 
19. ^ "S.D. chamber to honor Shipione as pension fund whistle-blower". San Diego Union-Tribune. 2004-12-22. http://legacy.signonsandiego.com/news/metro/pension/20041222-389-sdchambe.html. 
20. ^ Hall, Matthew (2005-06-30). "Lawyer's Cure Is A Bitter Pill". San Diego Union-Tribune. http://legacy.signonsandiego.com/news/politics/20050630-9999-1m30shea.html. 
21. ^ "League of Women Voters' Annual Civic Service Awards". San Diego Metropolitan Magazine. 2006-04-19. http://www.sandiegometro.com/utilities/printer.php?page=http://www.sandiegometro.com/dbr/index.php&dbrID=&dbrID=1022. 
22. ^ "SEC Charges Five Former San Diego Officials with Securities Fraud". SEC. 2008-04-07. http://www.sec.gov/news/press/2008/2008-57.htm. 
23. ^ "SEC Charges Five Former San Diego Officials with Securities Fraud". SEC. 2008-04-07. http://www.sec.gov/news/press/2008/2008-57.htm. 
24. ^ Williams Walsh, Mary (2009-08-26). "An Overhaul or a Tweak for Pensions". New York Times. http://www.nytimes.com/2009/08/27/business/27audit.html. 
25. ^ Chon, Gina (2010-03-29). "Gurus Urge Bigger Pension Cushion". Wall Street Journal. http://online.wsj.com/article/SB10001424052748703416204575146213238489720.html. 
26. ^ "Post Employment Benefit Accounting and Financial Reporting Project No. 34". Governmental Accounting Standards Board. 2010-09-17. http://www.gasb.org/cs/ContentServer?site=GASB&c=Page&pagename=GASB%2FPage%2FGASBSectionPage&cid=1176157376653. 
27. ^ Williams Walsh, Mary (2009-08-26). "An Overhaul or a Tweak for Pensions". New York Times. http://www.nytimes.com/2009/08/27/business/27audit.html. 
28. ^ "Invitation To Comment On Project 34 Pension Accounting and Financial Reporting". Governmental Accounting Standards Board (Comment No. 112). 2010-09-17. http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157432085. 

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Name	Shipione, Diann
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