Diann Shipione

Last updated

Diann Shipione is a former trustee of the San Diego City Employees' Retirement System pension board, credited with exposing unlawful underfunding of the pension fund [1] and omissions in municipal bond sales documents. [2] She was formerly a vice president at UBS financial services and is the wife of businessman Patrick C. Shea.

Contents

Situation background

The San Diego City Employees' Retirement System had been underfunded in some form for more than a decade. [3] In 2001, as a result of years of sharp increases in pension benefits combined with decreases in pension funding [4] and a decrease in the value of investments, [5] the fund fell below certain funding targets.

Revelation of the problem

In 2002 Shipione, as a pension board trustee, raised concerns [6] 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. [7] In 2003 she raised additional concerns that an announced $500 million City of San Diego municipal bond sale prospectus had material omissions about the pension fund. [8]

City officials and other pension board members made efforts to discredit and sideline her. [9] At one point they bought an ad in the San Diego Union-Tribune that scoffed, "Chicken Little Would Be Proud." [10] In a continued effort to remove her from the retirement board, the mayor and a City Council majority voted to ban investment advisers from the board; [11] Shipione was the only investment adviser on the retirement board. Eventually the City Council rescinded its vote to ban investment advisors after the national press picked up coverage on the matter. [12] Later, the City Council decided to terminate the remaining terms of all members of the board and have the entire board replaced. Despite calls for Shipione to be appointed to the new board, she was not. [13]

Conflict came to a peak on November 19, 2004 when she was ordered to leave a closed session of the trustees. A plan to place her under citizen's arrest and have police remove her was almost implemented, but she left as ordered. [14] The other board members voted to file ethics charges against her, ask for her removal as a board member, and ban her from meetings. [15] The San Diego Ethics Commission later dismissed the complaints levied against her by the pension board. [16]

The United States Securities and Exchange Commission began investigations into the city's municipal bond disclosures regarding its pension and retiree health care obligations. By 2005, several city officials had resigned, including the City Auditor, City Manager, City Treasurer, [17] and newly reelected Mayor Dick Murphy. [18]

Aftermath

The City of San Diego was the target of two federal investigations [19] following revelations in January 2004 that financial documents used to secure bonds had been filled with errors and omissions. [20]

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. [5]

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. [5]

Notwithstanding the multi-year smear campaign and plan to arrest her concocted by city officials and pension board trustees, Diann Shipione was eventually proven right. [20]

In 2009 Shipione was admitted to the Harvard Kennedy School of Government Master's program in Public Administration. [21] While at Harvard she remained active in the national public pension debate [22] and participated in three separate Governmental Accounting Standards Board [23] official Invitations to Comment [21] regarding potential changes to pension accounting and financial reporting standards. [24]

Recognition

Shipione received the following public recognitions for her pension system related services:

Education

Shipione received a B.A. from the University of Arizona and a M.P.A. from Harvard University.

Personal Background

Raised in Boston MA, Athens Greece, Salt Lake City Utah, and Tucson Arizona, Shipione was the first AFS Intercultural Programs exchange student from the United States to Sri Lanka, then known as Ceylon. [29] She graduated from the University of Arizona and Harvard. Shipione worked in the technology field, first for Metamorphic Systems in the “Utility Muffin Research Kitchen” with Phil Zimmermann, legendary encryption engineer and creator of Pretty Good Privacy (PGP), hardware wizard Steve Welch, and futurist Tom Meyer. She later worked with early "Case for Mars" conference organizers, including NASA planetary scientist Dr. Christopher P. McKay.

In 1986, she began a 20-year career in the financial services industry that included Morgan Stanley, Merrill Lynch and U.B.S.

In 1995, she was appointed to the San Diego Funds Commission that invested and oversaw a ~$36 million civic trust. She was later appointed one of four public representative Trustees on the thirteen member San Diego City Employees' Retirement System Board ($5 bl.). She remained a Trustee until 2005 when the board was completely stood down and replaced during the San Diego pension scandal brought to light by Shipione. [30]

Related Research Articles

Arthur Andersen LLP was an American accounting firm based in Chicago that provided auditing, tax advising, consulting and other professional services to large corporations. By 2001, it had become one of the world's largest multinational corporations and was one of the "Big Five" accounting firms. The firm collapsed by mid-2002, as details of its questionable accounting practices for energy company Enron and telecommunications company WorldCom were revealed amid the two high-profile bankruptcies. The scandals were a factor in the enactment of the Sarbanes–Oxley Act of 2002.

<span class="mw-page-title-main">MCI Inc.</span> American telecommunications company (1983–2006)

MCI, Inc. was a telecommunications company. For a time, it was the second-largest long-distance telephone company in the United States, after AT&T. WorldCom grew largely by acquiring other telecommunications companies, including MCI Communications in 1998, and filed for bankruptcy in 2002 after an accounting scandal, in which several executives, including CEO Bernard Ebbers, were convicted of a scheme to inflate the company's assets. In January 2006, the company, by then renamed MCI, was acquired by Verizon Communications and was later integrated into Verizon Business.

<span class="mw-page-title-main">Sarbanes–Oxley Act</span> 2002 U.S. law regarding corporate accounting

The Sarbanes–Oxley Act of 2002 is a United States federal law that mandates certain practices in financial record keeping and reporting for corporations. The act, Pub. L. 107–204 (text)(PDF), 116 Stat. 745, enacted July 30, 2002, also known as the "Public Company Accounting Reform and Investor Protection Act" and "Corporate and Auditing Accountability, Responsibility, and Transparency Act" and more commonly called Sarbanes–Oxley, SOX or Sarbox, contains eleven sections that place requirements on all U.S. public company boards of directors and management and public accounting firms. A number of provisions of the Act also apply to privately held companies, such as the willful destruction of evidence to impede a federal investigation.

<span class="mw-page-title-main">Arthur Levitt</span> American businessman, journalist and 25th SEC chairman

Arthur Levitt Jr. is the former chairman of the United States Securities and Exchange Commission (SEC). He served from 1993 to 2001 as the twenty-fifth and longest-serving chairman of the commission. Widely hailed as a champion of the individual investor, he has been criticized for not pushing for tougher accounting rules. Since May 2001 he has been employed as a senior adviser at the Carlyle Group. Levitt previously served as a policy advisor to Goldman Sachs and is a Director of Bloomberg LP, parent of Bloomberg News.

<span class="mw-page-title-main">Dick Murphy</span> American mayor and judge (born 1942)

Richard M. Murphy is an American politician who served as the 33rd mayor of San Diego from 2000 to 2005. He is a member of the Republican Party.

<span class="mw-page-title-main">CalPERS</span> California government agency which manages pensions for government workers

The California Public Employees' Retirement System (CalPERS) is an agency in the California executive branch that "manages pension and health benefits for more than 1.5 million California public employees, retirees, and their families". In fiscal year 2020–21, CalPERS paid over $27.4 billion in retirement benefits, and over $9.74 billion in health benefits.

<span class="mw-page-title-main">Mayor of San Diego</span> Head of the executive branch of the San Diego city government

The mayor of the City of San Diego is the official head and chief executive officer of the U.S. city of San Diego, California. The mayor has the duty to enforce and execute the laws enacted by the San Diego City Council, the legislative branch. The mayor serves a four-year term and is limited to two successive terms.

<i>Enron: The Smartest Guys in the Room</i> 2005 documentary film by Alex Gibney

Enron: The Smartest Guys in the Room is a 2005 American documentary film based on the best-selling 2003 book of the same name by Fortune reporters Bethany McLean and Peter Elkind, who are credited as writers of the film alongside the director, Alex Gibney. It examines the 2001 collapse of the Enron Corporation, which resulted in criminal trials for several of the company's top executives during the ensuing Enron scandal, and contains a section about the involvement of Enron traders in the 2000-01 California electricity crisis. Archival footage is used alongside new interviews with McLean and Elkind, several former Enron executives and employees, stock analysts, reporters, and former governor of California Gray Davis.

Aulana Louise Peters is a retired partner at the law firm of Gibson, Dunn & Crutcher LLP, where she was active partner from 1980 to 1984 and from 1988 to 2000.

<span class="mw-page-title-main">Northern Trust</span> American financial services company

Northern Trust Corporation is an American financial services company headquartered in Chicago, Illinois, that caters to corporations, institutional investors, and ultra high net worth individuals. Northern Trust is one of the largest banking institutions in the United States and one of the oldest banks in continuous operation. As of June 30, 2022, it had $1.7 trillion in assets under management and $17 trillion in assets under custody. Northern Trust Corporation is incorporated in Delaware.

<span class="mw-page-title-main">Enron scandal</span> 2001 accounting scandal

The Enron scandal was an accounting scandal involving Enron Corporation, an American energy company based in Houston, Texas. When news of widespread fraud within the company became public in October 2001, the company filed for bankruptcy and its accounting firm, Arthur Andersen—then one of the five largest audit and accountancy partnerships in the world—was effectively dissolved. In addition to being the largest bankruptcy reorganization in U.S. history at that time, Enron was cited as the biggest audit failure.

The San Diego pension scandal was a multi-year scandal involving the City Employee's Retirement Pension Fund in San Diego, California.

<span class="mw-page-title-main">Teresa Ghilarducci</span> American academic

Teresa Ghilarducci is an American scholar on labor and retirement issues. She has advocated for government to extend occupational retirement plan coverage to all workers. She published Rescuing Retirement in 2018; the book makes the case for a Guaranteed Retirement Account that would supplement Social Security. In 2016 she wrote a popular book, How to Retire with Enough Money: And How to Know What Enough Is. One of her most recent books, When I’m Sixty Four: The Plot Against Pensions and the Plan to Save Them, investigates the loss of pensions on older Americans and proposes a comprehensive system of reform. Her previous books include Labor's Capital: The Economics and Politics of Employer Pensions, winner of an Association of American Publishers award in 1992, and Portable Pension Plans for Casual Labor Markets, published in 1995. Ghilarducci is an executive board member of the Economic Policy Institute, a member of the Retirement Security Advisory Board for the Government Accountability Office, court appointed trustees for the retiree health care trusts for UAW retirees of GM, Ford, and Chrysler and the USW retirees of Goodyear Tire. Ghilarducci won an Association of American Publishers award for her book Labor's Capital: The Economics and Politics of Employer Pensions in 1992. She previously taught economics for 25 years at the University of Notre Dame.

<span class="mw-page-title-main">Teacher Retirement System of Texas</span> Teacher retirement investment fund of Texas

Teacher Retirement System of Texas (TRS) is a public pension plan of the State of Texas. Established in 1937, TRS provides retirement and related benefits for those employed by the public schools, colleges, and universities supported by the State of Texas and manages a $180 billion trust fund established to finance member benefits. More than 1.6 million public education and higher education employees and retirees participate in the system. TRS is the largest public retirement system in Texas in both membership and assets and the sixth largest public pension fund in America. The agency is headquartered at 1000 Red River Street in the capital city of Austin.

<span class="mw-page-title-main">Participants in the Madoff investment scandal</span>

Participants in the Madoff investment scandal included employees of Bernard Madoff's investment firm with specific knowledge of the Ponzi scheme, a three-person accounting firm that assembled his reports, and a network of feeder funds that invested their clients' money with Madoff while collecting significant fees. Madoff avoided most direct financial scrutiny by accepting investments only through these feeder funds, while obtaining false auditing statements for his firm. The liquidation trustee of Madoff's firm has implicated managers of the feeder funds for ignoring signs of Madoff's deception.

<span class="mw-page-title-main">Accounting scandals</span> Scandal arising from the disclosure of financial misdeeds

Accounting scandals are business scandals which arise from intentional manipulation of financial statements with the disclosure of financial misdeeds by trusted executives of corporations or governments. Such misdeeds typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of corporate assets, or underreporting the existence of liabilities; these can be detected either manually, or by the means of deep learning. It involves an employee, account, or corporation itself and is misleading to investors and shareholders.

Patrick C. Shea is an attorney in California. He was the federal court-appointed attorney that represented 170-plus municipal entities with investments of over $5 billion in the Orange County, California, Chapter 9 bankruptcy. On December 6, 1994, the County of Orange declared Chapter 9 bankruptcy, from which it emerged in June 1995. The Orange County bankruptcy was the largest municipal bankruptcy in U.S. history. Following a tumultuous several year period of financial disclosures by the City of San Diego relating to its massively underfunded pension and retiree health care system, in 2005 Shea ran for mayor of San Diego on a platform of filing a Chapter 9 bankruptcy for the city in order to restructure its troubled financial condition.

Diann is a feminine given name and may refer to:

"Tone at the top" is a term that originated in the field of accounting and is used to describe an organization's general ethical climate, as established by its board of directors, audit committee, and senior management. Having good tone at the top is believed by business ethics experts to help prevent fraud and other unethical practices. The very same idea is expressed in negative terms by the old saying "A fish rots from the head down".

<span class="mw-page-title-main">Ligand Pharmaceuticals</span> American Pharmaceutical Company

Ligand Pharmaceuticals Incorporated is a biopharmaceutical company located in San Diego, California. Founded in 1987 as Progenix Inc., the company went public in 1992. Initially focused on developing its own drugs, a period of turbulence in the early 2000s culminated in its CEO being ejected by the shareholders and provoked a change in focus to the acquisition of existing drugs and forming partnerships to develop them further.

References

  1. ↑ Spagat, Elliot (2004-09-25). "Ignoring Whistleblower May Cost City Dearly". Associated Press.
  2. ↑ Broder, John M. (2004-09-07). "Sunny San Diego Finds Itself Being Viewed as a Kind of Enron-by-the-Sea". New York Times.
  3. ↑ Revell, Janice; Levinstein, Joan; Neering, Patricia (2004-05-31). "The $366 Billion Outrage". Fortune Magazine.
  4. ↑ Bauder, Don (2009-06-20). "Whistleblower Shipione heads to Harvard". San Diego Reader.
  5. 1 2 3 United States Securities and Exchange Commission, SEC (2008-04-07). "SEC Charges Five Former San Diego Officials with Securities Fraud". SEC.
  6. ↑ Shipione, Diann (2002-12-04). "San Diego steers a dangerous course by underfunding workers' pension plan". San Diego Daily Transcript.
  7. ↑ "Cathy Lexin et al., Petitioners, v. The Superior Court of San Diego County" (PDF). Court of Appeal - Fourth Appellate District Division One. 2007-09-07.
  8. ↑ Broder, John M. (2004-09-07). "Sunny San Diego Finds Itself Being Viewed as a Kind of Enron-by-the-Sea". New York Times.
  9. ↑ Navarrette, Rubin (2011-02-25). "The Trouble With Public Pensions? Ask San Diego". CNN.
  10. ↑ Ritter, John (2004-10-24). "San Diego now 'Enron by the Sea'". USA Today.
  11. ↑ Weinberg, Neil (2004-08-16). "Trust Us". Forbes Magazine.
  12. ↑ Weinberg, Neil (2004-08-16). "Trust Us". Forbes Magazine.
  13. ↑ LaVelle, Philip J. (2005-05-10). "Sanders calls for benefit rollbacks, Shipione's return". San Diego Union-Tribune.
  14. ↑ LaVelle, Philip J. (2004-12-16). "Citizen's Arrest of Shipione Weighed". San Diego Union-Tribune. Archived from the original on 2011-07-19.
  15. ↑ Smolens, Michael (2021-04-16). "Timing will help San Diego move on from pension nightmare". San Diego Union-Tribune.
  16. ↑ Sherwin, Doug (2005-12-29). "Shipione: Ethics charges were effort to silence critics". San Diego Daily Transcript.
  17. ↑ Donohue, Andrew (2005-05-17). "Six SD Officials Charged In Pension Scandal". Voice of San Diego.
  18. ↑ Broder, John M. (2005-04-26). "Mayor of Scandal-Plagued San Diego Says He Will Quit". New York Times.
  19. ↑ Ritter, John (2004-10-24). "San Diego now 'Enron by the Sea'". USA Today.
  20. 1 2 LaVelle, Philip J. (2006-01-07). "Whistle-blower was right, but feels no vindication". San Diego Union-Tribune.
  21. 1 2 Williams Walsh, Mary (2009-08-26). "An Overhaul or a Tweak for Pensions". New York Times.
  22. ↑ Chon, Gina (2010-03-29). "Gurus Urge Bigger Pension Cushion". Wall Street Journal.
  23. ↑ Governmental Accounting Standards Board, GASB (2010-09-17). "2010 Invitation To Comment On Project 34 Pension Accounting and Financial Reporting". Governmental Accounting Standards Board (Comment No. 112).
  24. ↑ Governmental Accounting Standards Board, GASB (2011-10-14). "2011 Invitation To Comment On Projects 34-E and 34-P Pension Accounting and Financial Reporting". Governmental Accounting Standards Board (Comment No. 208).
  25. ↑ Washburn, David (2004-12-22). "S.D. chamber to honor Shipione as pension fund whistle-blower". San Diego Union-Tribune.
  26. ↑ "Special Award Winners-Diogenes Award". Public Relations Society of America. 2005.
  27. ↑ "Gloria Penner Civic Service Award Dinner" (PDF). San Diego Voter. League of Women Voters, San Diego. April 2006. pp. 1, 3. Archived from the original (PDF) on June 28, 2006. Retrieved August 23, 2022.
  28. ↑ "Women's Herstory Month Notables for March 22 to March 28, 2015". San Diego County Commission on the Status of Women. 2015.
  29. ↑ "Plan Foreign Study". Tucson Daily Citizen. 1969-06-11.
  30. ↑ Smolens, Michael (2021-04-16). "Timing will help San Diego move on from pension nightmare". San Diego Union-Tribune.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.