SEC Charges San Diego's Independent Auditor for Fraud in Connection With City Municipal Securities Offerings

Securities and Exchange Commission, Dec 11, 2007

Washington, D.C. - The Securities and Exchange Commission filed a settled civil fraud action against San Diego's independent auditor in connection with the city's false and misleading financial statements in five 2002 and 2003 bond offerings.

According to the Commission's complaint, the independent auditor issued unqualified audit reports on the bond offerings that raised $260 million from investors but contained materially false and misleading information about San Diego's pension and retiree health care obligations.

The Commission charges against certified public accountant Thomas J. Saiz and his firm, Calderon, Jaham & Osborn (CJO), allege that they failed to comply with generally accepted accounting standards, were not knowledgeable about San Diego, and failed to obtain sufficient competent evidential matter.

"Auditors play an important role in providing investors with material information in municipal securities offerings," said Linda Chatman Thomsen, Director of the SEC's Enforcement Division. "It is therefore critical that auditors of municipalities conduct their audits with a high degree of rigor, competence and independence, and that cities hire auditors who have the technical skills, experience and resources to conduct proper audits and not hire auditors based primarily on the lowest bid or other factors unrelated to the auditor's skills, resources and abilities."

Rosalind Tyson, Acting Regional Director of the SEC's Los Angeles Regional Office, added, "Saiz, like many independent auditors of municipalities, participated in drafting the footnote disclosures to the city's financial statements. Saiz failed to exercise proper professional care and skepticism to see that San Diego disclosed both the positive and negative information regarding its pension and retiree health care obligations."

For this full Securities and Exchange Commission article please visit their site online at www.sec.gov.