SAN DIEGO
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The Southeastern Economic Development Corp. made a conditional commitment yesterday to pay the legal defense of its outgoing president, Carolyn Smith, who has been sued by San Diego City Attorney Michael Aguirre over bonuses she approved for herself and her staff.
After a two-hour closed-door meeting last night, the chairman of the agency's board of directors, Artie “Chip” Owen, announced that trustees agreed to provide Smith indemnification, but a list of conditions will be attached.
Those conditions can give SEDC the flexibility to withdraw the indemnification, said SEDC's legal counsel, Regina Petty.
Aguirre sued Smith this month demanding that she repay bonuses the city did not authorize. SEDC employees received compensation of more than $1 million above their base pay over a five-year period.
Trustee Karen Howard said the board's decision to provide Smith legal defense only reaffirms provisions already in her contract. The contract includes indemnification, provided Smith was acting within the scope of her job.
Aguirre alleges in the lawsuit that Smith acted outside the scope of her employment when she approved the bonuses for herself and others.
Smith was fired last month amid revelations about budget and compensation anomalies at SEDC, a nonprofit corporation formed by San Diego to guide redevelopment in the southeast quadrant of the city. Smith, SEDC's president since 1994, is set to leave Oct. 21. She has said the bonuses were part of authorized budgets and were given out according to the agency's written policies and long-standing practices.
Mayor Jerry Sanders and the City Council plan to replace most of the trustees on SEDC's board early next month. In the meantime, the Mayor's Office, Aguirre and some City Council members have urged the board to refrain from making major decisions. Aguirre said yesterday that the new board, once seated, can try to undo the indemnification.
At the beginning of yesterday's meeting, trustee Cruz Gonzalez tried unsuccessfully to have the board continue the entire agenda until next month for the new board.
However, Owen and Petty argued that decisions must be made on time-sensitive legal matters, including Smith's request for legal defense. Owen lectured the board on its fiduciary duty and said the board may be waiving certain legal rights by not taking action.
“To say you are not going to undertake any of the normal course of business of this board smacks of breaching your fiduciary responsibility,” Owen said.
Petty told trustees they have a “duty of loyalty” to the SEDC. She reminded them they serve on the independent board of a California corporation. The mayor and City Council have said the SEDC board must answer to them because it exists only to serve the city.
The board yesterday also discussed a lawsuit filed by citizen activist Ian Trowbridge against Smith and the SEDC, alleging the agency's board violated the state's open-meeting law when it approved Smith's termination agreement behind closed doors. The agreement calls for Smith to receive $100,350 in severance. Trustees voted not to undo the agreement. Trowbridge said he will continue to pursue his suit.
Helen Gao: (619) 718-5181; helen.gao@uniontrib.com
