San Diego’s city council has dropped Vinson & Elkins from a Securities and Ex-change Commission (SEC) investigation into allegations of securities fraud by municipal officials.
Morgan Lewis & Bockius will replace Vinson. The firm will help the SEC to conclude an 18-month investigation into the council’s finances and its failure to disclose details of its pension fund deficit to potential investors. The deficit is estimated to be more than $1.4bn (£760m).
Vinson was criticised by the council for high fees and the scope of its work. The council believed that Vinson should not represent the council before the SEC at the same time as acting as an independent investigator into any possible securities fraud.
The council also criticised Vinson’s fee management. The firm did not submit regular receipts despite its billings topping $6.3m (£3.4m) since February 2004.
Morgan Lewis will be paid up to $250,000 (£135,900) initially. The firm will produce receipts and has been blocked from charging for mileage or airfares from its Los Angeles (LA) office. It will only represent the city before the SEC.
Vinson is no stranger to SEC controversy. Post-Enron, the regulator questioned how Vinson could give Enron a clean bill of health just weeks before it removed $580m (£315.4m) of fake earnings from its books and then declared bankruptcy.
San Diego city manager Lamont Ewell said Morgan Lewis partner John Hartigan’s experience as a former SEC assistant director of enforcement was a key consideration in the firm’s appointment.
Vinson issued two reports on the pension troubles, revealing long-term disclosure flaws. However, the reports found no wrongdoing or any signs of a cover-up by municipal staff.
Vinson was unavailable for comment.