SAN FRANCISCO - Standard & Poor's affirmed its AA-minus general obligation bond rating on Oakland and the Oakland Joint Powers Financing Authority last week, reacting to a whistleblower lawsuit that claims the city's financial statements overstate its cash balances.
Former Controller Larae Brown last month filed a lawsuit alleging she was fired by city administrator Deborah Edgerly for reporting that Oakland's financial statements overstated its cash position by $172 million. Brown's lawsuit, filed in Alameda County Superior Court, seeks $1.5 million in damages for wrongful termination in March 2007.
"We are confident that our audited financial statements are correct," said Edgerly spokeswoman Karen Boyd. She said Brown was fired "for cause" but wouldn't comment further because it is a personnel matter.
Standard & Poor's last week said it is watching the case closely and will review the city's financial management practices. The credit rating agency said it has not seen evidence that would change its rating. Standard & Poor's upgraded Oakland's general obligation bonds to AA-minus from A-plus early this month.
In her lawsuit, Brown alleges that she reported the city's alleged financial mismanagement to the city's internal and external auditors.
Macias, Gini & O'Connell LLP of Sacramento certified Oakland's comprehensive annual financial report for the year ended June 30, 2007.
"We are in the beginning stages of evaluating the claims in the suit and we do not believe the claims will result in a change in the audit opinion at this time," said Linda Forbes, a spokeswoman for the firm.
"We put a lot of value in the fact that the auditors have signed off on their financial statements," said Gabe Petek, an analyst at Standard & Poor's.
"While our present understanding of the city's cash position is consistent with what is reported in its audited financial statements, a material discrepancy could result in a rating action," Standard & Poor's said in a press release.
Oakland is the eighth largest city in California. It had $1.7 billion of bonds outstanding at the end of fiscal 2007. Its GOs are rated A1 by Moody's Investors Service and A-plus by Fitch Ratings.
