SAN FRANCISCO - Orrick, Herrington & Sutcliffe LLP, California's biggest bond counsel firm, has agreed to pay San Diego $2.875 million to settle a lawsuit that accused the firm of negligence for failing to discover the city's pension scandal earlier.

Orrick was counsel to the city in 2002 and 2003, when San Diego failed to disclose its growing pension liabilities to bond investors. Orrick eventually discovered the problem and reported it to the city attorney, setting in motion a series of investigations that eventually led to Securities and Exchange Commission sanctions against the city in 2006.

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