Municipal bonds used to be as good as gold — pretty much completely risk-free, if low-yielding, investments. San Diego's financial bust and what led up to it changed that view, and today federal regulators accused several former city officials of fraud for allegedly hiding the city's true financial picture.

The Securities and Exchange Commission charged five former officials with fraud for having issued false and misleading financial statements for five separate municipal bond offerings in 2002 and 2003. Among those charged was former city manager Michael T. Uberuaga, who resigned in March 2004.

Buyers of the bonds were unaware that the city was facing "severe difficulty funding its future pension and retirement health care obligations unless new revenues were obtained, pension and health care benefits were reduced or city services were cut," the commission noted.

The city's unfunded pension liability was $284 million in 2002 and was expected to grow to a staggering $2 billion in 2009, and the city's liability for its health care commitments to retirees was another $1.1 billion, according to the complaint, filed in federal district court in San Diego.

Instead of disclosing all the salient facts, city officials went ahead and falsely certified documents that hid the city's true financial state, the federal government said.

"Municipal officials responsible for municipal bond disclosure play a key gatekeeper role in protecting investors," said Linda Chatman Thomsen, director of the commission's division of enforcement.

"It is therefore imperative that they honor the public's trust by ensuring that investors are provided with accurate, material information about the issuer's fiscal health."

The S.E.C. also named former city treasurer Mary E. Vattimo, former auditor and comptroller Edward P. Ryan, former deputy city manager for finance Patricia Frazier, and former assistant auditor and comptroller Teresa A. Webster.

According to the commission's complaint, Vattimo drafted "false and misleading disclosures," and Uberuaga falsely certified — by signing the closing letter for one of the bond offerings — that the information it contained was accurate. Lawyers for the accused did not have immediate comment.

The city's finances began to flounder in the mid-1990s when it began to cut back on funding its retirement plan at the same time it was shelling out more on retiree benefits. The investment earnings city officials counted on to make up the difference slid during the stock market decline at the end of the decade.

The city of San Diego settled earlier S.E.C. charges of securities fraud by agreeing not to do it again and to retain an independent consultant for three years to make sure it complied with federal securities disclosure requirements.

by Elizabeth Olson