The City of Fullerton has agreed to pay $40,000 to settle a years-long CalPERS case involving four retired officials whom the state pension system determined were unlawfully employed by the city. The settlement comes after Fullerton spent approximately $187,000 on outside attorneys defending the city and the four retirees.

Councilmember Ahmad Zahra spoke on the settlement in his comments at the latest City Council meeting.
“We had a CalPERS problem that cost us $240,000,” Zahra said. “Why? Because you fire a city manager, then you bring in people who don’t know how to hire people properly.”

Newly obtained discovery records provide support for the broader point behind Zahra’s criticism: Fullerton’s temporary leadership deliberately used interim retirees while waiting for a future permanent city manager to select members of the executive team.

CalPERS retirees may temporarily fill vacant government positions without suspending their pensions, but state law generally requires the appointment to occur while the agency is actively recruiting a permanent replacement.

Fullerton appointed Eddie Manfro as interim Human Resources Director, Gregory Pfost as interim Community and Economic Development Director, Cindy Collins as interim Deputy City Manager, and Jeffrey Collier as an interim executive who performed Deputy City Manager duties before later serving as acting City Manager.

During an August 2021 City Council discussion, then-Acting City Manager Steve Danley explained why he was bringing in interim officials rather than permanently filling the executive vacancies. Danley said he wanted the incoming permanent city manager “to be able to choose who the permanent person is,” and therefore wanted “an interim in between” until that person arrived. Then-Mayor Bruce Whitaker confirmed the same strategy. Whitaker said the interim appointment would allow the anticipated long-term city manager to choose that key member of the city’s staff.

Those statements are significant because they show that the interim appointments were not simply bridging short recruitments already moving toward permanent hires. City leadership was intentionally keeping the positions temporary so that a future city manager could make the
permanent selections. The CalPERS discovery record specifically cites those comments as evidence that Fullerton was not recruiting permanent appointees in good faith at the time.

CalPERS later determined that all four retired annuitants had been unlawfully employed because the city did not sufficiently demonstrate active recruitment for permanent replacements. Fullerton argued that it had begun recruitment by approving internal personnel requisitions and displaying employment flyers at City Hall. The city also argued that it had consulted with CalPERS while arranging some of the appointments.

But CalPERS found that the limited flyers and other records were not enough to establish the legally required permanent recruitments. CalPERS withdrew some of its original allegations involving work-hour limits and repeat appointments after receiving additional information. However, it maintained its finding that the recruitment requirement had not been met in all four cases. CalPERS also found that Collier had received more compensation than the published salary range permitted for the Deputy City Manager position.

The findings exposed the retirees to potentially severe consequences, including repayment of pension benefits received during the periods of unlawful employment. A December 2025 email obtained through a Public Records Act request revealed that the City Council had agreed to indemnify the four retirees. Indemnification does not necessarily constitute a legal admission of fault, but it meant that the city agreed to financially protect the retirees in the litigation.

At the latest Council meeting, the City Attorney reported that the council voted 5-0 to enter into a settlement agreement and general release with CalPERS on behalf of both the city and the four retirees. Under the agreement, the city will pay CalPERS $40,000. The City Attorney also disclosed approximately $187,000 in outside-counsel fees.

CalPERS will release its related claims, ending the administrative appeals without a final ruling determining whether the city’s recruitment efforts legally satisfied state pension law. The settlement protects the retirees from the substantially larger financial consequences CalPERS initially threatened. It also means Fullerton taxpayers ultimately paid the legal and settlement costs resulting from the disputed appointments.
The written settlement agreement has not yet been publicly examined. That document should clarify whether CalPERS formally withdrew its unlawful-employment determinations or merely agreed not to pursue the resulting claims in exchange for the settlement.