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Los Angeles mayor by-passes national search and names ally H. David Nahai to run Department of Water and Power
Making a move that had been expected for weeks, Los Angeles Mayor Antonio Villaraigosa said Monday he had nominated one of his close allies, attorney H. David Nahai, to run the city's Department of Water and Power. The City Council still must vote to confirm Nahai, who spent two years as a Villaraigosa appointee on the five-member, volunteer Board of Water and Power Commissioners, which oversees the DWP. He promised to develop a "water contingency plan" within 30 days to help the utility respond to the statewide drought. That plan will offer ways to impose higher rates on the biggest water users to encourage conservation, he said. "I believe we have to start to plan for a long dry spell," he said. Nahai, 54, had made no secret of his desire to run the nation's largest municipal utility, which is seeking a package of water and electrical rate hikes even as it expands its reliance on alternative energy sources. Council President Eric Garcetti, who serves on the committee that will review Nahai's nomination, said he wanted to ensure that the new general manager could provide more accountability from the DWP. Born in Tehran and raised in England, Nahai has spent a decade on the Regional Water Quality Control Board. He was named by Villaraigosa to the DWP post only days after DWP General Manager Ron Deaton announced that he was retiring from the city after 42 years. Deaton had been the city's highest-paid executive, receiving $345,000 a year. Los Angeles Times_ 10/30/07 (logon required)
If anyone has been a symbol of unseen power and influence at Los Angeles City Hall, it's Ron Deaton, a 42-year bespectacled bureaucrat who built a formidable reputation by getting the city's elected leaders to do what he told them. In the decade that he advised the 15-member City Council, such labels as "the most powerful person in City Hall" and "the 16th council member" attached themselves to the Seal Beach resident. And when he took the top job at the city's Department of Water and Power in 2004, Deaton found another place where he could affect the lives of millions while staying out of the public eye. But these days, Deaton is participating in a different behind-the-scenes drama, as he, his doctors and Mayor Antonio Villaraigosa wait to see whether, or when, he will leave the agency that provides electricity and water to 3.8 million residents and businesses. Deaton, 64, has been on medical leave from the DWP since July. Sources familiar with the DWP say Deaton could decide his future as soon as this week. Meanwhile, one of Villaraigosa's closest allies, attorney H. David Nahai, has gone so far as to resign from the appointed DWP commission to improve his chances of replacing Deaton. Los Angeles Times_ 10/22/07 (logon required)
The president of the Los Angeles Board of Water and Power Commissioners resigned Friday, a move interpreted at City Hall as his first step toward securing the top executive job at the $4.2-billion municipal utility -- the nation's largest. Within hours, two sources close to Mayor Antonio Villaraigosa described Nahai as the mayor's top pick to replace DWP General Manager Ron Deaton, who has been on medical leave since July. Deaton, who earns nearly $345,000 a year, went on leave after suffering a heart arrhythmia during a trip abroad. Nahai, 54, was born in Tehran and raised in England. A DWP board member since 2005, he also serves on the Regional Water Quality Control Board. Before Deaton's illness, Nahai had voiced interest in the top DWP post. Los Angeles Times_ 10/6/07 (logon required)
Los Angeles Department of Water and Power chief Ronald F. Deaton hospitalized on Costa Rica trip
Ronald F. Deaton, chief of the Los Angeles Department of Water and Power, was hospitalized in Costa Rica over the weekend with an irregular heartbeat, officials announced Monday. In a statement released Monday, the DWP said that "Deaton suffered what doctors have described as a serious cardiac arrhythmia" on Friday night while on vacation with his family. Deaton, 64, was appointed to head the nation's largest municipal utility in late 2004 by then-Mayor James K. Hahn. Deaton, a 42-year employee with the city, previously served as the top advisor to the City Council in his role as the city's chief legislative analyst. Robert Rozanski, the DWP's chief administrative officer, is filling in for Deaton. It is a busy time for the agency, which is expected to raise water and power rates this fall and is also trying to greatly increase its supply of clean power. "From what I hear, it's going to be quite some time before Ron will be well enough to return to his duties, and that is as it should be," DWP commission President H. David Nahai said. Los Angeles Times_ 7/10/07 (logon required)
Dowie, the former public relations executive was sentenced last week to 3 1/2 years in federal prison. (He's set to surrender to authorities on March 30.) He was convicted by the federal government of defrauding Los Angeles taxpayers, possibly by as much as $6 million. He was nevertheless welcomed into Hollywood, a place where a guy with a good yarn, a few well-placed friends and a quest for self-reinvention can find a home. His screenplay, titled "Anonymous Sources," was recently optioned by Jonathan Sanger, a producer on "The Elephant Man," "The Producers" and "Vanilla Sky," among others. The project is now in development, and Dowie, 58, — who maintains his innocence and plans to appeal his conviction — said he'll spend the last few weeks of his freedom doing a rewrite, fine-tuning his plotline. Sanger's company and Dowie signed a contract for an undisclosed amount last fall. For the last two months, Dowie has been working on rewrites with Sarah Black, a former senior vice president of actor Tom Cruise's production company at Paramount. (The U.S. attorney's office declined to comment on Dowie's efforts. "We wouldn't react to stuff like that," said spokesman Thom Mrozek. "We stay above the fray." He also said there's no law on the federal books to prohibit Dowie from writing or profiting on a screenplay, or anything else, that even remotely involves the case). Dowie was charged with 15 counts of conspiracy and fraud. (The judge later described Dowie as an "extremely calculating" man who had lost his "moral compass.") The case dragged on and his legal bills started to mount (eventually topping $3 million). Dowie sold the house, split with his wife, moved into a little apartment and started looking for ways to make money. Los Angeles Times_ 2/7/07 (logon required)
January, 2007
Former public relations and newspaper executive Douglas R. Dowie was sentenced Tuesday to 3 1/2 years in federal prison for defrauding city taxpayers, adding a painful coda to a career that once scaled the heights of Los Angeles media influence and political power. U.S. District Judge Gary Feess told Dowie that he had abused the public's trust and lost his "moral compass" in masterminding a scheme to overbill city government for consulting services. But in his first courtroom statement on the case, Dowie defiantly insisted that he was wrongfully convicted May 16. After he was sentenced, he said, "I am innocent, and I will appeal." In contrast, co-defendant John Stodder Jr., 51, was contrite, accepting responsibility. He received a 15-month sentence. The scandal rocked Los Angeles City Hall, where Dowie had been a confidant of then-Mayor James K. Hahn. It spurred ethics reform and is credited with helping persuade voters to elect Antonio Villaraigosa mayor. It also bloodied one of the nation's premier public relations firms: Dowie's employer, Fleishman-Hillard. In 2004, the firm paid the city $6 million to settle a lawsuit claiming overbilling, mainly to the Department of Water and Power. Dowie, 58, a former managing editor at the Daily News of Los Angeles, headed Fleishman-Hillard's Los Angeles office. He earned as much as $330,000 a year and the firm's DWP contracts alone amounted to $3 million a year. The St. Louis-based company, with 80 offices worldwide, was never charged with a crime, though a succession of top executives from its L.A. office admitted participating — several under grants of immunity — and testified against their former boss. Los Angeles Times_ 1/31/07 (logon required)
U.S. District Judge Gary Feess said Monday he's inclined to sentence two ex-PR executives who overbilled the Department of Water and Power to less time than federal guidelines recommend, but put off sentencing to give the defense a chance to question an investigator about how much the fraud cost the utility. Dowie, who headed the Los Angeles office of public relations firm Fleishman-Hillard, was convicted in May of conspiracy and multiple fraud counts, along with his onetime right-hand man, Stodder. Prosecutors have asked for five years for Dowie and nearly three and one-half years for Stodder. City News Service/Pasadena-Star News_ 1/9/07
Dowie, who headed the Los Angeles office of PR firm Fleishman- Hillard, was convicted in May 2006 along with Stodder, his onetime right-hand man. Both men face the prospect of incarceration. Dowie -- an ex-Marine, former United Press International bureau chief in Los Angeles and a onetime Los Angeles Daily News managing editor -- was an insider in the administration of then-Mayor James Hahn. His attorneys argue that if he is ordered to spend time behind bars, he should be allowed to do so at a work camp rather than prison. In 2005, Fleishman-Hillard settled with the city by paying $5.7 million in connection with the overbilling. City News Service/NBC4_ 1/8/07
November, 2006
Los Angeles Department of Water and Power overbilling case comes to a close
A public relations firm has agreed to pay $1 million to the Los Angeles Department of Water and Power to settle claims that the company couldn't substantiate charges and overbilled the agency for consulting services, officials announced Wednesday. The settlement allows the Lee Andrews Group to repay the money over six years and resolves "claims" against the firm that were raised in audits by the DWP and City Controller Laura Chick. The company is a former subcontractor to Fleishman-Hillard Inc., which last year agreed to pay $5.7 million to settle a city lawsuit that alleged that firm padded its bills to the DWP and other city agencies. The agreement, signed by company founder Donna Andrews and negotiated by the city attorney's office, does not use the word "overbilling." However, DWP Board President H. David Nahai and Chick confirmed the claims of audits involved overbilling, including unsubstantiated invoices and the marking up of invoices to amounts that were not reasonable for the services rendered. Los Angeles Times_ 11/9/06 (logon required)
The former head of Fleishman-Hillard's public relations office in Los Angeles should be sentenced to five years in prison and his top executive to more than three years for overcharging L.A.'s Department of Water and Power and other clients, federal prosecutors have recommended. The recommendations are significantly less than the maximum 240 years facing Doug Dowie, who ran the agency's L.A. office, and 225 years facing John Stodder, who were convicted in May of multiple counts of conspiracy and wire fraud. Their sentencing is set for Nov. 13. Prosecutors cited their "ongoing refusal to accept any responsibility for their conduct," according to court documents. The overbilling case grew out of a sweeping investigation into City Hall corruption. In arguing that he should get only probation, Dowie filed numerous letters of support, including one from former Department of Water and Power chief David Wiggs, who worked with the defendant during the period when most of the overbillings took place. "I had complete trust in Doug and if I were to run a company again, I would not hesitate to seek out and hire Doug," Wiggs' letter said. "The findings of the jury simply do not reflect the person I know and worked with for 3 1/2 years." Los Angeles Daily News_ 10/2/06
Former Fleishman-Hillard PR exec Steve Sugarman gets 3 years probation; Was star witness at trial
A former Fleishman-Hillard executive who became a star prosecution witness after admitting to bilking the Los Angeles DWP out of tens of thousands of dollars, was sentenced Monday to three years' probation. Steve Sugerman had faced 15 years in prison and fines totaling $750,000 for his guilty plea on wire-fraud charges. But prosecutors recommended leniency in exchange for Sugerman's testimony against his former boss, Doug Dowie. He and John Stodder, a former public-relations executive who joined the firm after Sugerman left, each face more than 200 years in prison after their convictions on conspiracy and wire fraud. As part of his plea agreement, Sugerman admitted to defrauding clients out of $120,000, including thousands of dollars in hours he billed but didn't work. Richard Kline, Fleishman-Hillard's general manager in Los Angeles, said it would be inappropriate to comment on the sentence. The firm paid nearly $6 million to settle a city lawsuit alleging overbilling. Dowie and Stodder are scheduled for sentencing Oct. 2. Los Angeles Daily News_ 9/19/06
May, 2006
Douglas Dowie, the former Los Angeles political powerbroker and newspaper executive, was convicted today of conspiracy and fraud in the alleged scheme to overbill city taxpayers for public relations consulting services. Dowie was convicted on 14 counts of wire fraud and one count of conspiracy. His aide and codefendant, John Stodder Jr., was convicted on 11 counts of wire fraud and one of conspiracy. Conspiracy carries a maximum penalty of five years in prison and most of the wire fraud counts carry a maximum penalty of 20 years in prison. Jurors, who deliberated for more than four days, believed that public relations giant Fleishman-Hillard intentionally overbilled city taxpayers for its service to the city Department of Water and Power, the port and the airport. Dowie headed Fleishman's Los Angeles operation, earning as much as $330,000 a year and using his media and political contacts to build a bustling office that received City Hall contracts amounting to $3 million a year from the DWP alone. The St. Louis-based firm, with 80 offices worldwide, was never charged with a crime, though a succession of top executives at its Los Angeles office under Dowie were alleged to have participated in the scheme. The firm paid the city $6 million last year to settle a civil lawsuit that alleged overbilling. Los Angeles Times_ 5/16/06 (logon required)
As jurors deliberate criminal charges against former public relations executive Douglas Dowie, a federal judge threw the one-time Los Angeles political power broker out of civil court Monday after he failed to prove that he was fired improperly. The tentative decision by U.S. District Judge Margaret M. Morrow was a blow to Dowie, now being tried on criminal conspiracy and fraud charges of overbilling Los Angeles on behalf of his then-employer, Fleishman-Hillard Inc. Dowie, 58, a confidant of former Los Angeles Mayor James K. Hahn and a former managing editor of the Los Angeles Daily News, claimed in the parallel civil lawsuit that he had been fired because he uncovered a scheme of illegal campaign contributions by Fleishman-Hillard's Los Angeles office, which he headed. The St. Louis-based public relations firm settled a lawsuit and paid the city more than $6 million in damages for overbilling the city's water and power, port and airport agencies. Los Angeles Times_ 5/9/06 (logon required)
Prosecutors charged Friday that Douglas Dowie, a onetime City Hall power broker and public relations executive, masterminded a billing scheme that defrauded city taxpayers and L.A.'s water and power, port and airport operations. Assistant U.S. Atty. Adam Kamenstein closed Dowie's conspiracy and fraud proceedings by citing the first day of trial one month ago, when jurors were told that prosecution of the former Fleishman-Hillard Inc. public relations honcho was one of "first-grade morals and third-grade math." Dowie's defense attorney, Nic Hanna, countered that the case was based on "just three scared and very intimidated witnesses who cut a deal with the government, and a handful of e-mails taken out of context." Dowie and John Stodder Jr., his assistant, are charged with conspiracy to defraud clients of Fleishman-Hillard, the St. Louis public relations giant that built a big L.A. practice based in part on Dowie's connections and drive. The firm admitted to overbilling, and last November completed damage payments to the city totaling $6 million to settle a lawsuit on behalf of taxpayers. "The people in St. Louis — they knew all about it. How did Mr. Dowie and Mr. Stodder come to be the lucky ones?" said Stodder's attorney, Jan Handzlik, demanding to know why "bigwigs" at headquarters were not charged in the billing conspiracy. Los Angeles Times_ 5/5/06 (logon required)
Douglas R. Dowie, a political power-broker and one-time editor of the Daily News, rested his case Tuesday without calling any witnesses to refute charges that he and a top aide at Fleishman-Hillard Inc. public relations giant conspired to defraud city taxpayers by overbilling the Department of Water and Power. The surprise ending means that neither Dowie nor co-defendant John Stodder will testify. Stodder called two witnesses, and his lawyer said he would rest his case today. A one-time confidante of former Mayor James K. Hahn, the former $330,000-a-year head of Fleishman-Hillard's Los Angeles office raided City Hall to create a politically connected staff that brought in millions of dollars in business from the city's water, port and airport agencies. Dowie's testimony had been expected to cast city contracting practices in a dim light. Dowie's lawyers contend that subordinates padded bills without his knowledge, and Stodder said he did nothing wrong. The defense is expected to contend in closing arguments this week that government witnesses did not conclusively show the men acted with the intent to defraud the city and other clients. Los Angeles Times_ 5/3/06 (logon required)
April, 2006
Although his lawyers have yet to say whether Douglas Dowie will testify, jurors in the former public relations executive's trial on charges of overbilling the city heard from him Friday when prosecutors played a videotaped deposition in which he discussed how he ran Fleishman-Hillard's Los Angeles office. Dowie and a deputy, John Stodder, are accused of conspiring to falsify billings to the city Department of Water and Power and other city and private agencies on behalf of the St. Louis public relations giant. Fleishman-Hillard has repaid the city about $6 million for billed work it acknowledged could not be verified. Assistant U.S. Atty. Adam Kamenstein put on a multimedia show in federal court Friday, interspersing clips of Dowie speaking with excerpts from some of the 1.2 million e-mails seized in the two-year investigation. The e-mails included one from June 6, 2003, in which Dowie asked Stodder, "How much could we pad [the DWP account] with ambiguous billings?" Los Angeles Times_ 4/29/06 (logon required)
Steven Sugerman, who once served as one of then-Mayor Richard Riordan's top aides, told federal jurors he billed falsely for the international public relations giant, and instructed subordinates to do the same, at the direction of his boss, Douglas Dowie, who himself was once a confidant of former Mayor James K. Hahn. Sugerman, testifying under a cooperation deal with prosecutors, said the DWP was treated as a "cash cow" to make up deficits in projected monthly revenues for the Los Angeles office of Fleishman-Hillard, then a powerhouse at City Hall. The testimony was the most compelling to date in a federal fraud and conspiracy trial targeting Dowie and his co-defendant, John Stodder Jr., that has laid bare the intersection of politics and profit at City Hall. Like Sugerman, the other major witnesses have been former city employees, communications industry executives or former journalists. Stodder worked in the Tom Bradley administration. Los Angeles Times_ 4/28/06 (logon required)
A federal judge declared a former city official hostile to prosecutors Tuesday, an unusual move that gives them more freedom to question him about overbilling by one of the nation's largest public relations firms. The testimony of Eric Moses, a top aide to former Mayor Richard Riordan and once a writer for the Los Angeles Daily News, drew the ire of U.S. District Judge Gary A. Feess, who is presiding over the trial. It was a flutter of drama that momentarily broke a succession of testimony focusing on dozens of billing documents. They are the backbone of the fraud and conspiracy case against Douglas Dowie, once a political power broker and former Daily News managing editor, and John Stodder, who was his deputy. Both helped build the Los Angeles office of Fleishman Hillard Inc., often by winning government consulting contracts. Dowie, who once earned $330,000 a year and was a confidant of former Mayor James K. Hahn, alleges that his employer fired him to cover up a scheme to funnel illegal political contributions. The firm has acknowledged overbilling the city and repaid city agencies almost $6 million to settle a lawsuit. The firm said Dowie's allegation is an attempt to extort money from the St. Louis-based firm. In a short hearing after jurors were dismissed for the day, Feess called Moses unresponsive and recalcitrant. Los Angeles Times_ 4/19/06 (logon required)
A second worker has identified Fleishman-Hillard Inc. executive John Stodder as the man who issued instructions to falsify public relations billings to the city, a federal jury was told Friday. Candice Campbell, who worked in the international public relations firm's Los Angeles office for 10 years, testified Friday against Stodder and his former boss, Douglas Dowie, who are on trial for conspiracy and fraud. They are accused of padding bills to the city's Department of Water and Power to help their employer collect $325,000. Fleishman agreed to repay almost $6 million to the DWP for the false billings. The final $2.2-million payment was made Nov. 10. Los Angeles Times_ 4/15/06 (logon required)
Los Angeles Department of Water and Power case witness admits making misstatements during probe
A former Fleishman-Hillard employee who testified she padded bills to the city on orders from her former bosses admitted Wednesday to making misstatements to investigators, but held firm to her basic story of fraud by the international public relations firm. Monique Moret, testifying under a grant of immunity, was pummeled over five hours of cross-examination by a lawyer for John Stodder, on trial in the overbilling scheme that cost taxpayers almost $6 million. Also charged in the case is Doug Dowie, the head of Fleishman-Hillard's Los Angeles office. Stodder was his deputy. All the funds have been repaid by Fleishman-Hillard, which was close to former Mayor James K. Hahn and influential in Los Angeles political circles until the scandal hit. It's a closely watched case cutting to the heart of City Hall corruption. Los Angeles Times_ 4/13/06 (logon required)
A former Fleishman-Hillard vice president testified Tuesday that she padded the public relations firm's bills to the Los Angeles Department of Water and Power by as much as $50,000 a month. Monique Moret, who is testifying under a promise of immunity from prosecution, told jurors that she acted at the direction of her boss, John Stodder, who told her that the orders came from Douglas Dowie, the Los Angeles office's general manager. Why? Assistant U.S. Atty. Adam Kamenstein asked Moret. "We hadn't met our projections," she said. "We needed to bump up our hours." Stodder and Dowie are on trial in downtown Los Angeles on federal conspiracy and wire fraud charges. They are accused of bilking more than $325,000 from the DWP and other clients between 2000 and 2004. Dowie, in a separate civil filing, has asserted that he is a scapegoat for campaign money-laundering by Fleishman-Hillard. Los Angeles Times_ 4/12/06 (logon required)
One martini was all it took. Slipped into a $300,000 bill from a public relations firm with close ties to Mayor James K. Hahn, the cocktail, imbibed by Hahn deputy Troy Edwards, didn't pass Department of Water and Power employee Randy S. Howard's smell test, he testified Friday. He refused to approve paying for the drink, and was moved out of his job as DWP director of corporate communications. Douglas Dowie, the former head of Fleishman-Hillard's Los Angeles office, and his deputy, John Stoddard Jr., are accused of billing DWP more than $300,000 for hours they didn't work. They have pleaded not guilty. The case is the first criminal prosecution to come out of an ongoing state and federal "pay to play" investigation into accusations that politicians traded city contracts for campaign contributions. Although pay to play is not part of the government's case against the two public relations executives, Dowie has accused Fleishman-Hillard in a separate civil suit of wrongfully firing him in January 2005 to cover up the firm's laundering of campaign contributions to Los Angeles politicians. A lawyer for the firm has denied the allegations. Los Angeles Times_ 4/8/06 (logon required)
Trial of 2 in overbilling of Los Angeles Department of Water and Power gets underway
The first criminal trial arising from the ongoing "pay-to-play" investigation into Los Angeles city contracting opened Tuesday with dozens of prospective jurors completing questionnaires. Twelve of those panelists will eventually decide the fate of two former public relations executives accused of conspiring to overbill the city a total of about $325,000 in 2000, 2002 and 2003. Douglas R. Dowie, once a political fundraiser and confidant of former Mayor James K. Hahn, and John Stodder, Dowie's deputy, ran Fleishman-Hillard's Los Angeles office. They are accused of padding the firm's $3-million-a-year contract with the city's Department of Water and Power. Dowie, 58, of West Hills and Stodder, 50, of Palos Verdes Estates have pleaded not guilty to conspiracy and wiretapping. If convicted, they could face three to five years in prison, legal experts say. Los Angeles Times_ 4/5/06 (logon required)
January, 2006
Review sought of Los Angeles Department of Water and Power's chief
After a year of controversy over spending by the Department of Water and Power, Los Angeles Mayor Antonio Villaraigosa called Thursday for the agency's governing board to begin a performance evaluation of its general manager. A letter from Villaraigosa details 37 goals and issues that should be considered in evaluating Ron Deaton, who was appointed to head the DWP in November 2004 by then-Mayor James K. Hahn. The review is required by the City Charter, but the timing drew more attention to the department, which has been embarrassed in recent weeks by reports of buying bottled water, paying for writing classes and supporting an expensive employee exercise facility. Mayoral spokesman Joe Ramallo said similar letters are going to the airport and harbor departments. Los Angeles Times_ 1/20/06 (logon required)
Owens Valley, California residents locked in standoff with Los Angeles Department of Water and Power
The standoff at Pine Creek is only one of many disputes between Owens Valley residents and Los Angeles, which has been importing Eastern Sierra snowmelt since 1913, turning much of the valley into desert scrubland in the process. But there is a certain urgency to the squabbles now, with the election of a new mayor in Los Angeles and his appointment of environmentalist Mary Nichols to head the DWP's Board of Water and Power Commissioners. Initially, environmentalists and supporters of the DWP activities here had high hopes for dramatically improved relations between the city and valley. Now, they aren't so sure. Asked to comment on the Pine Creek dispute, for example, DWP General Manager Ron Deaton smiled and cited a quote often attributed to Mark Twain: "Whiskey's for drinkin', water's for fightin'." "We're not going to send police up there with shotguns like we did in the 1920s," Deaton said. "But we may have to settle this in court." Gearing up for a legal showdown over Pine Creek, many of the 90 residents of 40 Acres have been spending nearly all of their spare time in libraries and in Inyo County archives, trying to shore up their claims to the water needed for household chores, irrigation and fighting fires. Los Angeles Times_ 1/9/06 (logon required)
July, 2005
In a cooperation deal with federal prosecutors, a former executive at public relations giant Fleishman-Hillard pleaded guilty Monday to taking part in a scheme to bilk the city of Los Angeles out of thousands of dollars by padding bills to the Department of Water and Power. Sugerman, 41, is expected to testify against his former boss at a trial set for November. Sugerman faces a maximum sentence of 15 years in prison and a $750,000 fine, but could receive probation because of his cooperation. Los Angeles Times_ 7/12/05 (logon required)
June, 2005
PR exec pleads guilty in phony Los Angeles Department of Water and Power billing scheme
Steven Sugerman, a public relations executive and former city official, agreed today to plead guilty to participating in a scheme at Fleishman-Hillard to bilk the city of Los Angeles through phony billings to the Department of Water and Power. Federal prosecutors announced that Sugerman, 41, who served as director of communications for Mayor Richard Riordan, has also agreed to testify against his former boss at Fleishman-Hillard, Douglas R. Dowie, who was indicted on similar charges last week. Sugerman acknowledged involvement in overbilling of more than $120,000 at Fleishman, an international public relations firm, over two years. He was charged only with $68,000 of that total. Los Angeles Times_ 6/9/05 (logon required)
A federal grand jury indicted Douglas R. Dowie, 57, of Los Angeles, on 15 felony counts of wire fraud and one count of conspiracy. His name was added to an existing complaint against a former Fleishman-Hillard vice president, John Stodder, 49, of Palos Verdes Estates, who faces a conspiracy charge and 11 counts of wire fraud. Stodder has pleaded not guilty to the charges. Dowie was expected to be arraigned Friday. Each count of wire fraud carries a penalty of up to 20 years in prison. The indictment alleged that Dowie and others were responsible for more than $300,000 in fraudulent bills submitted to the Los Angeles Department of Water and Power. Previously, officials had put the number at $250,000. In March, Dowie filed suit against the firm, claiming it used him as a scapegoat in a city billing scandal. AP/San Francisco Chronicle_ 6/2/05
April, 2005
The settlement, which also covers the Convention and Visitors Bureau, the Port of Los Angeles and Los Angeles World Airports, which operates Los Angeles International Airport, ended the PR firm's troubles with the city but not with federal and county prosecutors. Richard Kline, Fleishman’s regional president and Los Angeles general manager, said in a press release that the firm settled after conducting an internal investigation that found “some senior executives of the Los Angeles office, who are no longer with the firm, caused certain bills to be presented to the city that appear to be improper and indefensible." Los Angeles Business Journal_ 4/20/05
Assistant U.S. Atty. Adam D. Kamenstein said he expects another indictment this month or next in the ongoing investigation of public relations firm Fleishman-Hillard that allegedly submitted false bills to the Los Angeles Department of Water and Power. John Stodder Jr. is the only former Fleishman-Hillard executive charged to date in a case involving at least $250,000 in allegedly phony bills submitted for work never performed. Kamenstein said he expects a grand jury to return a superceding indictment against Stodder and an additional defendant in April or May. His comment came after a judge asked why the government wanted to postpone Stodder's August trial. Kamenstein did not indicate who he expects the other defendant to be. Los Angeles Times_ 4/12/05 (logon required)
Dowie claims in the suit that he was fired in January, despite the findings of the firm's own investigation that he did not engage in misconduct involving billing practices with the city's Department of Water and Power. The suit seeks lost wages and other damages. Dowie earned an annual salary of about $370,000. St. Louis-based Fleishman-Hillard has been the focus of a Los Angeles County district attorney's investigation and a separate probe by federal prosecutors. AP/San Francisco Chronicle_ 3/31/05
John Stodder, 49, a former senior vice president at Fleishman-Hillard, a public relations firm that won millions of dollars of city business, pleaded not guilty to federal fraud charges in an alleged scheme to overcharge taxpayers. He's charged with 11 counts of wire fraud and is scheduled to stand trial Aug. 2. Stodder was indicted last month in which he is accused of being responsible for nearly $250,000 in fraudulent bills submitted to the Los Angles water and power department. The indictment also alleged Fleishman-Hillard overbilled such clients as the Port of Los Angeles, architect Frank Gehry's firm and the World Wide Church of God. Fleishman-Hillard has been the focus of a county investigation into whether Mayor James Hahn's administration forced businesses to "pay to play" for contracts. AP/San Francisco Chronicle_ 2/7/05
A federal grand jury delivered the first indictment in a wide-ranging criminal investigation of corruption in Los Angeles city government, alleging that a former public relations executive at Fleishman-Hillard defrauded city agencies and private clients. The indictment accuses John Stodder Jr., a partner and senior vice president who ran the firm's local public affairs practice, of participating with "others known and unknown" to submit at least $250,000 in false billings to the Department of Water and Power. Also allegedly cheated were the Port of Los Angeles, the Worldwide Church of God and the firm of renowned architect Frank Gehry. The indictment makes it clear that grand jurors believed Stodder was not acting alone, referring to at least two other "co-schemers." Law enforcement officials declined to say whether they would seek charges against others, but noted that they had not finished their work. Los Angeles Times_ 1/14/05 (logon required)
December, 2004
Arguing that Los Angeles officials have prejudiced residents against Fleishman-Hillard, the public relations firm has asked for the city's lawsuit alleging that the company defrauded taxpayers to be moved to Ventura County. The firm has offered to negotiate a settlement of a city audit's claims that Fleishman billed the city for $4.2 million in questionable costs. The Los Angeles city attorney filed a lawsuit alleging that the firm overbilled the city after The Los Angeles Times reported July 15 that seven former employees said they were encouraged or directed to inflate bills to the Department of Water and Power. Los Angeles Times_ 12/18/04 (logon required)
Billing records and e-mails show that the DWP paid Fleishman more than $400,000 over 2002 and 2003 for work to bolster the mayor's image, craft his responses to civic crises and even develop major policy initiatives. Los Angeles Times_ 11/19/04 (logon required)
City Controller Laura Chick, who issued an audit critical of Fleishman, released billing records showing the firm's employees held lengthy meetings with the mayor's deputies while the DWP was charged thousands of dollars for those consultations. The mayor firmly rejected the suggestion that Fleishman was working for him rather than for the DWP. Richard Kline, who heads Fleishman's Los Angeles office, said he was unaware of any orders from the mayor's office to do public relations for Hahn rather than the DWP. Los Angeles Times_ 11/18/04 (logon required)
Controller Laura Chick said she turned the findings over to federal and local prosecutors who are investigating the contract, as well as City Atty. Rocky Delgadillo, who has sued Fleishman-Hillard seeking reimbursement for alleged overbilling. Fleishman-Hillard disagreed with most of the audit findings, but offered to submit to mediation to work out a settlement. Chick and Delgadillo rebuffed the mediation idea. Los Angeles Times_ 11/16/04 (logon required)
Los Angeles expands lawsuit against PR firm Fleishman-Hillard
City Attorney Rocky Delgadillo claims the firm and the former head of its Los Angeles office defrauded three city departments by overcharging on monthly bills. The city originally filed a lawsuit against Fleishman-Hillard and unnamed employees on July 16, alleging the company defrauded the city under a $3 million annual contract it had with the Department of Water and Power. AP/San Francisco Chronicle_ 9/14/04
International
PR firm Fleishman-Hillard Inc. routinely overbilled Los Angeles' Department
of Water and Power, former employees say
Former employes claim time sheets were falsified at Fleishman-Hillard on a
$3-million-a-year city contract to improve the image of the DWP. The company
says it does not condone unethical or improper billing. The former employees
said they were encouraged — and sometimes told — to submit falsified
time sheets to the DWP to make as much as possible from the municipal utility,
which was considered a "cash cow." Los Angeles Times_ 7/15/04
(logon required)
Fleishman-Hillard,
one of the largest U.S. public relations firms, withdraws from all
contracts with the city of Los Angeles, including the Department of
Water and Power, in the midst of a federal probe into allegations that
city officials rewarded campaign donors with lucrative contracts
The St. Louis-based firm, whose client roster reads like a Who's Who of Corporate
America, said it will not renew expiring contracts with the Port of Los Angeles
and the Department of Water and Power, and will step out of an ongoing pact
with the city's airport administrator on May 20. The three contracts net Fleishman-Hillard
about $3 million a year, less than 2 percent of the annual billing for the
agency's 85 worldwide offices.Reuters_ 4/21/04
