L.A. Plans to Sue PR Firm Over DWP Bills

City Atty. Rocky Delgadillo said Thursday that he would sue Fleishman-Hillard Inc., an international public relations firm, for allegedly defrauding the city of Los Angeles by systematically inflating monthly bills on work it did under a $3-million-a-year contract with the Department of Water and Power.

Delgadillo was among a quartet of elected officials who reacted to revelations in The Times on Thursday that seven former Fleishman employees had said they were routinely encouraged and sometimes told to submit falsified time sheets overstating hours spent on the DWP account.

Two additional former employees surfaced to say that falsified billings extended to some Fleishman commercial accounts.

Richard Kline, a senior partner who now runs the firm’s Los Angeles office, said Fleishman does not condone unethical conduct, and he called on current and former employees to come forward if they had any knowledge of such practices.

“It’s always been the policy of Fleishman-Hillard to encourage employees to bring their concerns forward to management, and we want to reiterate it now,” Kline said. “We encourage any employees, past or present, to bring any concerns to me personally as regional president and general manager of the L.A. office. Or they can contact our chief talent officer, Agnes Gioconda, based in St. Louis.

“We find the notion of fabricating billable hours abhorrent and in violation of everything we stand for as a company,” Kline said. “The allegations about the past events in the L.A. office are very disturbing, if true. We’re not discounting any information as we continue our investigation.”

After the city attorney’s office interviewed the only former employee identified by name in the Times article, Delgadillo released a statement saying: “My office is preparing a lawsuit to get back the ratepayers’ money. This is more than sloppy billing; it appears to be outright fraud against the ratepayers of this city. And it’s particularly egregious since city residents just got slapped with a rate hike. Ratepayers should be furious to learn that their hard-earned dollars are likely paying the fraudulent bills of PR consultants.”

The former employee, Diana Greenwood, confirmed that she was contacted Thursday by an assistant city attorney, who asked if she would be a witness in a civil suit.

“I said yes,” said Greenwood, now an independent screenwriter.

She told The Times that she quit Fleishman in 1999 after a year because she was disturbed by the inflated billings. She estimated that about 20% of her time billed to the DWP was bogus. She is the daughter of Noel Greenwood, a former Times senior editor who retired in 1993.

A spokesman for Delgadillo said the lawsuit could be filed as early as today.

Also Thursday, Los Angeles County Dist. Atty. Steve Cooley wrote Delgadillo and City Controller Laura Chick asking them to join him in assessing whether any crimes had been committed.

“Assuming the allegations in the L.A. Times are accurate,” Cooley said in a statement, “what we are talking about is a false billing scheme where the victims are Los Angeles city taxpayers and DWP ratepayers. It’s a form of theft. We have requested the city controller, Laura Chick, and the city attorney, Rocky Delgadillo, be involved and work with the district attorney’s office to determine whether a crime has occurred. An investigation is merited.”

A spokeswoman for Mayor James K. Hahn said late Thursday that Hahn had directed the DWP to investigate its bills from Fleishman-Hillard to “get to the bottom of this.”

“If there was overbilling or any other problem, he wants to seek the strongest recourse available,” said Deputy Mayor Julie Wong.

Controller Chick said she would proceed with an already-initiated audit of the Fleishman contract, which she said had been hampered by the firm’s reluctance to turn over certain documents.

She said she would also use disclosures from the former employees to argue that certain city contracting practices needed to be overhauled.

She said the city relied too heavily on multiyear consulting contracts with firms such as Fleishman-Hillard, which has had DWP contracts since 1998 worth more than $25 million.

“Year after year,” she said, “we’re paying the same company for the same services.... Why haven’t we trained in-house staff?”

Two of the former Fleishman employees, who were not identified by name, told The Times that in recent years inflated billings on the DWP account sometimes amounted to $30,000 a month.

Two additional former employees of Fleishman’s Los Angeles office came forward Thursday with claims of false billing on the firm’s commercial accounts.

Keith Pillow, who said he worked as a middle manager at Fleishman for part of 2000 and 2001, when he was laid off, said he falsified some hours. He said he was ordered to bill 10 hours a day, rather than a customary eight, in August 2001, at a time when high-tech firms were eliminating or cutting back on outside public relations expenses.

Pillow said there were discussions in the office about how to “fill in that time.” He said a conclusion was reached that “a certain number of hours” would have to be “fabricate[d]” in order “to meet the requirement.”

Kline confirmed that Pillow worked at Fleishman for 15 months but denied his claims about billing practices.

“With certainty, and unequivocally, there’s no mandate and no model and no policy at Fleishman-Hillard that requires or suggests 10 billable hours a day,” Kline said. “In the last couple of hours, we’ve reviewed [Pillow’s] time-entry reports. In the entire time he was with the firm, he billed 10 hours a day on 13 days. His average billable hours was 6.5 hours per day.... In August 2001, he averaged 4.4 billable hours a day.”

Pillow stood by his claim that there was a 10-hour requirement.

“I think that’s bogus,” he said of Kline’s accounting. Pillow said he was certain he had billed for more 10-hour days than cited by Kline.

A second employee, who worked at a low level in the Los Angeles office, said she faked about 10 hours a week, billed to deep-pocket commercial clients at $180 an hour.

“You had to fake your hours or you weren’t billing enough time to be [considered] profitable,” said this employee, who, like most of those quoted in The Times on Thursday, insisted on anonymity. They said that because they still worked in the PR field, they feared their careers might be harmed if they were quoted by name.

Meanwhile, a Fleishman senior vice president told a luncheon meeting of the Orange County chapter of the Public Relations Society of America that, under the circumstances, all of the attention the firm was getting was unwelcome.

Debra Hotaling criticized the Times article, saying it “was built almost entirely on anonymous sources.”

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Times staff writer Susan Anasagasti contributed to this report.