Firm used taxpayer money for prostitutes, Las Vegas bachelor parties, DWP claims in lawsuit

The Los Angeles City Attorney alleged Thursday that top managers at a consulting firm hired by the Department of Water and Power authorized inflated time records to earn payments for work the firm never performed, then spent the money on prostitutes, hotels and bottle service liquor for two Las Vegas bachelor parties.

A motion filed in Los Angeles Superior Court seeks to expand the civil lawsuit that the city and the DWP filed last year against PricewaterhouseCoopers.

That lawsuit alleged that the firm had fraudulently misrepresented how it could help launch the DWP’s new billing system, which proved a nightmare when it spewed thousands of faulty bills and enraged customers.

City officials have said it is possible for the DWP to recover millions in damages stemming from that alleged fraud. Thursday’s legal action accuses the firm of stealing tens of thousands of dollars from ratepayers.

PriceWaterhouse Coopers violated the public trust and engaged in “reprehensible and potentially criminal conduct,” DWP General Manager Marcie Edwards said in a statement.

Daniel J. Thomasch, PricewaterhouseCoopers’ outside counsel, said in a statement that the firm “never submitted falsified time records to LADWP and never received a single dollar from LADWP to which it was not due.”

“LADWP’s amended complaint is not provoked by concerns over a subcontractor’s billing practices — it is a crude attempt to disparage PwC because PwC has had the audacity to stand up to LADWP’s much-hyped, but baseless, lawsuit,” Thomasch said.

The city alleged in the court filing that the scheme involved several senior managers as well as an outside contractor and ran from 2011 until at least 2013.

Three PricewaterhouseCoopers managers and the contractor used the stolen funds to pay for two “lavish” Las Vegas bachelor parties — one for the consulting firm’s partner in charge in 2011 and another for a firm manager two years later, the documents allege. In addition to the escorts, hotel stay and alcohol, the DWP alleges that stolen ratepayer money was used for condoms, a steak dinner and a poolside cabana party.

The city alleged that the PricewaterhouseCoopers partner in charge instructed the contractor to falsify his time records, and that the partner and other managers approved them.  The money funneled through the contractor to pay for the parties and other improper expenses, the city alleged.

The latest legal action comes 15 months after the city and its utility sued PricewaterhouseCoopers, alleging the firm had fraudulently misrepresented how it could help launch the new system. In 2010, the PricewaterhouseCoopers received a $60-million contract — later increased by $9.2 million — from the DWP to update the utility’s outdated billing system.

Because of its botched billing system, DWP officials were unable to bill 180,000 customers for 17 months. More than 11% of the utility's meters were unable to function properly, the city claimed in its lawsuit.

At the time the case was filed, Thomasch called the suit “meritless” and said the utility was trying to shift blame away from “its self-inflicted billing problems.”

In a statement, Mayor Eric Garcetti said the allegations filed Thursday, “if true, are not only reprehensible, but also a betrayal of our core values and the people's trust. We demand the utmost integrity from those with whom we do business; DWP ratepayers deserve nothing less.”

Times staff writer Emily Alpert Reyes contributed to this report.

emily.alpert@latimes.com

Twitter: @LATimesemily

matt.stevens@latimes.com

Twitter: @ByMattStevens

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