City Council Control of Agencies’ Major Contracts Is Urged

Three City Council members, in a challenge to Mayor James K. Hahn’s administration, called Wednesday for the City Council to take final control over major contracts away from the commissioners who oversee the airport, port, and water and power departments.

The proposal by council members Wendy Greuel, Jack Weiss and Antonio Villaraigosa comes after an audit found that a public relations firm had overbilled the city by $4.2 million and as local and federal investigators probe city contracting.

Greuel said the audit by city Controller Laura Chick shows the need for checks on the ability of the three independent city departments to award contracts.

“We have to hold these departments accountable for the taxpayers’ money,” Greuel said. “Our current system has failed us.”

In an audit released last month, Chick found that Fleishman-Hillard had overcharged the Department of Water and Power on a multiyear, $24-million public relations contract.

Chick told the Audits and Governmental Efficiency Committee on Wednesday that the firm submitted millions in unsupported charges. “This is a story of corporate greed,” she said.

Chick’s audit found that Fleishman-Hillard project managers padded employee hours, charged inappropriate commissions and demanded payments for overhead expenses, including the cost of preparing bills to the DWP.

Officials of the public relations giant did not appear at the hearing. But Richard Kline, regional president of Fleishman-Hillard, acknowledged last month that at least $652,457 in bills over five years were not supported by documentation.

Henry Martinez, the former acting general manager of the DWP, said the Fleishman contract was necessary to help the department “present a positive face for the customers.” But he conceded that normal procedures were not followed. “This contract does not reflect normal, day-to-day business,” he said.

Greuel, the committee’s chairwoman, said an amendment to the city charter should be placed on the May ballot to require City Council approval of large contracts awarded by the city’s three so-called proprietary agencies. The mayor-appointed commissions that oversee those agencies have the power to award contracts.

A spokeswoman for Hahn had no immediate comment Wednesday night on the proposal.

Greuel’s proposal drew immediate support from Villaraigosa -- who is challenging Hahn for the mayor’s office -- and Weiss, who has endorsed Villaraigosa’s candidacy. The battle over contracting is certain to play a prominent role as Hahn seeks a second term.

The council committee also agreed to consider establishing a unit in the controller’s office to look for waste, fraud and abuse in city government.

Hahn fired off a strongly worded letter to Greuel opposing that idea, saying the city charter already requires the controller to review all bills and withhold payment if there are problems.

“A waste, fraud and abuse unit in the Controller’s Office seems about as redundant as creating an anti-crime unit within the Police Department,” the mayor wrote.

And in a thinly veiled attack on Chick, Hahn attached copies of 26 checks to Fleishman that the controller herself had signed.

Chick, who has withdrawn her endorsement of the mayor for reelection, said sarcastically that she could understand why Hahn wouldn’t want to give her additional resources to investigate waste, fraud and abuse.

“Mayor Hahn is fighting the work I’ve been doing to shine a light on what is going on behind closed doors in his administration,” she said in a statement. “Mayor Hahn has long wanted to put a muzzle on me and the city’s employees, but we will not be deterred.”

One of the committee’s three members, Councilwoman Janice Hahn, the sister of the mayor, was absent, while Villaraigosa, who is not a member, attended the meeting.

Michael de Castro, one of the outside auditors who examined Fleishman’s bills at Chick’s request, described how the public relations firm billed the DWP for up to 2,800 extra hours.

He went on to say that Fleishman-Hillard also charged the city for time preparing its bills. “It is not an industry practice to bill time preparing a bill for a client,” De Castro said.

Manolo Robles, the DWP’s own director of internal audits, said his team had found $330,000 in questionable charges and referred the matter to Frank Salas, then the DWP’s chief administrative officer.

Robles said Salas replied that he had talked to Fleishman-Hillard and that the firm said the charges were appropriate.