U.S. Seeks E-Mails in City Probe

The U.S. attorney’s office has served subpoenas at the St. Louis headquarters of public-relations giant Fleishman-Hillard as part of its investigation into contracting practices in Los Angeles.

The international public relations firm has won contracts in recent years worth more than $20 million from various city departments, including three that federal officials are probing. The company has also been a major political donor to Mayor James K. Hahn and to the campaign two years ago against the secession of the San Fernando Valley from Los Angeles.

Sources said federal prosecutors had requested all e-mails between Fleishman executives and city officials over a period of years.

A Fleishman spokesman said the firm was cooperating fully.

“To the best of our knowledge, we’ve performed our business for the city in a totally appropriate manner,” said Richard S. Kline, regional president.

Federal officials would not discuss the investigation or explain their interest in Fleishman-Hillard.

Over the last two months, the U.S. attorney has subpoenaed thousands of pages of contracting records from Los Angeles’ airports department, the Port of Los Angeles and the Department of Water and Power. Fleishman holds public-relations contracts with all three departments.

Federal investigators have also summoned port officials, including the port’s head of public affairs, Julia Nagano, to testify before a grand jury. The department of public affairs oversees a two-year $560,000 contract with Fleishman to “develop key messages” for the port.

That contract was awarded in June 2002, soon after Fleishman had paid $10,000 for its executives to dine with the mayor at an anti-secession fundraiser.

Last week, The Times reported that executives of an engineering company had told federal prosecutors that their firm had lost a multimillion-dollar contract at Los Angeles International Airport because the company had refused to contribute $100,000 to the anti-secession campaign.

The federal subpoenas come as a $3 million-a-year contract Fleishman has with the DWP is being scrutinized at City Hall.

Last week, City Controller Laura Chick began an audit of the contract. Chick said she did not understand how the agency could justify its request for an 18% water rate increase when it was spending so much on outside public relations and had an in-house PR staff.

Chick said she had questions about Fleishman’s December and January invoices. Many of the billings either did not specify what services had been provided or seemed questionable, she said.

Fleishman officials said they would cooperate fully with Chick’s audit.

In total, the DWP has paid Fleishman-Hillard nearly $20 million over the last seven years. Since 1998, city records show, Fleishman and its executives have contributed more than $135,000 to city candidates and political committees controlled by city elected officials.

The company also has ties to the mayor’s office. A Fleishman executive accompanied Hahn on his trip to Asia in 2002. Former Deputy Mayor Matt Middlebrook left Hahn’s office last year for a job with Fleishman’s San Francisco office. Soon after, another Fleishman employee, Shannon Murphy, was hired as the mayor’s spokeswoman.

In the past, Hahn has said that the company was doing a good job and that its fees were reasonable. On Thursday, Hahn spokeswoman Julie Wong said the mayor had welcomed the controller’s audit of the Fleishman contract. His office had no comment on the subpoenas.

Meanwhile, Los Angeles County Dist. Atty. Steve Cooley is investigating whether some members of Hahn’s administration traded campaign contributions for favorable treatment during contract negotiations.

Times staff writer Anna Gorman contributed to this report.