City May Launch a Fraud Squad

Alarmed by allegations that a public relations firm repeatedly overbilled the city, Los Angeles officials moved ahead Wednesday with a plan to create a new investigative office to ferret out waste and fraud in city departments.

The proposal to establish a Waste, Fraud and Abuse Investigation Unit in the city controller’s office was recommended for approval by the council’s audit committee, which allocated $108,000 for the remaining six months of the fiscal year.

“It’s sending a message to everyone in the city of Los Angeles that we are serious about ensuring that taxpayer dollars are protected,” said Councilwoman Wendy Greuel, chairwoman of the Audits and Governmental Efficiency Committee.

The proposal must still win the full council’s support, but members said that such approval seems likely. They cited an audit by City Controller Laura Chick accusing Fleishman-Hillard of overcharging the Department of Water and Power by $4.2 million. City Atty. Rocky Delgadillo has filed a lawsuit to recover the money.

“Laura Chick and Rocky Delgadillo have showed how tenacious and aggressive investigations by watchdog units can move the ball forward and uncover wrongdoing,” said Councilman Jack Weiss, a member of the panel. “I don’t believe they have exhausted the wrongdoing that can be uncovered, and I think this unit will help.”

Mayor James K. Hahn initially questioned the need for the new unit.

But Deputy Mayor Doane Liu said Wednesday, “We are open to it as long as this is not duplicative of existing functions.”

The controller often uncovers fraud through routine audits, but Chick said her office did not have the staff or expertise to determine whether allegations made outside of the audit process were valid.

The office received 33 allegations, including accusations of kickbacks by contractors and misuse of city resources, in the last six months, and more than half involve the airports, harbor, and water and power departments, she said.

“As a dark cloud hangs over the city of Los Angeles, this is an important step forward in cleaning up our government,” Chick said. “I have received a deluge of credible and helpful whistle-blower tips.”

The audit committee recommended that Chick be allowed to hire two fraud investigators and a clerk to start the unit, which would set up a whistle-blower hotline.

The office would work with both the city attorney’s office and the Ethics Commission.

LeeAnn Pelham, executive director of that panel, said it “welcomes the opportunity to have an office that will aggressively make sure taxpayer funds are not abused.”

Councilwoman Janice Hahn, the mayor’s sister, supported creation of the new unit, though she said the DWP itself could have headed off any problems with more vigilance.

Ron Deaton, DWP general manager, told the committee Wednesday that internal audits in the last two years identified $350,000 in questionable billings for administrative overhead. But he said a former general manager decided not to try to recover the money, the understanding being that Fleishman-Hillard would not submit similar billings in the future.

Deaton acknowledged that the internal audit and the decision to pay the bills were not discussed by an audit subcommittee of the DWP board, which simply filed the audit without a hearing.

“If it had been caught then, would we be having these same discussions today?” asked Greuel, referring to the city’s lawsuit to recover $4.2 million from the public relations firm.