Outside P.R. Consultant Reaps Millions From City

Last June, Los Angeles Mayor James K. Hahn held a fund-raiser for his campaign to defeat secession, then in its crucial months. One of the big donors was the public affairs firm of Fleishman-Hillard, which paid $10,000 for its executives to dine with Hahn at the exclusive City Club.

The next day, the city’s Harbor Commission, whose members are appointed by the mayor, awarded the firm a two-year public relations contract for $400,000.

Six days later, the Los Angeles Airport Department approved the final paperwork to begin another Fleishman-Hillard contract, this one for $500,000.

And on July 2, one week after the fund-raiser, the city approved an $800,000 extension to Fleishman-Hillard’s existing $15.3-million public relations contract with the Department of Water and Power. Two more city contracts worth more than $3 million were awarded to the firm within months.

All told, the company in recent years has won city public relations contracts worth more than $20 million. City officials and Fleishman-Hillard executives say there is no connection between the company’s political support and its ability to get city business. The relationship is legal, above-board and based on the high quality of the firm’s work, they say.

The relationship has benefited Hahn as well. Fleishman-Hillard performs many services for the city, from accompanying Hahn on a trip to Asia to drafting an opinion piece for a local newspaper under the name of DWP chief David Wiggs, a service for which it charged the city $3,600. In some cases, Fleishman-Hillard even does public relations for city departments, such as the DWP, that have their own public relations staffs.

Fleishman-Hillard is an international company. Its local office is headed by a hard-charging ex-Marine and former newspaper editor who has become one of Hahn’s close advisors. In his 12 years at Fleishman, General Manager Doug Dowie, 55, has turned the company’s local office into one of the largest political donors in Los Angeles, has given jobs to top aides of City Hall politicians and has provided hundreds of thousands of dollars’ worth of image-building help to Hahn.

Internal memos released by the mayor’s office show that Dowie is intimately involved in shaping how Hahn sells his agenda to the public.

The mayor’s deputies call on him for damage control during political controversies or potentially damaging news developments, including the recent allegations that the DWP engaged in energy price-gouging.

Records show that Dowie alerted the mayor’s top deputies by e-mail about campaign moves by secessionists last year. He paid for Hahn’s annual holiday bash for the media and helped one deputy mayor buy tickets to last year’s World Series.

Fleishman-Hillard’s biggest city contract is with the DWP, which has paid the company $16 million over the last six years. But a survey of the city’s 10 largest departments found that six use outside public relations companies regularly and, of those, four have retained Fleishman-Hillard.

Some watchdogs are troubled that the firm has won so many city contracts after becoming a major political donor at City Hall.

“This demonstrates precisely the insidious way that money works in government,” said Dan Tokaji, chairman of California Common Cause. “It’s the pay-to-play system we see at every level of politics, from Los Angeles City Hall to the nation’s capital.”

City records show that Fleishman-Hillard and its executives have contributed $137,000 to city candidates and political committees controlled by elected city officials since 1998.

That includes donations to 11 of the current 15 City Council members and to two others who will join the council July 1, as well as 24 contributions totaling $16,400 to Hahn.

Dowie alone gave $7,000 during the period, including $3,000 to Hahn. In March, Dowie got an invitation to a Hahn reception for 100 top political supporters.

Fleishman-Hillard provided the first check to Hahn’s anti-secession committee, United L.A., and eventually contributed $55,000 to the secession-opposition groups formed by Hahn and other elected officials.

At the same time, city records show the firm provides the mayor’s office with pro bono public relations help on many of Hahn’s pet projects, including the “One Book, One City L.A.” literacy campaign. Although there is no charge, that help is worth as much as $36,000 a month to the city, according to records of the mayor’s office released after The Times filed a Public Records Act request.

A Jan. 13 memo from Dowie to the mayor’s staff says one of the five goals of the firm’s pro-bono efforts is to “Position Mayor Hahn as a leader in Los Angeles,” and it lists “political constituencies” as well as civic and business leaders among the campaign’s target audiences.

There is no bar to companies’ providing free advice to office-holders, but city rules prevent public money from being used on political activities. Hahn said no public money ever has been used for that purpose, and he added that that the company’s political activity had nothing to do with its success in getting city work.

“I don’t know which contracts they have and how much they are for, but I think they do a good job,” Hahn said.

Billing records show that Dowie’s assistance can be expensive. He recently attended a traveling exhibit on the DWP and had lunch with Wiggs. He billed the agency for $1,275 for the three hours.

The DWP spent $700 more for Dowie to attend a two-hour meeting of the DWP commission. A two-hour lunch with a pair of DWP executives also was billed by Dowie at $700.

Former Fleishman-Hillard manager Eric Moses billed the DWP $600 for three hours spent attending a City Council meeting on Wiggs’ salary and drafting “talking points.”

The total monthly billing has exceeded $220,000. Under the contract, Fleishman-Hillard submits a monthly report on what it has done to promote the agency, along with its bills. The agency caps the amount the company can charge per month.

The firm also bills the DWP for costly meals, travel and entertainment. Records show hotel tabs of $295 a night and limousine bills of $156. Lunch for two at the Water Grill: $108.

The firm also used DWP funds to buy season tickets to basketball and football games, saying the expense was part of showing appreciation to big DWP customers. And a Fleishman-Hillard executive drafted an opinion piece discussing “DWP fiscal responsibility” to run in a local newspaper. The bill for the work was $3,600.

Hahn defended the decision to use Fleishman-Hillard to help promote the city and said the firm’s fees are reasonable.

“These contracts are all subject to bidding through proposals, so if they weren’t coming in with a competitive proposal, they wouldn’t get the contract,” the mayor said

Dowie makes the same point.

“In each case, all these contracts were competitively bid,” he said of the deals that followed last year’s City Club fund-raiser. He added that the competitive processes for those jobs began months before the Hahn dinner.

Still, some competitors complain that two recently approved contracts were given to Fleishman-Hillard even though its billing rates were higher than those of other bidders.

For the latest DWP contract, the firm’s services ranged from those of an account executive, at $170 per hour, to Dowie’s, at $425 per hour. Three senior vice presidents bill at $315 per hour. One competing bid offered billing rates from $125 to $255 per hour, and another said its top rate would be $250 per hour.

DWP officials said cost was one of eight factors considered, and records show that weight also was given to “compatibility with DWP management.”

On the airport pact, Fleishman-Hillard was given the job to market Los Angeles International Airport after it proposed billing rates of $155 per hour for work of an assistant account executive and $275 per hour for two senior vice presidents. None of the six firms passed over by the city proposed charging more than $230 per hour.

One firm not selected, Tri-Star Marketing, offered rates from $40 to $150, and another with airport experience, Pulsar Advertising, offered to bill at $65 to $175 per hour.

“It is outrageous,” Pulsar President Alberto Gonzalez said of the city’s taking a much more expensive offer. “Airports are highly political, and even more so in Los Angeles, because it is so tied to the mayor’s office.”

Using one firm extensively can help the city because a relationship can develop in which the company has expertise in the city operations, according to Steven B. Frates, a senior fellow at the Rose Institute of State and Local Government at Claremont McKenna College.

But, Frates said, the practice also could have a negative effect if city government is seen as closed to all but one politically active company. “It certainly is at least a perception problem,” he said.

Dowie makes no apologies for his success, crediting the quality of his team.

In recent years Fleishman-Hillard has hired away deputy mayors and top aides to City Council members. Former Assembly Speaker Bob Hertzberg recently joined the firm’s roster, as have former top editors from the Los Angeles Times and Daily News of Los Angeles. Dowie was managing editor at the latter publication before he joined Fleishman-Hillard 12 years ago.

“I could give twice as much” campaign money, he said, “and if I did not have the talent I do in this office, I wouldn’t get the contracts.”

The company was founded in 1946 by Al Fleishman and Bob Hillard in an office above a five-and-dime store in St. Louis. They later hired an executive from Hallmark who took the company worldwide. Today the firm is still headquartered in St. Louis, but it has 30 offices in North America and more than 50 others elsewhere in the world.

The company reported worldwide revenue of $342 million in 2000. The L.A. office also has won government jobs outside of City Hall. Last year it contracted with the city-financed Los Angeles Convention and Visitors Bureau for $15,000 a month. The firm also received a $75,000 contract from the Los Angeles schools superintendent last July and a $395,000 contract from the Los Angeles Community College District in September.

But it is the firm’s work for Los Angeles City Hall that has occasionally generated criticism of the city’s relationship with Fleishman-Hillard.

In 1998, Richard Alarcon and Jackie Goldberg -- both then City Council members and now state legislators -- tried unsuccessfully to cancel a Fleishman-Hillard contract with the DWP, questioning the need for outside public relations services when the city agency had a public relations staff of its own and was laying off engineers because of a budget crisis.

“How can we lay off thousands of employees -- some in the public relations section of the DWP -- and then bring in a contract for $3 million?” Alarcon asked.

The DWP employs 14 people in its public relations and media relations office, which has its own budget of $4.5 million annually.