PR Firm Drafts Ethics Reforms

Faced with investigations into its billing and contracting practices in the city of Los Angeles, Fleishman-Hillard on Thursday banned corporate contributions to political candidates and ballot measures, ordered training for employees on tightened billing procedures and agreed to set up a hotline to receive reports of abuses.

John Graham, chief executive of the public relations firm, outlined the new rules in an e-mail to employees on the same day that Los Angeles City Controller Laura Chick rejected another invoice from the firm.

Chick refused to pay a $2,200 bill for work at the city’s Harbor Department, saying there was insufficient detail about the services provided.

Graham said the new rules would uphold the company’s long commitment to the highest ethical standards.

“That is why the recent allegations of billing irregularities in our Los Angeles office are so disturbing: They run counter to everything this agency has stood for in 58 years,” he wrote in the e-mail.

Graham’s order won’t prohibit individual employees of the firm from contributing to local campaigns. Fleishman-Hillard’s political action committee, which is financed with voluntary contributions from company executives, will still donate to federal candidates, but not to local or state candidates and ballot measures.

Ethics-reform advocates in Los Angeles praised the decision to stop corporate contributions to city and state races.

“It sends a good signal that they recognize the problem linking campaign contributions and contracts,” said Bob Stern, head of the Center for Governmental Studies and a coauthor of the state’s political reform laws. “It’s a good PR move on their part, but they have a long way to go to resurrect their image.”

Stern is among those who have questioned whether there is a tie between political contributions in Los Angeles and the awarding of contracts. “Contractors should not be making contributions,” he said.

Chick, City Atty. Rocky Delgadillo and Los Angeles County Dist. Atty. Steve Cooley are investigating allegations by former Fleishman employees that they were encouraged to pad billings on work for the city.

In addition, a federal grand jury has subpoenaed the company’s records as part of an investigation into the awarding of contracts at City Hall.

The company has been paid more than $25 million to provide public relations services to the city during the last six years.

During that period, the firm and its employees have contributed $146,000 to city candidates and Mayor James K. Hahn’s anti-secession committee. Of that, the company gave $42,000 to candidates and $15,000 to the anti-secession campaign.

Fleishman-Hillard drafted the reforms with the help of an ethics expert.

Under the new ethics code announced by Graham, a three-level approval process will be set up before contributions can be solicited from Fleishman-Hillard employees on company property or company time.

A hotline will be set up for employees and others to anonymously report “any questionable or unethical behavior,” company managers will meet with employees to remind them of proper practices, new billing certification procedures will require sign-offs by managers, and workers on government jobs will undergo training on the requirements of public-sector contracts.

Exit interviews will be improved and regular audits will be launched.

“These measures are important first steps in reassuring our colleagues, our clients and the industry that we are taking these allegations seriously,” Graham said.

He said the firm has hired independent legal counsel to conduct an internal investigation into the allegations of former employees, and if improper billings are found, clients will be reimbursed.

The reforms are likely to help the company’s image, said Jerry Swerling, director of public relations studies at the Annenberg School of Journalism at USC.

“The agency, to those of us in the field, had a really good reputation going into this,” Swerling said. “There is an expectation that they would respond in a gold-standard way to restore their reputation.”

Chick, who in April refused to pay Fleishman’s December and January invoices, raised the same issue of inadequate invoices in rejecting the firm’s latest billing for work at the Harbor Department.

She refused to release the invoice to the media or to provide details of the billing.

Chick is auditing the Fleishman-Hillard contracts at the harbor, airport, and water and power departments.

Richard Kline, the regional president for Fleishman-Hillard in Los Angeles, said the firm would cooperate.

“We have absolutely no problem in providing the additional information she needs,” he said.