L.A.’s Fees for Outside Law Firms Grow 20%

The city of Los Angeles is continuing to spend significantly more each year on outside law firms, hitting $29.6 million in the fiscal year that ended June 30, an increase of 20% over the year before and more than twice what was spent four years earlier.

City Atty. Rocky Delgadillo defended the billings publicly Monday but admitted concern in a recent memo to the mayor and City Council; he proposed exerting more control over spending by the city’s semi-independent agencies, including the water and power, harbor and airports departments.

The city’s report on spending comes after months of criticism about the rising bill for outside legal firms, many of which have held political fundraisers for the city officials who decide how legal contracts are awarded.

City Councilman Antonio Villaraigosa, who requested the report, said he will press for changes to give the council more say in how money is spent for private legal advice.

“The fact that outside counsel costs have more than doubled in five years is an alarming revelation that makes greater council oversight and involvement an imperative,” said Villaraigosa, who is a candidate for mayor.

At a minimum, Villaraigosa said, the council should be notified of all cases in which outside attorneys are hired, but he said he is open to more dramatic changes as well.

Delgadillo has also proposed a package of reforms. In an Aug. 27 memo, he wrote that his own internal review, as well as reports in The Times, have “shown that the proprietary departments and other independent agencies, such as the Community Redevelopment Agency and the Housing Authority, have not provided the required oversight and management that this administration expects.

“A cursory review of these agencies has shown that the decision to use outside counsel by some agencies is often made without this office’s review and approval,” Delgadillo wrote.

In the memo, obtained Monday by The Times, Delgadillo wrote that he wants to create an outside-counsel committee to review all new contract proposals and set up a citywide outside-counsel fund from which all expenditures would be controlled by the city attorney’s office.

Katie Buckland, a spokeswoman for Delgadillo, said the proposals have been submitted to the mayor, council and top administrators for approval, but the city attorney has not heard back yet on whether there is support to enact the changes.

Delgadillo also said in the memo that he plans a sample audit of past billings “to ensure that taxpayer dollars have not been wasted.”

The water and power, airports and harbor departments can approve legal contracts with a term of three years or less without requiring council approval.

They have similar powers on public relations contracts, which have also been criticized in recent months. After controversy over the Department of Water and Power’s $3-million-a-year contract with Fleishman-Hillard, Mayor James K. Hahn ended outside contracts with public relations firms.

The spending report on legal services was prepared by two top city managers and concluded that the City Council could get a better handle on billings if it required departments to notify the council on all new contracts for legal services and instructed the city attorney to ask for money whenever outside law firms are needed, rather than providing an annual budget for such work.

“It’s a concern whenever costs go up,” said Chief Legislative Analyst Ron Deaton, who co-wrote the report with City Administrative Officer William Fujioka. “In some of the cases, the legal entanglements you get into are amazing.”

Villaraigosa asked for the report from Deaton and Fujioka after The Times reported in May that outside legal billings had doubled in the five years ending in the 2002-03 fiscal year.

The new report indicates that spending continued to increase in the fiscal year that ended June 30 of this year.

The Times reported that 50 of the 71 law firms hired by the city, as well as their attorneys, had contributed $1.1 million since 1998 to candidates for city office and political committees they control. The donations include $244,875 to Hahn and $154,500 to Delgadillo. Some of the contracts and contract extensions were awarded within weeks of political fundraising events sponsored by law firms.

Hahn and Delgadillo have denied that the increase in outside legal contracts is tied to such fundraising.

The city attorney’s office had previously reported that city departments spent $18.9 million on outside legal assistance in the fiscal year ending June 30, 2003, but the new report found a broader base of billings, including those for workers’ compensation and for firms that handle small jobs when a city attorney has a conflict of interest.

Counting all legal bills, the new report said, spending on outside counsel went from $14.2 million in the 1999-2000 fiscal year to $24.5 million in the 2002-03 fiscal year to $29.6 million a year later.

Tim McOsker, the mayor’s chief of staff, said concerns about the increase in costs for outside attorneys should be balanced against Delgadillo’s success in bringing down liability costs.

“We are very proud of our judicious use of outside counsel,” said Buckland, a spokeswoman for Delgadillo. She said outside law firms helped the city attorney’s office cut legal judgments against the city in half from 2001 through 2003.

In their report, Deaton and Fujioka suggested that “to strengthen council oversight of expenditures, the council can institute a formal policy to provide no funding for outside counsel contracts in the city attorney’s budget.” Instead, they said, the council could require the city attorney to return to the council for an appropriation each time services are required.

Deaton, however, said he likes Delgadillo’s proposals, and wants to see if they can work before recommending whether the council should exercise more oversight.