Exec Seen as Defying PR Probe

Federal prosecutors indicted former Fleishman-Hillard executive John Stodder Jr. after he declined to cooperate in a continuing investigation into the public relations giant’s Los Angeles office, according to sources familiar with the case.

Stodder, a partner and senior vice president dismissed by the firm last week, surrendered to authorities and appeared Friday afternoon before U.S. Magistrate Judge Carolyn Turchin, who ordered him released on $10,000 bail.

A former news reporter and advisor to Mayor Tom Bradley, Stodder, 49, was indicted Thursday on 11 counts of wire fraud in connection with an alleged scheme to submit at least $250,000 in false billings to the Los Angeles Department of Water and Power.

He and other Fleishman-Hillard executives, “known and unknown,” also submitted phony bills to the Port of Los Angeles and two private clients, the Worldwide Church of God and the firm of renowned architect Frank Gehry, the indictment alleges.

One source familiar with the case said prosecutors indicted Stodder to put pressure on him to cooperate as they try “to move up the chain” to Douglas R. Dowie, a former head of Fleishman-Hillard’s Los Angeles office and confidant to Mayor James K. Hahn.

Stodder, who oversaw the firm’s local public affairs work, is important because he “can give them Dowie and the scope of Dowie’s instruction,” the source said, adding that he believed at least one Fleishman-Hillard executive with knowledge of the alleged false-billing scheme was already cooperating with federal authorities.

Another source described Stodder’s indictment as “the first of several” likely to come from the investigation into the firm.

But the sources said the momentum prosecutors have gained in the Fleishman inquiry should not be taken as a sign that indictments were close in a broader probe of alleged corruption in city government being conducted jointly by the U.S. attorney’s office and Dist. Atty. Steve Cooley.

Under terms of his bail, Stodder must remain in Southern California and try to find employment, according to Turchin. The magistrate ordered him to return to court Feb. 7 for arraignment.

Assistant U.S. Atty. Adam Kamenstein, who is heading the corruption investigation, declined to comment after Stodder’s court appearance.

One of Stodder’s lawyers, former federal prosecutor Maurice Suh, also declined to comment. But the initial signs were that Stodder was prepared to fight. Jan Handzlik, another attorney and former federal prosecutor representing Stodder, said Thursday that the evidence would vindicate his client, who “looks forward to his day in court.”

Like Stodder, Dowie was ousted last week by Fleishman-Hillard, which has been cooperating with federal authorities since The Times disclosed the alleged overbilling scheme last year.

The newspaper article quoted seven former employees of the firm as saying they were encouraged and even ordered to add phony hours to their time sheets.

After the story was published in July, the firm immediately placed Dowie on paid leave. Thomas Holliday, his lawyer, said his client had done nothing wrong.

Until Fleishman-Hillard’s $3-million-a-year contract with the DWP drew the attention of federal prosecutors last spring, Dowie was a major Hahn fundraiser and advisor, counseling the mayor on public relations and public policy initiatives.

Laurie Levenson, a law professor at Loyola Law School in Los Angeles and a former federal prosecutor, said it was clear to her that Stodder’s indictment marked the beginning of a broader effort.

“What would be typical is for the prosecution to put pressure on the individual to cooperate against others,” she said. “Sometimes the only silver lining is to be the first one charged.”

Even before Stodder was indicted, former Fleishman-Hillard employees had identified him in interviews with The Times as integral to the alleged overbilling scheme.

Said one former employee, who asked not to be identified: “It was Stodder who, in a meeting of the eight to 10 people in the public affairs unit, would say, ‘We’re $30,000 short, so we’ve got to come up with more hours.’

“He wouldn’t come right out and say, ‘We’ve got to fraudulently bill,’ but the message was clear,” the former employee added.

Campaign records show that, as would be expected of someone who made his living in the political world, Stodder was a steady, though not stellar, contributor to local officials after Fleishman-Hillard hired him in 2002.

Stodder gave $200 to Los Angeles Councilman Martin Ludlow, as well as $250 to former Councilman Nick Pacheco, Councilman Tony Cardenas and former Councilwoman Ruth Galanter.

He gave $300 to Councilwoman Wendy Greuel and $400 each to council members Alex Padilla and Janice Hahn, the mayor’s sister.

Records also show that he gave the $1,000 maximum to the mayor in 2003.

But one former employee said Stodder’s influence reached beyond his checkbook.

The former employee said Stodder was one of a handful of top Fleishman-Hillard executives who got frequent calls for advice from former Deputy Mayor Troy Edwards, who himself resigned after his name surfaced last year in the “pay to play” investigation.

The former employee said Edwards used Stodder and Dowie as a personal think tank.

“Troy always had a lot of questions, and called over to very senior people at the agency to ask for their counsel and advice -- one could argue more than one in his position should have needed to,” the former employee said.

As for the firm itself, a third former employee predicted tough going.

Although he gave executives at St. Louis-based Fleishman-Hillard high marks for fully cooperating with the federal investigation, he said local public relations professionals were generally puzzled about why the firm hadn’t been more aggressive in defending itself.

He called Thursday’s indictment a “stain” on Fleishman’s name.

“Is it damaging? Without question,” the former employee said.

“But can the agency survive it? I think they’re going to have to rely on every ounce of credibility they’ve ever gained and continue to do the right thing,” he added.

And he said the stain extends to former Fleishman-Hillard employees like him.

“Every one of us who has ever worked there” now has “to deal with the implication,” he said. “It’s irritating. It makes me angry.”

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Times staff writers Tina Daunt, Patrick McGreevy, Deborah Schoch, Henry Weinstein and David Rosenzweig contributed to this report.