PR Exec to Plead Guilty in Fraud

Steve Sugerman, a public relations executive and former Los Angeles city official, agreed Thursday to plead guilty to participating in a scheme at Fleishman-Hillard to bilk the city of Los Angeles through phony billings to the Department of Water and Power.

Federal prosecutors announced that Sugerman, 41, who served as director of communications for Mayor Richard Riordan, has also agreed to testify against Douglas R. Dowie, his former boss at the international public relations firm. Dowie, who headed Fleishman’s Los Angeles office, was indicted on similar charges last week.

In a criminal charging document and a plea agreement filed in federal court, Sugerman admitted participating in the overbilling scheme “in accordance with Dowie’s general directions.”

Sugerman acknowledged he was involved in the overbilling of more than $120,000 at Fleishman over two years.

Sugerman, who joined Fleishman in 1997 after leaving the mayor’s office and left in early 2002, is the third former employee of the firm to be charged in the case. Also accused of bilking the city in the scheme is John Stodder Jr., who succeeded Sugerman as the executive in charge of Fleishman’s public affairs unit, which supervised the Department of Water and Power contract. Dowie and Stodder, who both maintain their innocence, are scheduled to go on trial Aug. 2.

Sugerman, who now runs his own public relations firm, the Sugerman Communications Group, faces a maximum sentence of 15 years in prison but agreed to cooperate with the government in return for possible leniency. He could be placed on probation.

Asked whether anyone else would be charged in the case, Assistant U.S. Atty. Adam Kamenstein said: “It’s an ongoing investigation.”

Diana Greenwood, a former Fleishman-Hillard employee who worked in Sugerman’s public affairs unit, said Thursday that she felt a sense of closure at the news that Sugerman had been charged and had agreed to testify against Dowie.

“To me, he was one of those people that went along [with the overbilling], but you saw it pained him greatly,” said Greenwood, who said she quit in 1999 after a year at Fleishman-Hillard because of the widespread overbilling.

“When I couldn’t do it anymore, I looked him in the eyes and said, ‘You know what you’re doing. I know what you’re doing. I really don’t think that you agree with this. And I can’t work here anymore,’ ” she said. Greenwood is a daughter of former Times Senior Editor Noel Greenwood, who retired in 1993.

Sugerman’s lawyer, Ellyn Garofalo, said Thursday that Sugerman left Fleishman-Hillard to start his own business “effectively because he was very unhappy with the environment at Fleishman-Hillard, particularly with the conduct of the DWP account.”

The case grew out of a Times investigation, published last July, in which seven former Fleishman employees, including Greenwood, told the newspaper about the alleged overbilling.

Fleishman-Hillard was hired by the city during the Riordan administration. At first, it had a subcontract. Then Sugerman left Riordan’s office and went to work for the firm. It soon got a much larger contract, which, former employees said, was treated by Dowie as a “cash cow.”

The firm had been hired to help the DWP cope with changes in the state’s electricity regulations, which might have caused DWP to lose its monopoly status and compete with private utilities for customers.

Even after that threat faded, Fleishman-Hillard officials were able to convince city government that their services were worth retaining. Dowie helped by ingratiating himself with Mayor James K. Hahn, who succeeded Riordan in 2001. Dowie raised money for Hahn’s political campaigns and became a valued unofficial advisor, using Fleishman-Hillard’s $3-million annual contract with DWP as a vehicle to burnish the mayor’s image.

At the same time, prosecutors allege, Dowie led a conspiracy to bilk the city of about $325,000 in 2000, 2002 and 2003.

Dowie is accused of directing Sugerman and later, Stodder, to pad bills when revenue to be collected by the firm’s Los Angeles office fell short of the monthly billing projections submitted to Fleishman-Hillard headquarters in St. Louis.

The firm has acknowledged overbilling the city, apologized and agreed to pay nearly $6 million to settle a civil lawsuit brought by City Atty. Rocky Delgadillo after the Times article was published.

In business for himself, Sugerman has represented a variety of high-profile clients, including the Pacific Maritime Assn., the Playa Vista development, Magic Johnson’s corporate interests and the city of Beverly Hills, according to news accounts and his company’s website.