A public relations firm has agreed to pay $1 million to the Los Angeles Department of Water and Power to settle claims that the company couldn’t substantiate charges and overbilled the agency for consulting services, officials announced Wednesday.
The settlement allows the Lee Andrews Group to repay the money over six years and resolves “claims” against the firm that were raised in audits by the DWP and City Controller Laura Chick.
The company is a former subcontractor to Fleishman-Hillard Inc., which last year agreed to pay $5.7 million to settle a city lawsuit that alleged that firm padded its bills to the DWP and other city agencies.
“With this settlement today, the final chapter comes to a close in this sorry tale of corporate greed,” Chick said Wednesday.
The agreement, signed by company founder Donna Andrews and negotiated by the city attorney’s office, says only that it settles “claims that might arise out of or are related in any way to such invoices and the audits.” It does not use the word “overbilling.”
However, DWP Board President H. David Nahai and Chick confirmed the claims of audits involved overbilling, including unsubstantiated invoices and the marking up of invoices to amounts that were not reasonable for the services rendered.
“The fact that this could happen is very alarming and disturbing to us,” said Nahai, whose board voted to approve the settlement late Tuesday in closed session.
Nahai said that the overbilling took place before the current board was seated and that the panel has since implemented contracting reforms.
“It’s a good settlement for the city and the DWP because it recovers a substantial amount of money for the city -- $1 million -- and it secures that money without the necessity for protracted litigation,” Nahai said of the settlement that stemmed from a two-year investigation.
Lee Andrews Group was paid $4.8 million under a now-expired contract to provide the DWP with advertising, communication, community outreach and media relations services.
Like Fleishman-Hillard, Lee Andrews Group has been a major political contributor at City Hall, giving more than $41,000 to several city candidates in the last eight years.
The company, which says on its website that it does technology, environmental compliance and public affairs consulting, qualified as a minority and women-owned firm that originally subcontracted with Fleishman and then won a DWP contract on its own.
No one at the company would comment on the settlement. The amount of the settlement is significantly higher than the billings that were questioned in a November 2004 audit by Chick that looked at $24 million that the DWP spent over a period of five years on public relations contracts.
That audit found that subcontractors hired by Fleishman-Hillard submitted unsubstantiated invoices and engaged in unreasonable markups of $314,600.
The audit said Lee Andrews Group contracted work on the “Green Power Hero” program.
Lee Andrews paid $137,000 for the work, but billed Fleishman-Hillard $316,000, for a markup of 130%, the audit found.
City Atty. Rocky Delgadillo issued a statement calling the agreement “a very good result for our client, the DWP and for the residents of Los Angeles.”
The agreement does not preclude prosecutors from seeking criminal charges, and the settlement document was sent to the city attorney for consideration, officials said.
After Fleishman-Hillard agreed in April 2005 to reimburse the city, federal prosecutors charged the former local general manager of the firm’s Los Angeles office, Douglas Dowie, and an aide with defrauding the city, and a federal jury convicted the two men earlier this year.
The public relations overbilling scandal rocked City Hall and was criticized by Antonio Villaraigosa as part of his successful campaign last year to unseat then-Mayor James K. Hahn.
Two weeks after the DWP audit, the city controller refused to pay $74,000 to Lee Andrews Group, objecting that the company’s invoices were not specific.
The rejected invoices included 23 hours of work billed by company President Donna Andrews at $218 per hour in May for “strategic planning” and “administration.”
Other employees billed for the same services at rates ranging from $56 to $200 per hour.
The proposed settlement requires that if Lee Andrews Group seeks a contract with the agency before the $1 million is paid, a hearing be convened to determine whether the firm is a responsible bidder.