The Los Angeles Department of Water and Power filed a federal lawsuit Tuesday against a Colorado-based construction and engineering firm, accusing it of overbilling the utility over a seven-year period.
The lawsuit alleged that the Englewood-based company conspired to defraud the DWP by preparing and approving numerous invoices that “artificially inflated the value of the work performed by CH2M Hill and its subcontractors.”
The lawsuit comes one year after an audit commissioned by the DWP concluded that CH2M Hill had overbilled the municipal utility by as much as $4.5 million.
Although the lawsuit does not say how much the city believes it is owed by CH2M Hill, DWP General Manager H. David Nahai said his agency would seek at least $13.5 million, plus punitive damages and $10,000 for each allegedly false claim submitted by the company. “This lawsuit doesn’t specify a number because it’s possible that by the time that other damages are added, the number could be much larger” than the original amount that was overcharged, Nahai said.
CH2M Hill received contracts worth $106 million since 1998 to control dust on the dry bed of Owens Lake, which is about 200 miles northeast of Los Angeles.
A spokesman for CH2M Hill said he had not seen the lawsuit, but denied the allegations of fraud. “We did what we believe, and what others believe, was good work for the city,” said Martin Nicholson, CH2M Hill’s regional manager for the Southwest region. “We stand behind that work.”
CH2M Hill was hired in 1998 to provide the city attorney’s office with expert witness services as it worked to limit the DWP’s liability at Owens Lake, which had been dry for several decades -- after water from the Owens River was diverted to feed a growing Los Angeles.
The original contract, awarded during the administration of then-Mayor Richard Riordan, was not competitively bid and was repeatedly expanded, according to a report commissioned by the DWP two years ago. That contract grew from $550,000 to $13.9 million by January 2001. A second grew from $28 million to more than $90 million between April 2001 and April 2006.
The DWP lawsuit accuses CH2M Hill of breach of contract, fraud and providing negligent representation. Relying on the state’s false claims act, the DWP intends to seek triple damages in the billing case.
“We hope this will send a strong and clear message to anyone who is doing business with the DWP that this commission is watching the spending of ratepayers’ money like a hawk,” said commission President Nick Patsaouras, an appointee of Mayor Antonio Villaraigosa.