In 2013, the Los Angeles Department of Water and Power rolled out a flawed computer system that produced wildly inaccurate bills that overcharged ratepayers by tens of millions of dollars and saddled them with unmerited penalties. Six years later, the city-owned utility is still mired in scandal over the debacle.
The latest twist in the saga? This week FBI agents raided several offices across Los Angeles, including the DWP headquarters and the City Hall office of City Atty. Mike Feuer. Agents were looking for evidence of bribery, kickbacks, extortion and other possible crimes involving the city’s settlement of a class-action lawsuit filed by ratepayers over the billing errors, according to search warrant reviewed by Times’ reporters.
On Tuesday, in the wake of the raids, Mayor Eric Garcetti announced that DWP General Manager David Wright, who had already planned to step down in October, would leave immediately and be replaced with “leadership that maintains the public trust.”
The federal investigation appears to be related to allegations that the city and its outside attorneys engaged in fraud and double-dealing in connection with the lawsuit settlement. Last month, a Los Angeles County Superior Court judge appointed a former federal prosecutor to examine the relationship between the city attorney’s office and its outside attorneys.
This settlement, reached in 2015, cost the utility $67 million — of which some $20 million was paid to plaintiffs’ attorneys. It was supposed to mark the end of an embarrassing billing fiasco and the beginning of a period of more aggressive customer service standards and responsible managerial oversight.
Instead, we have FBI agents storming the DWP. So much for making the DWP an example of “public integrity” and “transparency,” as Garcetti promised during his first year in office.
It’s important to remember that no charges have been brought. And the allegations, as best we understand them, are a little hazy and complicated. But here’s what we know: Following the billing debacle, several class-action lawsuits were filed on behalf of overbilled ratepayers, and the utility ultimately reached the $67-million settlement. In the meantime, City Attorney Feuer hired New York attorney Paul Paradis to help the city sue PricewaterhouseCoopers, the consultant hired to help develop the billing system.
During that lawsuit, lawyers for PricewaterhouseCoopers say they uncovered evidence that Paradis had also helped orchestrate the ratepayer class-action lawsuit against the city as part of scheme to quickly settle customer complaints without further investigation and focus on the PricewaterhouseCoopers lawsuit. If this was done, as alleged, without the knowledge of the lead plaintiff in the class-action lawsuit, that would be a violation of legal ethics.
The implication was that Paradis had worked both sides of the deal — representing the city in the PricewaterhouseCoopers case as well as the ratepayers suing the city. And he would benefit financially from both lawsuits. In addition, the FBI is investigating more than $36 million in contracts the DWP has entered into with companies connected to Paradis.
At least one of the city’s outside attorneys has said that Feuer’s office directed the scheme and that the DWP leadership was aware of it. Feuer has denied the allegation and launched an ethics review of his office. There have been no charges filed and no arrests made.
This scandal’s refusal to die is immensely frustrating. The fiasco began with an attempt to replace a woefully out-of-date customer billing system, which was itself emblematic of DWP’s lack of investment in modernizing the utility. Multiple layers of political oversight, from the City Council to the mayor-appointed DWP board, failed to prevent the botched rollout. The billing problems were compounded by the utility’s dismal customer service. And now? Assertions of bribery, fraud and kickbacks in the aftermath.
Along the way, many lawyers have been enriched, but the scandal-prone DWP has been left under a cloud. Again.