Public relations firm Fleishman-Hillard overcharged the Los Angeles Department of Water and Power by $4.2 million through "unsubstantiated, unsupported and questionable" billings, the city controller said in an audit released Tuesday.
Controller Laura Chick said she turned her findings over to federal and local prosecutors investigating the contract, and to City Atty. Rocky Delgadillo, who has sued the firm seeking reimbursement.
"What my audit found are millions of dollars in bills that boggle the mind and defy common sense," Chick said at a news conference near the DWP's downtown headquarters. "Fleishman-Hillard treated the ratepayers of Los Angeles like a cash cow, milking them for millions."
Richard Kline, regional president of Fleishman-Hillard, acknowledged for the first time in public Tuesday that some of the firm's bills were not supported by documentation, but he said they amount to no more than $652,457 over five years.
Kline said Fleishman-Hillard disagreed with most of the audit's findings but would submit to mediation to work out a financial settlement.
"It appears time was added to the L.A. DWP billing that cannot be supported," Kline said. "We reported this to representatives of the controller's office, and we have been working with the U.S. attorney and district attorney since July to fully understand what happened."
Chick's audit is the first estimate of how much Fleishman-Hillard may have overbilled the Department of Water and Power. The Times reported in a July 15 article that seven former employees of the firm said they were encouraged or directed to inflate bills to the municipal utility. Some of the former employees said bogus billings sometimes totaled $30,000 per month.
Chick's office looked at $24 million the firm billed to the DWP for public relations work during the last five years. The DWP originally contracted with Fleishman-Hillard in 1998 to promote its services because the Legislature was considering allowing private utilities to compete for power customers in Los Angeles.
The audit found $1.2 million in billings not complying with the contract, $1.1 million in unsupported labor costs, $488,000 in unallowable charges to cover the cost of billing the city, and $314,000 in questionable markups by subcontractors, among other alleged overcharges that bring the total to $4.2 million.
