Issuing a public apology, Fleishman-Hillard on Tuesday agreed to a $5.7-million settlement of a lawsuit by the city of Los Angeles that alleged the public relations company padded its bills.
Los Angeles sued Fleishman-Hillard and its former local general manager last year. The suit contended that the company defrauded the city while billing more than $20 million from 1998 through 2004. Fleishman performed public relations work for several city agencies and worked without charge for Mayor James K. Hahn.
The lawsuit was filed a few days after an article last July in The Times quoted seven former employees who said workers routinely inflated monthly billings to the Department of Water and Power and were encouraged -- sometimes even directed -- to submit falsified time sheets. A city audit in November identified $4.2 million in questionable and unsubstantiated billings.
A criminal investigation is continuing. One person has been indicted, and prosecutors have said they expect at least one additional indictment.
Richard Kline, the firm's regional president, apologized to the residents of Los Angeles and said an internal investigation found problems with billings to the city.
In a statement, the firm said: "On the basis of that investigation, the agency believes some senior executives of the Los Angeles office, who are no longer with the firm, caused certain bills to be presented to the city that appear to be improper and indefensible."
The settlement agreement does not contain an admission of wrongdoing by Fleishman-Hillard, Kline said.
The company, with offices in 80 cities worldwide, discontinued its contract work for the city last year and adopted internal reforms that included an end to political fundraising for local candidates.
"There has been a perception among some unscrupulous people that the city was an easy mark, that taxpayer money could be easily had through fraud," City Atty. Rocky Delgadillo, who filed the lawsuit, said in announcing the settlement. "Today I am putting those who do business with the city on notice -- my office will pursue anyone large or small who seeks to defraud the taxpayers of this city."
The settlement calls for the public relations firm to pay $4.5 million in cash to the city and the rest to be covered by forgiving about $1.2 million in outstanding bills for work done for the city.
