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Former PR Official Indicted in DWP Overbilling Probe

June 03, 2005|Ted Rohrlich and Ralph Frammolino | Times Staff Writers

Douglas R. Dowie, a leading Los Angeles public relations consultant, political fundraiser and confidant of Mayor James K. Hahn, was indicted Thursday by a federal grand jury on charges that he directed a criminal conspiracy to bilk city government out of hundreds of thousands of dollars.

Dowie, 57, of West Hills, routinely ordered subordinates at Fleishman-Hillard, an international public relations firm, to inflate the number of hours they worked under contracts with the city's Department of Water and Power and the Port of Los Angeles, as well as with two private clients, the indictment charged.

Dowie, who became general manager of the firm's Los Angeles office in 1999, was accused along with John Stodder Jr., who oversaw the firm's public affairs practice in Los Angeles from 2002 to 2004. Both were terminated in January.

Stodder, 49, of Palos Verdes Estates, was initially indicted in January on similar charges for participating in a scheme with "others known and unknown." Thursday's superseding indictment added Dowie's name, expanded the amount allegedly stolen from $250,000 to $325,000 and included a conspiracy count against both men.

For The Record
Los Angeles Times Saturday June 04, 2005 Home Edition Main News Part A Page 2 National Desk 1 inches; 36 words Type of Material: Correction
U.S. attorney -- An article in Friday's Section A about the indictment of public relations consultant Douglas R. Dowie referred to Debra Wong Yang, the U.S. attorney for the Central District of California, as Debra Wang.

Dowie and Stodder have maintained they are innocent.

The indictments of Dowie and Stodder are the first to come from a probe into city contracting, launched amid accusations that some contracts are awarded to those who "pay to play" through campaign contributions or political fundraising.

Dowie allegedly ordered about $75,000 in false billings in 2000, before Stodder joined the firm, and combined with Stodder to order an additional $250,000 in false billings in 2002 and 2003, according to the indictment.

The indictments of Dowie and Stodder followed a Times investigation, published last July, in which seven former Fleishman-Hillard employees told the newspaper about the alleged overbilling scheme.

The mechanics of the alleged fraud were crude, as captured in e-mail exchanges set forth in the indictment.

In January 2003, the indictment charged, Dowie e-mailed Stodder to ask whether they could "pad" the monthly bill to the DWP by adding $30,000 of "ambiguous counseling for the mayor" and two other top DWP executives.

Stodder e-mailed back to say that $30,000 was "more than the system could bear" but that a subordinate and alleged co-conspirator, who was not identified in the indictment, had told him that $15,000 was doable. The subordinate said "she could 'slip though another $15k without incurring too much more scrutiny,' " Stodder wrote.

In a continuing exchange, Stodder wrote Dowie again to say the subordinate would "just add hours across the board," the indictment said.

In allegedly inflating the monthly DWP bill by $46,000 in August 2003, the same subordinate allegedly e-mailed Stodder to say she was adding "activities for just about everyone that will pass the smell test."

Stodder responded by e-mail: "Thank you. I totally understand."

Fleishman-Hillard was hired by the city during the administration of Mayor Richard Riordan to help the DWP cope with changes in the state's electricity regulations.

At first, it had only a subcontract. Then Steve Sugerman, Riordan's communications director, went to work for the firm. It soon got a much larger contract.

Sugerman was Stodder's predecessor as head of the public affairs section and now runs his own public relations firm in Los Angeles. He was referred to in the indictment, although not named, as another conspirator who allegedly helped Dowie in 2000, according to people familiar with the case. His lawyer, Ellyn Garofalo, declined to comment Thursday.

The idea behind hiring Fleishman-Hillard was that the city-owned utility needed top-quality help polishing its image. It was thought to be dangerously moribund at a time when it might lose its monopoly status and have to compete with private utilities for customers.

Even after the deregulation threat faded, however, Fleishman-Hillard officials were able to persuade city government that their services were worth retaining.

Dowie helped by ingratiating himself with Hahn, who succeeded Riordan in 2001. Dowie raised money for Hahn's political campaigns and became a valued unofficial advisor, using Fleishman-Hillard's $3-million annual contract with DWP as a vehicle to burnish the mayor's image.

Records show that the DWP paid Fleishman more than $400,000 in 2002 and 2003 to help the mayor's office with work that had less to do with the DWP than with crafting Hahn's responses to civic crises and helping him develop major policy initiatives.

At the same time, the indictment said, Dowie cheated DWP ratepayers and city taxpayers by directing a scheme to pad bills. He acted when revenue to be collected by the Los Angeles office fell short of the monthly billing projections submitted to Fleishman-Hillard headquarters in St. Louis.

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