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Ex-PR Exec Testifies He Falsely Billed

Steven Sugerman says a defendant so directed him. Defense lawyer cites prosecution deal.

April 28, 2006|John Spano | Times Staff Writer

A former Fleishman-Hillard executive who once served as one of then-Mayor Richard Riordan's top aides told federal jurors Thursday that he personally falsified public relations billings to the city Department of Water and Power.

Steven Sugerman said he billed falsely for the international public relations giant, and instructed subordinates to do the same, at the direction of his boss, Douglas Dowie, who himself was once a confidant of former Mayor James K. Hahn.

Sugerman, testifying under a cooperation deal with prosecutors, said the DWP was treated as a "cash cow" to make up deficits in projected monthly revenues for the Los Angeles office of Fleishman-Hillard, then a powerhouse at City Hall.

The testimony was the most compelling to date in a federal fraud and conspiracy trial targeting Dowie and his co-defendant, John Stodder Jr., that has laid bare the intersection of politics and profit at City Hall.

Like Sugerman, the other major witnesses have been former city employees, communications industry executives or former journalists. Stodder worked in the Tom Bradley administration.

The Fleishman scandal broke at a time when allegations of corruption were swirling around City Hall. Those included separate claims of city contracts being traded for political contributions and of illegal "bundling" of campaign contributions to local politicians. So far, the Dowie trial has involved only allegations of fraudulent billing and conspiracy.

Stodder denies that he was aware of any false billings, and Dowie's lawyer has said any wrongdoing was carried out by subordinates without Dowie's approval. Fleishman-Hillard has refunded almost $6 million to the city for overbilling the DWP and other city departments.

Sugerman, a onetime senior vice president at Fleishman, capped the prosecution's case.

He will return Friday, and then the government will rest after the testimony of a final witness, the FBI agent who assembled the case.

Sugerman has pleaded guilty to three counts of wire fraud in the case. He faces a maximum sentence of 15 years in prison and a $750,000 fine.

Dowie's lawyer, Nick Hanna, suggested that Sugerman exaggerated his allegations against Dowie to curry favor with prosecutors and receive a lighter sentence.

Trim, bespectacled, wearing a gray suit like the lawyers surrounding him, Sugerman testified quietly, directly and succinctly, never appearing annoyed despite Hanna's excoriating questions.

The witness acknowledged that he hoped to receive a reduced sentence.

Hanna persisted, demanding to know why he pleaded guilty. Sugerman responded:

"For starters, I was guilty. I decided to take responsibility for what happened at Fleishman-Hillard and my role in it. I believe it was the right thing to do."

Sugerman said Dowie, a former Marine and managing editor of the Los Angeles Daily News, "reacted extremely negatively" to reports that the company would not make its projections. Dowie instructed him "to go back and figure out how to hit the numbers projected," Sugerman told jurors.

Asked why he then complied and arranged the false billings, Sugerman responded:

"Dowie was my boss. He gave me very specific instructions to meet these numbers. This was the only avenue I had left to accomplish this. He knew the billing system better than I did. I felt he was giving specific direction."

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