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Executive office furniture purchased in DWP fraud

Limits on credit cards were bypassed to acquire furnishings at inflated prices listed on statements as plumbing supplies and fire protection equipment.

October 30, 2010|By David Zahniser, Los Angeles Times

Two Los Angeles city workers accused of defrauding the Department of Water and Power pocketed thousands of dollars by marking up the cost of furniture and other materials delivered to the offices used by Mayor Antonio Villaraigosa's five-member DWP commission, officials said Friday.

Over the past two years, the utility obtained new office furniture for the utility's executives, even though there was no money in its budget for such expenditures, said Joe Ramallo, a spokesman for the utility.

The agency also ordered new furniture for the commission's meeting room. Yet invoices submitted to the utility never indicated that furniture was being purchased, investigators said.

The purchases are included in the felony fraud case filed Thursday against DWP employees Akbar Fonooni, 55, and Anthony Carone, 49, Ramallo said. "It appears by our own review that furniture and materials purchased for use in the commission offices and board room was involved," he said.

Prosecutors contend that Fonooni and Carone engaged in a scheme to purchase at least $3 million worth of supplies for the DWP from dummy companies that inflated the cost of the purchases by 10% or more.

The transactions in the case were spread across thousands of invoices over six years. The fact that DWP officials "didn't catch it means there weren't adequate controls, and a couple of dishonest employees could beat the system," Los Angeles County Deputy Dist. Atty. Gary Nielsen said.

Carone pleaded not guilty Friday and Fonooni is out of the country, prosecutors said. The two men, along with 45-year-old Troy Mitchell Holt of Anaheim, face felony charges of conspiracy, conflict of interest and misappropriation of public funds.

Ramallo said the DWP does not have cost estimates for the renovation of the commission's board room or the furniture provided to individual executives. But prosecutors said the utility purchased $242,000 worth of furniture between March 2008 and November 2009 for a number of different locations.

Once the defendants marked up the cost of that furniture, the utility wound up paying $399,000, said Seth Fogel, an investigator in Dist. Atty. Steve Cooley's Public Integrity Division. Adding to the intrigue, the invoices did not mention furniture, but listed other kinds of supplies, he said.

Prosecutors said the three defendants used the fake companies to inflate the cost of fire extinguishers, light bulbs, valves and other equipment procured by the DWP. Among the purchases made by the two men were 50 granite-top tables, which were bought by the utility in May 2009.

Investigators have turned up only one of the tables so far, Fogel said. "No one seems to really know where they are," he said.

The bill for those tables, originally valued at about $30,000, was charged to the DWP as about $40,000 worth of plumbing and fire protection equipment, Fogel said. The utility also bought six-foot "cognac colored" desks that were valued at $2,215 before any markup occurred.

The DWP is in the process of firing Fonooni, a fire protection engineer. Carone, a plumbing supervisor, remains employed without pay.

Fonooni and Carone made the purchases using roughly a dozen of the DWP's "P-cards," or purchasing cards, which had a monthly spending limit of $20,000. Because those cards did not allow a single expenditure to exceed $2,000, the defendants were forced to split an order into smaller pieces, the district attorney's office said.

DWP officials said they responded to the yearlong investigation by demanding more oversight of the utility's credit card purchases. Since search warrants were served at DWP offices in December, the agency has begun conducting random audits of purchases on its credit cards and demanding scrutiny of the bills from high-level managers, Ramallo said.

"The department is continuing its own internal investigation of this matter and earlier today requested the assistance of City Controller Wendy Greuel to conduct a full audit of the purchasing card program in order to identify additional improvements," Ramallo said in a statement.

david.zahniser@latimes.com

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