Skip to comments.CA: Feds indict P.R. exec in DWP billing scam
Posted on 01/14/2005 9:24:14 AM PST by NormsRevenge
In the first charges growing out of City Hall corruption investigations, a former top executive with the Fleishman-Hillard public relations firm was indicted Thursday by a federal grand jury on 11 felony counts of fraud.
The indictment of John Stodder, 49, a senior vice president who left the firm last week, centers on charges that he participated in a scheme over a two-year period to defraud the Department of Water and Power out of $250,000. He also is accused of overbilling the Port of Los Angeles, architect Frank Gehry's firm and the World Wide Church of God.
Stodder, who faces a maximum of 20 years in prison on each count, denied wrongdoing through his lawyer. He is due to appear in federal court today.
"Stodder and other unindicted co-schemers known and unknown to the grand jury fraudulently increased and caused others to increase (Fleishman-Hillard) billings by altering the billing work sheets to reflect a greater number of hours than ... employees actually had worked and recorded," the indictment said.
Working with District Attorney Steve Cooley's office, federal authorities have been investigating allegations of "pay-to-play" contracting practices in the administration of Mayor James Hahn, who has seen several key aides and commissioners leave under a cloud since the probes began.
Assistant U.S. Attorney Adam D. Kamenstein said in an interview that the investigations, which include the FBI and Department of Transportation, are continuing and could lead to others being charged.
The indictment points to two "co-schemers" who are identified as "CS-1" and "CS-2." Kamenstein said that in general, a co-schemer could be given immunity, though not necessarily.
The introduction of criminal charges raises the heat on Hahn, who had a close relationship with executives at Fleishman-Hillard and benefited from their advice and planning even as the firm was paid more than $24 million by the DWP, Harbor and Airport departments over six years.
Those contracts came under close scrutiny from City Controller Laura Chick, who, after a series of audits, accused Fleishman-Hillard of overbilling the DWP $4.2 million.
"The drumbeat of justice is certainly louder and clearer today with this indictment," Chick said in a statement. "While this is painful to witness, answers are needed as to why and how this happened, and this indictment is the beginning of that important process."
Hahn's spokesman, Deputy Mayor Doane Liu, described the mayor as "outraged" that the public's trust was violated.
"The mayor is pleased that the U.S. attorney responded so quickly to his demand that they get to the bottom of this alleged scheme," said Liu. "The mayor is as concerned as anyone that the city of Los Angeles has been victimized and the criminals need to go to jail."
Stodder's attorney, Jan Handzlik, said his client did nothing wrong.
"Mr. Stodder is shocked and dismayed that the U.S. attorney would choose to file these charges against a mid-level manager at Fleishman-Hillard, especially someone who has been there such a short time," Handzlik said. "He denies the charges and expects to be exonerated at trial."
Richard S. Kline, Fleishman-Hillard's regional president and senior partner, said the company was "saddened and deeply disappointed that a former employee has been charged with wrongdoing."
"No one in corporate management was aware of any improper activity and nothing in the indictment accuses anyone in corporate management of wrongdoing," said Kline, who has acknowledged DWP overbillings of more than $600,000.
Fleishman-Hillard and the U.S. attorney both said the public relations firm has cooperated in the ongoing investigation.
Last week, Kline disclosed that the former head of the Los Angeles office, Doug Dowie, and another executive involved in the DWP contract, Steve Getzug, had left the firm.
Dowie declined to comment Thursday, and Getzug could not be reached.
Stodder, a Palos Verdes Estates resident, was hired at Fleishman-Hillard in May 2002 and billed $325 an hour for work on the DWP contract. Supervised by Dowie, he was in charge of the public affairs group at Fleishman-Hillard that handled the DWP contract.
DWP internal auditors began questioning Fleishman-Hillard bills in early 2002 shortly before Stodder was hired. But according to the federal indictment, Stodder helped direct Fleishman-Hillard employees to "pad" bills to the DWP, in one case advising a co-worker to inflate a bill by $15,000 but not $30,000 because the larger amount was "more than the system could bear."
Stodder donated $3,600 to Los Angeles city politicians, including $1,000 to Hahn's re-election campaign. Dowie and other executives also donated money to Hahn and his 2002 campaign against San Fernando Valley secession.
In November, Chick released an audit showing that Fleishman-Hillard had overbilled the DWP by $4.2 million on its contract, which extended from 1998 to 2004. Fleishman-Hillard executives denied a wide-ranging conspiracy to inflate bills to the DWP, but acknowledged that they could not account for about $650,000 in bills to the municipal utility.
The indictment charges Stodder and unnamed other Fleishman-Hillard executives with encouraging employees to add hours to monthly bills submitted to the DWP, the Port of Los Angeles and two private clients, Gehry Partners LLP and the World Wide Church of God.
Officials from Gehry Partners and the World Wide Church of God did not return phone calls. Representatives of the DWP and Port declined to comment.
Cooley, whose office is working closely with federal investigators, applauded the indictment.
"Today's federal indictment is an important step in a concerted District Attorney and U.S. Attorney effort to prosecute public corruption in Los Angeles," Cooley said in a statement. "This joint local/federal effort is unprecedented in recent Los Angeles history involving pursuing public corruption."
Staff Writer Rick Orlov contributed to this report.
wonder when the Feds will indict "Little Jimmie" - anyone know what happened to the charges brought while he was City Attorney? - never heard the outcome...
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