P.R. Firm Doing Damage Control Over Its Own Billing

Staff Reporter

Fleishman-Hillard Inc.'s local public relations practice has found itself in an ironic position: trying to smooth out its own public relations.

Word of an audit being launched by the office of Los Angeles City Controller Laura Chick over a contract with the Department of Water & Power has the firm's Western regional partner conceding there could be perception problems involving the giant P.R. firm.

"We believe we have conducted ourselves in a fair and ethical manner, and that we've done excellent work. That hasn't changed," Richard S. Kline, who sits on the firm's operating committee, said in an interview last week. "There is a management group which is looking at the issues and making sure we're doing everything possible to cooperate with anyone who is conducting a legitimate evaluation or investigation."

But Kline conceded that the firm hasn't adequately addressed issues being raised over "the quality and value of the work" it has performed. "The company must communicate," he said. "Silence is not an option."

The DWP's $3 million-a-year contract with Fleishman was cited by members of the Los Angeles City Council as an example of questionable spending by the utility, which has requested an 18 percent increase in water rates.

Chick pushed for the audit after refusing the DWP's request to pay the December and January invoices for the firm's services. She explained that billings for those months didn't detail what service had been provided, while others listed charges of $50 to $100 for quarter-hour periods in which Fleishman employees said they had left phone messages or sent e-mails.

"The city in various places has consultant contracts that really need to be evaluated," Chick said in explaining the audit. "What are we getting for our money? Paying 50 to a 100 bucks to a consultant to leave a voice mail or e-mail to set up a meeting is not the right way to spend public dollars."

With DWP alone, Fleishman's local office has racked up more than $20 million in revenue over the past seven years.

Kline isn't saying much about Chick's audit or other ongoing investigations involving city contracting. "We are making sure we are complying with requests given to us, and stay focused on the great work we've done for our clients," he said.

Crown jewels

The Los Angeles office of Fleishman-Hillard, a unit of publicly owned Omnicom Group Inc., had developed an enviable public affairs practice, with a client base built mainly of government agencies and large corporations.

The crown jewels include the DWP, the Airport Commission, the Port of Los Angeles and the office of Mayor James Hahn. But questions have been raised about the close ties between those clients and the firm's former general manager, Doug Dowie.

Curt Kundred, an executive from the San Francisco office, replaced Dowie on an interim basis in February. As West Coast president, Kundred will oversee the San Francisco, L.A., Portland, San Diego and Sacramento offices.

Meanwhile, Dowie, who holds the title of senior vice president and senior partner, was named co-chairman of the agency's national public affairs office and will oversee California and the public affairs practice nationally. Dowie did not return calls.

Several Fleishman clients expressed little concern.

"They've worked very well with us as an agency, and served us well," said Dotty Diemer, vice president of communications with Cypress-based Mitsubishi Motors North America Inc. "We have no plans to do any type of audit on them at this point."

Mindy Rosen, spokeswoman for the Downtown Center Business Improvement District, a coalition of property owners in downtown L.A., added, "We are very happy with Fleishman-Hillard."

But Michael Turner, president of Bearsworth Communications Inc. in Chatsworth, who provides public relations to Los Angeles Unified School District and the city of Los Angeles, said Fleishman clients should be concerned about the distractions.

"As a client, I'd review my relationship," said Turner. "The best way for the office to recover is to divorce itself from the city. In this case, even though the contracts (with the city) are lucrative to the firm, they have to break away and redefine their reputation," he said.

Hal Dash, president of Cerrell Associates Inc., a political consulting and public relations firm, would not say whether he thought Fleishman should disengage from its city work. But Dash, who himself has close ties to city officials, said there are times when firms must sever contracts in order to regain credibility.

"P.R. firms are always faced with the fact that their behavior is watched, and should be watched, especially when dealing with public contracts because of the use of public money," he said. "It's up to the company to eliminate the conflict, and avoid conflict."

Acknowledging as much, Kline said the agency is doing pretty much what it tells its clients to do in similar circumstances. "That is deal with the issue in the most forthright way possible," he said.

Asked if the firm has considered severing ties with the city, Kline said: "That's speculative. We have not and cannot speculate on that. I guess if you are looking for a yes or no, I'd say we are proud of the work we've done for the city, and hope to continue the relationship."

In-House Client: After bad publicity, a local P.R. power must brush up its own image.

Company: Fleishman-Hillard Inc.

Headquartered: St. Louis

Founded: 1946

Parent: New York-based Omnicom Group Inc., which acquired Fleishman-Hillard in 1998

Top L.A. Executive: Richard S. Kline, Western regional president and senior partner on the agency's operating committee

Revenue: $345 million in 2002, the last year revenue was reported publicly

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