Fleishman-Hillard Inc. agreed Tuesday to pay $5.7 million to settle claims it overbilled several Los Angeles city departments for public relations contracts.
The settlement, reached with City Attorney Rocky Delgadillo's office, ended the PR firm's troubles with the city but not with federal and county prosecutors.
The settlement will cover overbilling claims stemming from contracts with the Department of Water & Power, the Convention and Visitors Bureau, the Port of Los Angeles and Los Angeles World Airports, which operates Los Angeles International Airport.
The settlement covers a period from May 1999 to early last year and includes $4.5 million in cash. The St. Louis-based public relations firm also forgave $1.2 million in outstanding bills submitted in 2003 and 2004.
Richard Kline, Fleishman's regional president and Los Angeles general manager, said in a press release that the firm settled after conducting an internal investigation that found "some senior executives of the Los Angeles office, who are no longer with the firm, caused certain bills to be presented to the city that appear to be improper and indefensible."
He added the results of the firm's investigation have been turned over to county and federal investigators, who indicted a senior official in January on fraud charges. That official, John Stodder, a former vice president at Fleishman's Los Angeles office, has pleaded not guilty.
The city originally filed suit in July against the public relations firm, alleging it padded bills on $20 million worth of contracts over the past seven years. City Controller Laura Chick later issued an audit finding the firm over-billed the city by $4.2 million on the $3 million-per-year contract with the DWP.
Earlier in 2004, Chick froze $533,000 in payments to bills on the contract, which she refused to pay until Fleishman justified those costs.
In November, Kline admitted the firm could not find documentation for $652,457 in billings.
"While this closes the civil case, we still look to the U.S. Attorney and District Attorney to bring to justice anyone guilty of criminal acts against the people of Los Angeles," Chick said in a statement released by e-mail on Tuesday. "If Fleishman-Hillard's contract renewal in 2002, for $9 million dollars (sic), had been debated openly and publicly, I doubt that it would have gone forward."
Another top Fleishman executive, Douglas Dowie, former general manager of the firm's Los Angeles office, left the firm in January and was named individually in the city's over-billing suit.
He did not pay part of the settlement and has been dropped from the suit, said attorney Michael Faber, who represents Dowie in a wrongful termination suit filed earlier this month.
"I'm astonished at the size of the settlement," he said. "It is worth noting that Mr. Dowie is not paying anything towards it."
The settlement has been approved by the DWP board but still must be approved by the Board of Harbor Commissioners and the Board of Airport Commissioners at their next meetings.
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