A former vice president at Fleishman-Hillard Inc. who managed a $3 million-per-year contract with the Department of Water & Power was indicted today by federal prosecutors on charges he helped submit $250,000 in fraudulent bills to the city department.
John Stodder, who was in charge of the public affairs practice group and worked on the contract from 2002 to 2004, was charged with 11 felony counts of wire fraud. The counts are based on bills to the DWP between January 2003 and February 2004. Each count carries a maximum possible penalty of 20 years in federal prison.
The indictment includes allegations that other Fleishman clients were overbilled, including the Port of Los Angeles, Gehry Partners LLP and the World Wide Church of God.
Stodder and "others known and unknown to the Grand Jury, knowingly and with intend to defraud, devised, participated in, and executed a scheme to defraud Fleishman-Hillard clients and to obtain money from Fleishman-Hillard clients by means of materially false and fraudulent pretenses, representations, and promises, and by the concealment and nondisclosure of material facts," the indictment states.
Federal prosecutors claim in the indictment that Stodder directed as-yet unnamed "co-schemers" to increase billings in order to meet monthly forecasts. The indictment alleges that changes were made to draft bills issued by the firm's St. Louis headquarters, which calculated billings from a computerized time entry program that included an employee's name, a description of the work, the amount of time spent on the work and the name of the client. Stodder and others "would falsely increase the amount of billable time reported as having been spent performing various services or would record time for services that actually had not been provided at all," according to the indictment.
The firm's headquarters incorporated the changes and sent back the approved billings to be mailed to clients in activity reports, the indictment says.
The indictment cites one instance, in January 2003, when a "co-schemer," referred to as "CS-2," asked Stodder "if they could 'pad' the DWP bill by $30,000 with 'ambiguous counseling for the mayor, (DWP General Manager) wigs, (DWP Chief Operating Officer) salas, etc.,'" referring to Mayor James Hahn, former DWP General Manager David Wiggs and former DWP Operating Officer Frank Salas.
Stodder told the co-schemer that "$30,000 was 'more than the system could bear' but that CS-1 had said that she could 'slip through another $15K without incurring too much more scrutiny,'" the indictment says.
That same month, the indictment says, Stodder told CS-2 that "rather than adding hours to 'Doug or Marcom' (meaning the hour entries that related to work another FH-LA employee or the FH-LA Marketing Communications group had performed), CS-1 would 'just add hours across the board.'"
During any given month, Stodder would direct "CS-1" to increase DWP bills by as much as $45,277, the indictment says.
Stodder is among a few former Fleishman employees who retained their own attorneys during a year-long investigation a move that often indicates they are targets or subjects of the investigation, according to several former prosecutors. Others who hired their own attorneys include the former manager of the firm's Los Angeles office, Douglas Dowie, who was placed on paid leave in July and left the firm earlier this year, and Monique Moret, a former senior vice president who resigned last year.
Stodder's attorney, Jan Handzlik, a partner at Howrey Simon Arnold & White, said his client denies the charges.
"Mr. Stodder is shocked and dismayed that the U.S. Attorney would file these serious charges against a mid-level manager at Fleishman-Hillard, especially one who has been there such a short period of time," he said. "He has always conducted himself in an ethical and above-board fashion and feels the evidence will demonstrate this."
Los Angeles County District Attorney Steve Cooley, whose office joined federal prosecutors in the indictment, issued a statement calling the indictment an "important step" in a prosecution that "is unprecedented in recent Los Angeles history involving pursuing public corruption."
Richard Kline, regional president, senior partner and Los Angeles general manager at Fleishman-Hillard, also issued a statement saying, "We're saddened and deeply disappointed that a former employee has been charged with wrongdoing. Fleishman-Hillard would never condone any of the activities alleged in the indictment."
The indictment also references an incident in September 2003, when Stodder directed a local Fleishman employee, referred to as J.M., to increase the number of hours on World Wide Church of God's bills by about $5,000.
Stodder, along with Dowie and Steve Getzug, a senior vice president, left the firm on Jan. 5.
Stodder is expected to appear at U.S. District Court on Friday, Jan. 14, for bail to be set.
The indictments come from a joint investigation with the Federal Bureau of Investigation, the U.S. Department of Transportation and the Los Angeles County District Attorney's Office.
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