The indictment of a former Fleishman-Hillard executive suggests that federal prosecutors are using a simpler billing fraud case to build the larger and more mutable pay-to-play investigation involving L.A. city officials, former federal prosecutors and law enforcement officials said.
At first glance, the 11 counts of wire fraud brought earlier this month against John Stodder, a former senior vice president at the public relations firm, appear far removed from the year-long federal investigation into allegations that city contracts were won in exchange for political contributions. But some law enforcement officials say that the billing fraud case is only the first concrete piece of the broader pay-to-play investigations.
The connection comes in Fleishman's well-documented ties to the administration of Los Angeles Mayor James Hahn from campaign contributions to the number of staff members who have moved between the two offices.
By exerting pressure on Fleishman in the billing probe, where a clear-cut paper trail can aid in prosecution, investigators are looking to gain the cooperation of people with direct knowledge of harder-to-prove corruption.
Pay-to-play investigations, particularly those involving political contributions, are among the most difficult public corruption cases to develop, former federal prosecutors said. To prove a corruption case of that type, investigators need testimony about conversations that can be verified by others or were caught on tape through wiretaps.
Getting people to cooperate and provide information about that relationship is critical, said former prosecutors.
"In the vast majority of cases, they can't make that connection in court because if it's done, the agreement is not expressed, it's implied," said William Portanova, a former federal prosecutor and white-collar criminal defense lawyer in Sacramento. "These sophisticated politicians understand that some things are simply not said. They have such plausible deniability, with layers of people and layers of lawyers, that it's a disgraceful hideous mess."
Stepping up pressure
Most people familiar with the overbilling investigation believe prosecutors are likely to indict more Fleishman executives.
Prosecutors allege that Stodder was involved in the inflating of bills to the city's Department of Water & Power by $250,000. In a Jan. 13 statement, Los Angeles County District Attorney Steve Cooley, whose office is working with federal prosecutors in the investigation, hinted at additional charges by calling the recent indictment an "important step" in prosecuting public corruption and saying that other "cases that may arise out of the ongoing investigation."
"I don't see this as potentially isolated fraudulent billing," said City Controller Laura Chick, whose audit of the airport department helped fuel the corruption investigation and whose audit of the Fleishman contract preceded the recent indictment. "This investigation has been a bit like an amoeba. It has changed shape and forms multiple times. It's an active, living process that is not over."
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