Douglas Dowie, former general manager of Fleishman-Hillard's Los Angeles office, was indicted today on charges he over-billed the city on a $3 million annual contract with the Department of Water & Power.
The indictment supersedes an earlier indictment brought by the U.S. Attorney's Office in Los Angeles against John Stodder, who was in charge of the Los Angeles office's "public affairs" practice group from May 2002 until this year.
According to the indictment, Dowie and Stodder conspired to "devise, participate in and execute a scheme to defraud Fleishman-Hillard clients." The indictment alleges the firm also over-billed the Port of Los Angeles, Gehry Partners LLP and the World Wide Church of God.
"We're very disappointed," said Dowie's defense attorney, Thomas Holliday, a partner at Gibson Dunn & Crutcher LLP. "We believe the charges are ill-placed and unfounded, and we look forward to Mr. Dowie having an opportunity to defend himself in court and anticipate he'll be fully vindicated."He said Dowie is expected to plead not guilty to the charges.
According to the indictment, 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. The firm's headquarters then incorporated the changes and sent back the approved billings to be mailed to clients in activity reports.
The indictment alleges Fleishman submitted more than $300,000 in fraudulent bills to DWP from January 2000 through January 2004.
Specifically, it alleges in January 2003 that Dowie asked Stodder if he could "pad" the DWP bill by $30,000. Stodder, who reported directly to Dowie, told him that $30,000 was "more than the system could bear." However, another co-conspirator, who was unnamed in the indictment, told Stodder they could "slip through another $15k without incurring too much more scrutiny." In an e-mail, Stodder told Dowie that the unnamed co-conspirator would "just add hours across the board." Dowie, responding by e-mail, told Stodder: "OK, let's do it." Later that month, the indictment alleges that Stodder and Dowie caused the co-conspirator to overcharge the DWP $6,855.
The indictment also states that in September 2003, the co-conspirator told Stodder by e-mail that she needed "to enter activities for just about everyone that will pass the smell test." Stodder, in an e-mail, told the co-conspirator, "Thank you. I totally understand." Later that month, it is alleged that Dowie, Stodder and the co-conspirator overcharged DWP $9,975.
The indictment also includes claims that Fleishman over-billed the World Wide Church of God in September 2003 and that it fraudulently increased the entries of billing worksheets from August 2002 to September 2003 on contracts with the Port of Los Angeles and Gehry Partners LLP.
Dowie, the former managing editor for news of the L.A. Daily News, began working at Fleishman in November 1991, serving as senior vice president and senior partner, and becoming general manager in April 1999. He was put on paid leave last July and left the firm on Jan. 5. He has filed a wrongful termination suit against his former employer, claiming Fleishman owes him up to $6 million in lost wages after the firm fired him because it needed a "scapegoat" and had to "curry favor" with federal investigators.
In a statement, Richard Kline, Fleishman's regional president, senior partner and Los Angeles general manager, said, "We deeply regret any improper actions that occurred in our Los Angeles office. We have taken full responsibility for any improper actions that occurred in our Los Angeles office, but no organization is immune from someone violating its policies. We have taken every step possible to set matters right with the City and its residents."
In April, Fleishman agreed to pay $5.7 million to settle civil claims it over-billed several Los Angeles city department on public relations contracts, including the DWP. Fleishman has cooperated with the criminal investigation, which includes the FBI, the U.S. Department of Transportation and the Los Angeles County District Attorney's Office.
City Controller Laura Chick, who released an audit of the DWP contract last year, said in a statement that the indictment "begins to close a painful chapter in a sordid tale in the history of Los Angeles."
Dowie, who is scheduled to appear in U.S. District Court tomorrow, faces a maximum penalty of five years in prison for one count of conspiracy to defraud. He also faces up to 20 years in prison for each of 15 counts of wire fraud.
Stodder, who was indicted on 11 counts of wire fraud, has pleaded not guilty.
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