LOS ANGELES: Fleishman-Hillard has brought an end to the multimillion dollar overbilling lawsuit brought against it by the city of Los Angeles with a $5.7 million settlement.
LA city attorney Rocky Delgadillo announced last week that the firm agreed to pay $4.5 million in a cash settlement, as well as cancel an additional $1.2 million in outstanding bills.
But the end of the civil suit is not the end of the controversy. "The agreement is [just] the civil settlement," Delgadillo said. Criminal investigations continue.
The sum, which is "substantially more" than any overbilling, includes punitive damages, said Delgadillo. However, neither Delgadillo nor Fleishman would say how much those punitive damages were or what portion was fraudulent billing. Delgadillo said only that an outside "expert litigation witness" had determined that the city would probably collect $850,000 if the case went to court and that he felt anything above that amount could be considered a penalty.
Kline said the firm had agreed to the settlement because it had "failed to meet our own standards," as well as the standards of the city. He added that the settlement helped avoid costly litigation and allows the firm to begin repairing its reputation.
"We can't undo the past," said Kline. "We apologize and are doing [all] possible to set it right."
The suit alleged that the firm submitted inflated or fraudulent invoices between 1999 and 2004 on contracts for the Department of Water and Power (DWP), the Harbor Department, and Los Angeles World Airports. An audit by the LA city controller said the firm had overbilled by $4.2 million, but Fleishman's own analysis placed the figure at $652,457 over a five-year period.
While the firm didn't admit to wrongdoing as part of the settlement, it did release an apology.
"Some senior executives of the LA office, who are no longer with the firm, caused certain bills to be presented to [LA] that appear to be improper and indefensible," the statement read.
Earlier this month, federal prosecutors warned that an indictment against ex-Fleishman employee John Stodder Jr. could soon be amended to name at least one more person, and US District Attorney spokesman Thom Mrozek said the civil settlement "doesn't affect our case against Mr. Stodder or our ongoing investigation."
Fleishman also faces a wrongful dismissal lawsuit from ex-GM Doug Dowie, who served as lead on the DWP account.