LOS ANGELES: Fleishman-Hillard improperly billed the LA Department of Water and Power (DWP) $4.2 million over a six-year period in "unsubstantiated, unsupported, and questionable charges," according to the results of an audit released last week by city controller Laura Chick.
Referring to the overcharges as "some of the worst tomfoolery I have ever seen," Chick demanded that Fleishman repay the money to the city, but stopped short of calling the activity fraud, saying she would leave such inferences to the "legal experts."
"My message to Fleishman- Hillard is short and clear: Give back the $4.2 million you took from the ratepayers of Los Angeles," she said.
The agency responded to the audit in a written statement, which read, "We strongly disagree with the vast majority of the Controller's report." It called for an independent mediator to resolve the issue.
Fleishman has been faced with investigations of its DWP work on numerous fronts, including a lawsuit brought by the LA city attorney and inquiries by the US attorney and the LA district attorney. Under investigation are three contracts with payments totaling more than $24 million.
Richard Kline, Fleishman regional president and senior partner, told PRWeek, "We want to determine the truth [and] know the facts. We're willing to reimburse the city for anything billed that was inappropriate."
Labor costs under question totaled $1,135,113. Chick said the audit found that time sheets submitted by individual employees were regularly changed by project managers to increase the billed hours without staff input. The audit also found that some employees changed their billable hours after the monthly billing cycle had ended, although Kline said this was not prohibited in the contract.
Industry leaders said some problems found in the audit are common in PR. "The practice of changing personnel during the course of an engagement is indeed common practice," said Joe Kessler, partner at Shepardson, Stern, & Kaminsky.
However, he added that other audit findings, such as adding hours after a billing cycle had closed, are unusual, and that clients must also bear responsibility: "It seems pretty clear at this stage that the city did a lousy job of overseeing this contract. If Fleishman is being held to industry standards, the client has to be held to industry standards, too."