LOS ANGELES: Fleishman-Hillard's legal troubles with the city of Los Angeles have the local PR community privately discussing the financial pressures faced by agency heads, while publicly remaining quiet.
"Everyone is holding their breath" to see what happens next, said Jerry Swerling, director of the center for strategic public relations at the USC Annenberg School of Communications.
Like many top PR professionals, most of whom declined to speak on the record, Swerling said that, although such billing controversies are a "rarity" in the agency world, the issue has provoked a discussion about what some say is an industrywide system that focuses more on revenue goals than strict accounting and billing.
While not talking specifically about Fleishman, Swerling said, "Everything hinges to varying degrees on that revenue forecast. Think about the pressure that generates."
The controversy intensified when the Los Angeles City Attorney sued Fleishman July 16 for allegedly overbilling the Los Angeles Department of Water and Power.
FH has launched its own investigation and said it was placing former LA GM Doug Dowie on administrative leave.
"This is a case of outright fraud," city attorney Rocky Delgadillo said in announcing the suit. He also has not ruled out the possibility that individual Fleishman employees could be named in it.
Delgadillo said that from 1999 to 2004, the PR agency billed more than $20 million against the DWP contract.
Richard Kline, FH regional president and LA GM, said the "firm would not accept or condone any misrepresentation of client billing." Kline said the agency was cooperating "with authorities investigating this matter." He added that he will take over all of Dowie's clients and other duties.
City controller Laura Chick said that her office, which has "been concerned about the Fleishman contract for some time," has hired outside forensic auditors to examine the issue.
The acting head of the DWP resigned last week at the request of the mayor. The Fleishman contract was not cited as a reason.
Delgadillo added that his office has been working on the investigation since April, and that he would offer "whistle blower protection" to any current or former FH employee who had information pertinent to the suit.