The Los Angeles Department of Water and Power was so unpopular, it hired the public-relations firm of Fleishman-Hillard to improve its image. Trying to figure out why is sort of like a metaphysical brainteaser. It was unpopular because it raised water rates while at the same time arrogantly frittering away the money it got from customers on things like a $100,000 bash to celebrate the reopening of Los Angeles City Hall and $75,000 to sponsor the L.A. Memorial Coliseum. And blowing more than $20 million, over six years, to Fleishman-Hillard, to improve its image.
But the DWP is owned by its customers, the people of Los Angeles, who by law cannot buy electricity from Edison or water from some little agency but have to buy from their own city department. The people also own City Hall and a chunk of the Coliseum, so why would the DWP need to use the money it gets from its ratepayers to help celebrate City Hall and sponsor the Coliseum? Should the DWP be using public money to sponsor public programs, as a private company might? And if the department’s image is bad in part because it spends so much on public relations, then why would it . . . See? It’s a puzzle.
The predicament reached a new stage last week when Fleishman, based in St. Louis, was accused of faking bills to the DWP. The firm had won a renewable $3 million annual contract to help the city’s monolithic Water and Power agency sell itself, but that figure was just a ceiling. If its monthly time sheets added up to less, it would be paid less, so — according to ex–Fleishman employees who spoke to the Los Angeles Times — the firm made up stuff to make sure it pulled in the maximum amount.
Even the things it didn’t make up looked fishy, like the hours upon hours one Fleishman employee apparently spent just clipping newspaper articles.
City Attorney Rocky Delgadillo claimed he had been on to Fleishman all along, but just didn’t have enough to move with until Times reporters Ralph Frammolino and Ted Rohrlich got an ex–Fleishman worker to cop to the time-sheet padding. Now that Delgadillo had a name, he could file suit, and he did, with alacrity, and he called a news conference to make sure everyone knew about it. It’s worth noting, though, that the lawyers the city attorney assigned to the case — Richard Helgesen and Susan Lopez-Giss — are both embedded at the DWP. They are suing the contractor who allegedly ripped off their client, but they can’t be expected to come down equally hard on the client itself, which arguably helped rip off the ratepayers by failing to adequately scrutinize the contract, the monthly invoices, and the work they were getting from Fleishman-Hillard.
Mayor Jim Hahn appeared alongside Delgadillo, along with Controller Laura Chick and Councilman Tony Cardenas, and declared, “We need to get to the bottom of how the DWP was overbilled.” He would meet, he said, with DWP board President Dominick Rubalcava to talk about what happened. But that was less than reassuring, since Hahn appointed Rubalcava, along with the other four board members, and Rubalcava was a major Hahn campaign donor. Hahn has had very close ties with Fleishman, hiring his chief media spokeswoman, Shannon Murphy, from the firm, and sending his chief of staff, Matt Middlebrook, to the same firm when he wanted to leave the Mayor’s Office.
That doesn’t mean Hahn did anything wrong in seeking out the (reputedly) very best people in the PR field to help him run Los Angeles. But it doesn’t look good.
A few blocks from the Delgadillo news conference, Hahn’s once-and-probably-future campaign opponent, Antonio Villaraigosa, held forth outside the DWP building with Councilman Jack Weiss and demanded that the department’s recent rate increase be suspended until he saw some major reforms in the way the DWP did business.
“Ultimately it is the mayor’s responsibility to address these problems,” Villaraigosa said, but the council, “in the absence of leadership,” must step in. His message was clear. Whatever Fleishman did, whatever the DWP did, the responsibility lies with the man who beat him for mayor three years ago. It’s still too early to determine whether ratepayers and voters will hold Hahn responsible for this scandal, but again, it doesn’t look good.
The Fleishman-Hillard DWP contracts go back to 1998, but much of this story starts in 2001, when Hahn and Villaraigosa were battling in their high-spending mayoral runoff. When Hahn won, he almost immediately had to campaign again, this time to block San Fernando Valley secession. Over the next year, persistent rumors began circulating around City Hall and out at the harbor and the airport that only companies that raised or donated money to Hahn’s campaign and the anti-secession movement would be considered for lucrative city contracts. If you wanted to play, you had to pay. Fleishman-Hillard paid, and whether or not that was the reason, its hefty DWP contracts were renewed.
Talk of pay-to-play had been rampant at City Hall for years. The allegations were always hard to prove, but things were a little different this time. A new charter allowed the city controller to conduct management audits of departments, and Laura Chick started poking around. District Attorney Steve Cooley promised to crack down on governmental corruption, if he could find any, and his people also started nosing about.
Chick was especially interested in the Fleishman contracts because she was as perplexed as any ratepayer might be over just why the DWP would need to spend public money to hire a public-relations firm. That brings us back to our brainteaser. You need to keep your customers happy. But it’s not clear why, since they are captive, and can’t go anywhere else. You use their money to hire a PR firm to convince them that they should be happy with you even though you spend money on things like PR firms.
The DWP gave all kinds of reasons for hiring PR firms, including creating a newsletter for employees and retirees, and other programs that helped it communicate with customers. But even with its own internal PR staff, plus the high-powered Fleishman experts, the DWP failed to adequately communicate to about 30,000 low-income and senior ratepayers that they had to complete their paperwork in order to keep their subsidies. And the DWP-Fleishman team did such a poor job of communicating the need for a planned 18 percent rate hike that the increase had to be lowered to 11 percent. So much for PR.
The Fleishman firm’s ties with City Hall are so close that you have to eliminate a few usual sources of information. Ex–Fleishman employee Shannon Murphy, who is now Hahn’s chief press spokeswoman, is not suspected of any wrongdoing, but she has been walled off from the Fleishman story to avoid any appearance of impropriety. In Delgadillo’s office, the same thing is true of chief press spokesman Eric Moses, who came over from a stint at Fleishman. And, in case you’re making a chart, please note that when Moses came over from Fleishman, it was to succeed Ana Garcia, who left Delgadillo’s office to go to KNBC — where she broke the story of irregularities in the DWP’s contracts with Fleishman. And Garcia, by the way, before she was with Delgadillo, had worked an earlier stint at KNBC, where she broke the story of corruption at the Entertainment Industry Development Corp., which launched the whole season of corruption probes at City Hall.
Now take another look at the DWP, which has a reputation as the most arrogant agency in local government. Because of the Fleishman scandal, Villaraigosa and Councilman Jack Weiss want to take away the water-rate increase and impose an inspector general to delve into every nook and cranny of the department. Neighbor-hood councils are highly suspicious because the DWP thumbed its nose at them when it (with Fleishman in tow) tried to jack up rates by 18 percent. The City Council, which took an extra $60 million from the DWP to balance its budget, does not want to be caught dead in the same room with the department, because of the Fleishman scandal. The mayor must now see the DWP as a major political liability, because of Fleishman. The DWP is highly unpopular, and it really needs something to improve its image. How about — well, hiring a major PR firm?