OMNICOM PR FIRM TO PAY L.A. $4.5 MILLION TO SETTLE CHARGES
Fleishman-Hillard Acknowledges 'Improper and Indefensible' Invoices
OMNICOM PR FIRM CHARGED WITH $4 MILLION IN OVERBILLINGS
Fleishman-Hillard Calls Los Angeles Controller's Allegations 'Erroneous'
16-count federal indictment
A 16-count federal indictment charged Doug Dowie, 57, with conspiracy and 15 counts of wire fraud. The conspiracy charge carries a maximum penalty of five years in prison and each wire fraud charge carries a maximum sentence of 20 years. Mr. Dowie was placed on leave in February 2004 and he left the agency in January.
The indictment also named John Stodder, the 49-year-old former head of the office’s public affairs practice who was charged earlier this year. The recent indictment, charging Mr. Stodder with federal conspiracy and 11 counts of wire fraud, supersedes the earlier charges, to which he pleaded not guilty. He left the agency earlier this year.
Settled civil suit
In April, Fleishman agreed to pay $4.5 million to the city of Los Angeles to settle civil claims brought against the firm. In addition to embarrassing the blue-chip agency, the scandal has had far-reaching effects on the Los Angeles PR industry, which saw local public affairs work disappear in its wake. Last year, Mayor James Hahn ordered city agencies to cease negotiations and cancel contracts with PR firms.
“We deeply regret any improper actions that occurred in our Los Angeles office," Fleishman's regional president and Los Angeles general manager, Richard Kline, said in a statement. “We have been cooperating fully with the investigating authorities since this inquiry began and we will continue to do so.”
Allegedly 'padded' bill to client
The indictment details a scheme in which Fleishman-Hillard submitted more than $300,000 in fraudulent bills to the water and power department and three other clients -- the Port of Los Angeles, the architect Frank Gehry’s firm and World Wide Church of God -- between January 2000 and January 2004. It describes a communication in which Mr. Dowie asked Mr. Stodder to “pad” the department of water and power bill by $30,000.
Mr. Dowie is expected to be arraigned today. Lawyers for Messrs. Dowie and Stoddard could not immediately be reached for comment.