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OMNICOM PR FIRM CHARGED WITH $4 MILLION IN OVERBILLINGS

Fleishman-Hillard Calls Los Angeles Controller's Allegations 'Erroneous'

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NEW YORK (AdAge.com) -- The city of Los Angeles has accused Omnicom Group PR firm Fleishman-Hillard of overbilling the city more than $4 million stemming from contracts with the city.
Los Angeles has turned down Fleishman-Hillard's offer of a mediated settlement. The city controller is demanding a full refund of the disputed amount.

City Controller Laura Chick announced the findings at a press conference Tuesday, following a several-month audit. He said the audit found $4.2 million in "unsubstantiated, unsupported, and questionable charges" on work done for the Los Angeles Department of Water and Power.

'Boggle the mind'
"What my audit found are millions of dollars in bills that boggle the mind and defy common sense," Ms. Chick said. "Fleishman-Hillard treated the ratepayers of Los Angeles like a cash cow, milking them for millions."

'Erroneous assertions'
Fleishman-Hillard, whose executives have said repeatedly that it would pay the city for any overbillings, vehemently denied the controller's findings, issuing a statement reading, in part, "The report presents preliminary questions and erroneous assertions to arrive at an inflated overall estimate of questioned costs."

The contracts came under scrutiny in April when Ms. Chick's office began to question discrepancies on invoices, including instances when the city said it was billed up to $100 an hour for leaving phone messages. The audit was later widened to include contracts with the city's airport and harbor departments, totaling $700,000 a year.

The city filed a civil lawsuit against Fleishman-Hillard in July and later expanded it to include Doug Dowie, the general manager of the agency's Los Angeles office, who has been on paid leave since July.

Questionable sponsorship commissions
The dollar figure said to be overbilled is roughly one-sixth of the amount of money the department of water and power has paid the agency since 1998. According to Ms. Chick, the figure included "thousands of hours of unsupported, unsubstantiated and questionable services as well as unallowable office expenses, questionable sponsorship commission payments, and misrepresented subcontractor costs."

In its statement, Fleishman-Hillard offered to have the dispute mediated by an official agreed to by both the city and the agency, while at the same time expressing a willingness to fight in court. Ms. Chick turned down the offer. "The time for game-playing is over," she said through a spokesman. "If Fleishman-Hillard wants to regain its stellar reputation, it's time for them to give the money back."

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