Hahn Moves to Defend Integrity in PR Billing Case

As opponents try to paint the mayor as being lax in monitoring contracts, he says the city is the victim. Strategists are unsure if the issue will affect election.

By Jessica Garrison and Patrick McGreevy, Times Staff Writers

Mayor James K. Hahn's reaction to the indictment of a public relations executive charged Thursday with fraud for allegedly overbilling two city departments was swift and unequivocal.

"The city of L.A. is a victim," the mayor said at a debate after the federal grand jury issued its indictment. "And when somebody steals from the government, they should be punished severely."

With the investigation into city contracting under Hahn's administration yielding its first indictment, Hahn responded with a vigorous defense of his long-standing reputation for integrity.

Nearly seven weeks before voters head to the polls in the mayoral election, Hahn's opponents have seized on the investigation as a way to question his leadership.

And now that probe is no longer just an abstraction. It has led to criminal charges against a top local official with Fleishman-Hillard, a firm that had a close relationship with the mayor's office.

"This issue isn't going away. It's going to dominate the campaign," said Ace Smith, the campaign manager for Councilman Antonio Villaraigosa, who is challenging Hahn for the second time.

But Villaraigosa and Hahn's other challengers could also find that voters, whose concerns tend to be about such issues as crime and traffic, are uninterested or even turned off by the candidates' repeated attempts to tarnish Hahn with the investigation.

"Whether this indictment will have any impact in the race at all is really impossible to know," said Darry Sragow, a political strategist who is not affiliated with any mayoral candidate. "Voters may feel there is no relevance to the mayor's race. Voters, in fact, could wind up angry with one of Hahn's opponents, if they feel the opponent has used this development inappropriately."

The strategy of the mayoral candidates is to suggest that Hahn, a former city attorney, is responsible for an administration that has been lax in monitoring contracts and faces an investigation into whether political contributors were illegally awarded contracts.

"There is a pay-to-play element in this that goes right to the mayor's office," Smith said.

On Friday, the mayor's challengers also took the opportunity to point out that Fleishman-Hillard executives have been major donors to the mayor and his political causes.

Since 2000, Fleishman employees have contributed at least $31,200 to Hahn's mayoral campaigns. The public relations firm has also donated $4,725 to Hahn's campaigns for mayor and his officeholder account.

In June 2002, Hahn raised $10,000 from Fleishman-Hillard for his campaign against San Fernando Valley secession. In the weeks after, the firm won a $400,000 contract with the port, a $500,000 contract with the airport, an $800,000 extension to its contract with the Department of Water and Power and two more city contracts worth more than $3 million.

Both Hahn and Fleishman officials have said there was no connection between the contribution and the contracts.

John Stodder Jr., the former Fleishman senior vice president who was indicted Thursday on 11 counts of wire fraud, has donated $3,600 to city candidates, including $1,000 to Hahn. In the last mayoral election, however, he donated $500 to Villaraigosa.

City Controller Laura Chick and City Council members Tony Cardenas, Wendy Greuel, Martin Ludlow, Alex Padilla and Janice Hahn also received donations from Stodder.

The mayor's campaign said Friday it would return any contributions from Stodder. "If he's given to us, we'll give it back," said Bill Carrick, Hahn's campaign manager.

State Sen. Richard Alarcon (D-Sun Valley), another mayoral candidate, predicted more indictments would give momentum to the issue.

"To me there is a sufficient nexus between the cavalier attitude of city officials toward monitoring contracts and the fact that there were massive contributions from contractors," he said.

At the same time, Hahn's challengers have also emphasized the close relationship between Hahn and some Fleishman executives. Douglas R. Dowie, the former head of Fleishman's Los Angeles office who has been accused of instructing employees to pad their billing hours, was both a fundraiser and advisor to the mayor.

Billing records and e-mails show that the DWP paid Fleishman-Hillard more than $400,000 in 2002 and 2003 for work that was designed to burnish the mayor's image or help him shape major policy initiatives.

"The mayor essentially treated us as an adjunct to his press office," one former Fleishman employee has told The Times.

There was also some movement between Fleishman and Hahn's administration. Shannon Murphy, a former Fleishman employee, was hired in 2003 to work in the mayor's office. Billing records show that when Murphy was working on Fleishman's DWP account, she was in nearly constant communication with Hahn's office. Her co-workers joked that her office was an annex to the mayor's office, according to former colleagues.

Murphy, who now serves as the mayor's communications director, said she had not been subpoenaed as part of any probe.

The mayor's office kept close track of Fleishman's contract with the DWP, although none of the billing records shows that the mayor himself attended meetings with Fleishman employees.

Carrick, Hahn's campaign manager, was scornful of the notion that Hahn benefited politically from Fleishman's work. "We didn't get anything out of this," he said. "To suggest that we thought this was some great plan to promote the mayor is … to me preposterous."

Still, political analysts said the indictment was bad news for Hahn. Even if the candidates fail to convince voters that Stodder has ties to Hahn, the indictment allows them to paint the mayor as "asleep at the wheel," said Jaime Regalado, director of the Pat Brown Institute of Public Affairs at Cal State Los Angeles.

"This hangs much more closely as a storm cloud over Jim Hahn that could burst open," he said. "It makes the election extremely volatile."

Indeed, before noon Friday, former Assembly Speaker Bob Hertzberg's website contained links to articles about the indictment.

"I think it has some legs because there is a lot of speculation about what is going to happen next, when the next shoe will drop," said Jewett Walker, the campaign manager for Councilman Bernard C. Parks, who has been one of Hahn's most outspoken critics.

Federal prosecutors have signaled that Stodder might have had two co-conspirators, and City Atty. Rocky Delgadillo is pressing a lawsuit that could yield more details about the contract in coming weeks.

Hahn and his campaign advisors resolutely maintain there is nothing to be concerned about, and Hahn appeared at a labor breakfast Friday morning looking cheerful. Carrick called the controversy "one of these pumped-up things by these candidates and their handlers."

The Hahn campaign even went on the offensive against Hertzberg, who had mocked Hahn's response to the indictment during the debate.

Campaign communications director Julie Wong e-mailed "interested parties" and attacked the former Assembly speaker for his work as a consultant for Fleishman. He was hired, Wong wrote, "a month after the U.S. attorney charges that overbilling of the city began." Wong stated, "Perhaps he can shed light on the billing procedures of his Fleishman colleagues."

Hertzberg expressed outrage at what he called Hahn's attempt to engage in the "cheap politics of guilt by association." Hertzberg worked for Fleishman from March 2003 through March 2004, earning $5,000 a month to recruit new clients, but Hertzberg said he never brought in any new business. Hertzberg attended a meeting on April 23, 2003, with top DWP officials, along with Stodder, Dowie and Murphy from Fleishman.

At least one mayoral candidate, Walter Moore, a Westchester attorney, signaled that the indictment also reflected on some other challengers as well. He noted that Stodder's alleged overbilling happened while Villaraigosa and Parks were on the City Council.

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Times staff writer Jeffrey L. Rabin contributed to this report.

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