FBI raids LA city attorney’s office over water billing settlement

The FBI searched the Los Angeles city attorney's office and the Department of Water and Power headquarters Monday in connection with a $67 million class settlement mired in accusations of fraud and collusion involving private attorneys representing the city.

The raid follows court revelations that special counsel hired by the city to represent its interests directed a lawsuit against the city by drafting a ratepayer complaint and handing it over to opposing counsel, who settled the case with no discovery. A total of $19 million in attorney fees were earmarked.

"The warrants served on our staff relate to issues that have arisen over the class action litigation and settlement surrounding the DWP billing system, and the city's lawsuit" against Pricewaterhouse Coopers," Rob Wilcox, a spokesman for City Attorney Michael N. Feuer, said in an email after the raids. "We have and will continue to cooperate fully with the expectation that the investigation will be completed expeditiously."

The raids were also confirmed by the FBI and the U.S. attorney's office in Los Angeles.

"A court-authorized search warrant has been executed at LADWP downtown headquarters. However, the affidavit is under seal and I simply cannot comment on it that at this time," said Rukelt Dalberis, an FBI spokesman in Los Angeles.

No arrests have been made.

Questions about the settlement have spawned two public investigations, one by Feuer himself, who said he did not know about any ethical breaches but vowed to get to the bottom of the issue.

The Los Angeles County complex court judge handling the matter, Elihu M. Berle, has selected a special master to look into the two cases.

Paul O. Paradis and Paul R. Kiesel, the city's special counsel accused by PricewaterHouse Coopers of collusion, have since resigned from working for the city. Paradis and ratepayer class counsel Jack Landskroner have pleaded the Fifth Amendment against self-incrimination during their depositions.

Berle had asked Landskroner during a March court hearing if any fees or kickbacks were paid to opposing counsel. Landskroner pleaded the Fifth through his attorney to every question the judge asked.

In addition, no-bid contracts awarded to a company controlled by Paradis to remediate the billing issues have been canceled by the city, although not before almost $20 million was paid.

Paradis' attorney at Sheper, Kim & Harris LLP did not respond to a request for comment.

Both sides have recently engaged in finger-pointing as to who directed the filing of the complaint against the city.

Kiesel testified in a deposition the filing was completed at the direction of the city attorney's office, after the city in April said it had recently discovered a "reprehensible breach of ethics" by special counsel.

"No one in the city attorney's office had any involvement, or awareness, of any such plan," the city attorney's office previously told the Daily Journal.

According to depositions, including Kiesel's, the city's plan was to get other pending lawsuits it was facing over the billing errors dropped and have those attorneys join in on a lawsuit on behalf of ratepayer Antwon Jones against PwC. Feuer was "on board" with that plan, according to a 2015 email from Deputy City Attorney James P. Clarke to Kiesel.

But it fell through and attorneys for the city then orchestrated a plan to have handpicked opposing attorneys file a class action drafted by Paradis, according to Kiesel, who did not provide evidence showing Feuer knew or directed the filing of the subsequent plan.

Kiesel could not be reached for comment Monday.

Jamie Court, president of Consumer Watchdog who has been following the legal developments in the case for a few years, said there could be more evidence of a conspiracy to defraud both ratepayers and the courts at a cost of tens of millions of taxpayer dollars.

"When the FBI has to show up at the city attorney's office with a search warrant, it is hard to imagine justice was being done inside," said Court.

"This is more than a black mark on City Attorney Feuer's record," Court said. "It may be a career-ending moment if he is found to be implicated directly on the fraud on the court and the ratepayers. If Feuer had submitted to an independent outside review earlier perhaps it wouldn't have taken FBI search warrants to wake up the city to the seriousness of the ethical lapses."

The state attorney general's office previously said it is looking into the matter. The office, which also said it does not confirm or comment on investigations, addressed the issue in a letter responding to concerns by Consumer Watchdog.

"The matters you describe understandably raise concerns for ratepayers, as well as members of the public, given the seriousness of the alleged fraud and the backdrop of past billing problems at DWP. We are carefully reviewing the issues raised in your letter. Beyond that, please understand that we cannot confirm or comment on investigations," wrote Sean McCluskie, chief deputy to Attorney General Xavier Becerra, on April 3.