LOS ANGELES (CNS/FOX 11) - From Victoria Spilabotte:
Skyrocketing bills for utilities they never used. That’s what happened in 2013 when the Los Angeles Department of Water and Power rolled out a new payment system, which it said was responsible for billing errors and overcharging customers huge sums
Many never recouped that money and now customers may get some answers about where some of it went.
LADWP has filed a new complaint to an already existing lawsuit against - PriceWaterhouseCoopers - the accounting firm in charge of rolling out that payment system.
The lawsuit alleges major fraud by PwC managers working on the billing.
In the suit, the utility said a group of co-conspirators, “defrauded the city and its ratepayers out of tens of thousands of dollars by approving and submitting falsified - and artificially inflated - time records.”
The stolen money was then allegedly used to pay for two Las Vegas bachelor parties for PWC managers.
Those bachelor parties allegedly included, “the services of prostitutes and escorts”
and “extravagant nights of partying, lavish hotel stays and thousands of dollars in “bottle service” alcohol,” according to the complaint.
LADWP said the group was stealing from the utility for three years and covering it up, but investigators only found out about it in May 2016.
One co-conspirator allegedly told another about the bachelor parties, “we are going to cover a lot of this trip with LADWP money,” according to the complaint.
In a statement LADWP said, “their alleged conduct is outrageous and our customers deserve to be repaid every dollar that the flawed billing system and fraudulent billings have cost them.”
PwC responded with it’s own statement that reads in part, “PwC never submitted falsified time records to LADWP and never received a single dollar from LADWP to which it was not due.”
Attorneys for the Los Angeles Department of Water and Power filed court papers today alleging the contractor that handled the troubled rollout of the utility's billing system three years ago intentionally over-billed the city and spent the money, in part, on prostitutes and two lavish bachelor parties in Las Vegas.
An attorney for PricewaterhouseCoopers, however, flatly denied the allegations, saying the company did not submit any false invoices to the city and "never received a single dollar from LADWP to which it was not due."
The DWP originally sued PricewaterhouseCoopers in 2015, accusing the company of mismanaging the rollout of the billing system in 2013. The court papers filed today seek to amend the lawsuit to add allegations of conspiracy
"PricewaterhouseCoopers not only misrepresented their qualifications and delivered a disastrously flawed billing system to LADWP, but based on the allegations in the court filing made today, they did so while violating public
trust and engaging in reprehensible and potentially criminal conduct," DWP General Manager Marcie Edwards said. "Even worse is the fact that the alleged fraudulent scheme was carried out by the PwC partner-in-charge and PwC's senior managers working on the billing system project.
"Their alleged conduct is outrageous and our customers deserve to be repaid every dollar that the flawed billing system and fraudulent billings have cost them," Edwards said.
According to the court papers, city investigators discovered in May that from 2011 through at least 2013, PwC and several of its top managers --including the partner leading the billing system project -- conspired to
defraud the city "by repeatedly submitting intentionally falsified PwC time records and invoices to the LADWP and city" for work that was never performed.
DWP officials allege in the court papers that PwC bilked the city out of "tens of thousands of dollars" and the money was used to pay for "the services of prostitutes and escorts," along with a "lavish bachelor party"
for the partner in charge of the billing system project, held July 15-17, 2011, in Las Vegas. The court document contends the party "included extravagant nights of partying, lavish hotel stays and thousands of dollars in `bottle
The DWP also alleges funds bilked from the city were used for a May 17-19, 2013, bachelor party in Las Vegas for "another senior PwC manager and close personal friend of the PwC partner in charge."
"The PwC partner who master-minded and personally directed the fraudulent billing conspiracy openly boasted of his clear intention to steal from the city and its ratepayers to pay for his own bachelor party in July 2011
when he told one of his fellow co-conspirators, `We are going to cover a lot of this trip with LADWP money,"' the court papers allege.
The court document claims DWP funds were used to pay for condoms, a steak dinner at the Palms Casino Resort and "a $6,497 day-long poolside cabana party complete with bikini models and bottle service liquor at the Hard Rock Beach Club."
Daniel Thomasch, attorney for PwC, blasted the allegations raised in the court documents, insisting -- as he did when the original lawsuit was filed -- that the case has no merit.
"PwC never submitted falsified time records to LADWP and never received a single dollar from LADWP to which it was not due," Thomasch said. "LADWP's amended complaint is not provoked by concerns over a subcontractor's
billing practices -- it is a crude attempt to disparage PwC because PwC has had the audacity to stand up to LADWP's much-hyped, but baseless, lawsuit."
When the lawsuit was filed last year, Thomasch called it a "transparent attempt by the DWP to shift blame away" from the utility.
The DWP "acknowledged in writing last year that PwC fulfilled each one of its contractual obligations and paid PwC in full," Thomasch said in 2015. "We will defend PwC's excellent work and this case vigorously."
Mayor Eric Garcetti said the allegations "if true, are not only reprehensible but also a betrayal of our core values and the people's trust."
"We demand the utmost integrity from those with whom we do business," he said. "DWP ratepayers deserve nothing less. I will do everything in my power to hold the responsible parties accountable for any and all wrongdoing."
The flawed rollout of the DWP billing system resulted in inaccurate and sometimes-wildly inflated bills being sent to numerous customers, while other customers did not receive any bills at all.
When announcing the lawsuit last year, City Attorney Mike Feuer accused PwC of doing such a poor job that "the ratepayers of the city paid $70 million for a billing system that didn't work," then paid millions of dollars to "two
other companies to fix the problem."
Feuer said the company misled the DWP while bidding for the $70 million city contract, by claiming it had a "100 percent success rate" in implementing the billing system, and falsely touted its success with a similar
system for the Cleveland Water Department.
The city agreed last year to pay $44 million to settle a class-action lawsuit on behalf of DWP customers who were inaccurately billed as a result of the flawed billing system.
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