A NEW FISCAL BLACK EYE FOR DWP
Water agency worker is charged with misappropriating more than $4 million in public funds.
A Los Angeles Department of Water and Power audio-visual technician was charged Thursday with misappropriating more than $4 million in public funds, creating another financial scandal for a city-owned utility that is about to request permission to raise rates.
In the last year alone, a pricey new computer system sent erroneously inf lated bills to thousands of customers, audits of a pair of secretive DWP nonprofits revealed questionable spending of millions in ratepayer funds, and breaks in the agency’s aging pipes routinely f looded streets in an otherwise drought-plagued city.
Despite the frequent missteps, the utility’s leaders say they need to collect hundreds of millions of dollars more from customers each year to modernize the infrastructure and comply with increasingly expensive environmental requirements.
“The problem is that DWP really needs the money,” said Jack Humphreville, a member of the Greater Wilshire Neighborhood Council and frequent critic of the agency. “But the optics suck.”
On Thursday evening,
Jeff Millman, a spokesman for Mayor Eric Garcetti, listed steps the administration has taken to reform the DWP and repair the beleaguered agency’s image: negotiating a contract with the utility’s powerful union that included no raises, fighting to allow auditors access to the nonprofits’ books, and hiring hundreds of customer service representatives to field billing complaints.
But he said the work isn’t finished. “No decision has been made about the rates,” he said.
The employee arrested on Thursday, Thatcus “T.C.” Richard, is accused of helping for years to steer small contracts for audio-visual work to companies owned by friends. In return, those companies subcontracted with a firm Richard owned, paying him more than $1 million, prosecutors alleged.
Richard’s bail was set at $1.2 million. He could not be reached for comment; no one answered the phone at his Moreno Valley home or at a second home that public records show he owns in Las Vegas.
“The City of Los Angeles employees should be work- ing for the public interest, not enriching themselves,” Garcetti said in an emailed statement. He added that the city would make every effort to “recover the money that was stolen.”
Richard, who was paid a little more than $100,000 per year by the DWP, retired in June 2014. Asked whether Richard will be able to keep his pension, DWP spokesman Joseph Ramallo said the agency was investigating its options.
Richard is charged with 27 felony counts, including misappropriation of public funds, embezzlement and contract fraud. If convicted on all counts, he faces up to 20 years in state prison, according to prosecutors.
The alleged fraud began as early as 1993, according to a statement from the DWP. Richard, who acted as a contract administrator for the utility, allegedly helped to steer approximately 140 city contracts to his friends’ companies.
Most of those contracts were small, less than $50,000, and “subject to lower-level supervisory approval,” the DWP statement said. The contracts were competitively bid, but Richard tailored the specifications to fit his friends’ businesses and attract little interest from competitors, according to the statement.
“It’s troubling to hear that any city employee would engage in this type of conduct,” Controller Ron Galperin said. “While I sincerely doubt that this behavior is representative of the men and women who work for the DWP, situations like this shake the public’s trust.”
That trust has been rocked a lot lately.
Last month, Galperin released a long-awaited audit showing that two nonprofits created by the DWP and financed with more than $40 million from ratepayers had paid millions to vendors without competitive bids, overpaid top managers and let them charge purchases to nonprofit-issued credit cards without spending limits or the need to file expense reports.
In five years, a handful of nonprofit employees charged more than $660,000 to those cards for things such as steak dinners and trips to Las Vegas, Hawaii and New Orleans, the audit found.
One nonprofit administrator, who was making about $220,000 a year, used his card for more than $30,000 worth of gas.
On top of that, the agency recently spent $178 million on a computer system that failed to send bills to many customers for months, and then sent ones that sharply inflated the actual amount of water and electricity used.
One elderly couple in Van Nuys, who hadn’t received a bill in months, recently got one that said they owed $51,649.32. After threats that their service would be shut off if they didn’t pay up, the agency admitted it was just another mistake.
The DWP is still sorting through a huge backlog of such errors.
And last year, a massive water main break on Sunset Boulevard, which f looded portions of the UCLA campus, caused millions of dollars in damage and became a vivid symbol of the agency’s crumbling infrastructure.
Smaller breaks, and the ensuing floods, have added a splash of irony to the ongoing story of California’s historic drought.
Nevertheless, the agency is poised to ask the mayor and the City Council to approve a plan to raise about $270 million more each year from customers.
“We understand that public trust and confidence is critical in everything that we do,” Ramallo said. “That is why we are firmly committed to doing everything possible to recover the money that is alleged to have been defrauded by this former employee.”