A NEW FIS­CAL BLACK EYE FOR DWP

Wa­ter agency worker is charged with mis­ap­pro­pri­at­ing more than $4 mil­lion in public funds.

Los Angeles Times - - CALIFORNIA - By Jack Dolan

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.”

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