Changing lawyers is costly, DWP is warned

City Attorney Mike Feuer said he won't stop the Los Angeles Department of Water and Power from removing his office and private attorneys he hired from an overbilling lawsuit at the center of a wide-ranging litigation scandal still plaguing his office.

Citing a conflict of interest in a letter to Feuer's office last week, the utility board's president, Cynthia McClain-Hill, asked him to remove three city attorneys and private outside counsel from representing the utility in an overbilling lawsuit at the center of numerous investigations. Those investigations, launched by the Department of Justice and FBI, have resulted in three people agreeing to plead guilty to bribery and kickback charges this month.

"As you know, our office has asked you to clarify precisely what that ostensible conflict is," Feuer wrote in a letter to McClain-Hill, last week. "[N]onetheless, given the unique circumstances here and in the spirit of continuing to work collaboratively with you and the LADWP board, I will agree to your request that LADWP may be independently represented on these matters."

The lawsuit at the center of several investigations was filed in 2015 by Los Angeles water customer Antwon Jones, who along with thousands of others, said he was overbilled by the largest utility in the nation in 2013. Configured and implemented by PricewaterhouseCoopers LLP, the system allegedly overbilled more than 1 million ratepayers. Antwon Jones v. City of Los Angeles, BC577267 (L.A. Sup. Ct., April 1, 2015).

The Jones class and the city reached a $67 million settlement shortly after the suit was filed. However, after it was revealed that the lawyer the city hired to sue PwC over the billing fiasco in a separate suit, had secretly drafted the Jones suit before it settled in record time and without discovery, the FBI raided Feuer's office, the Department of Water and Power office and the offices of at least two outside attorneys working for the city.

The investigations found a city-hired attorney, Paul O. Paradis of the New York law firm Paradis Law Group, had drafted and handed off the Jones complaint to hand-picked opposing counsel, Ohio lawyer Jack Landskroner. Landskroner, who died in June, received $19 million in attorney fees in 2015 without doing much, if any, work on the Jones case, according to the DOJ.

As a result of the investigations, the DOJ announced this month that Paradis and former Department of Water and Power General Manager David H. Wright had agreed to plead guilty to engaging in a bribery scheme involving tens of millions of dollars in kickbacks and no-bid contracts.

Paradis, who agreed to plead guilty to bribery a week before Wright did, admitted to receiving a nearly $2.2 million kickback from Landskroner.

After the DOJ announced the guilty pleas, McClain-Hill asked that Feuer's office and other attorneys he hired to represent the utility be removed from the Jones case and other legal matters involving the utility. While McClain-Hill did not mention them by name, Los Angeles attorneys Eric M. George and Kathryn L. McCann of Ellis George Cipollone LLP currently represent the city in the Jones suit.

While George did not respond to a request for comment Monday, Feuer said, "There is no claim that current outside counsel has any conflict or has engaged in wrongdoing of any kind," and that hiring new outside counsel will cost taxpayers millions of dollars.

"If, notwithstanding these points, the board would like to terminate its existing contract with current outside counsel and engage new counsel for these matters, that is the board's prerogative under the City Charter," Feuer wrote.

Agreeing with Feuer Monday, Los Angeles attorney Brian S. Kabateck of Kabateck LLP, who was appointed as new class counsel in the Jones suit after Landskroner was removed, said removing George and McCain now would be like "throwing the baby out with the bathwater."

"It's an overreaction to the current circumstances, which are severe," Kabateck said. "But the outside counsel we've been dealing with have been ethical and hardworking and we've worked hard together to try to bring this to a close."

"If [utility board members] went the route of hiring new counsel, not only do I agree with Feuer, that it would cost millions of dollars in additional fees, I'm going to incur hundreds and hundreds of additional hours, which in turn, will become the burden of the city," Kabateck said.

"My request is they let us finish our job with these lawyers," Kabateck added.

Responding to Feuer's letter Monday, McClain-Hill said she appreciated the city attorney's willingness to allow her and the board to seek independent counsel. As to the claim that it will cost millions of dollars to replace the department's current counsel, McClain-Hill said: "It remains to be seen what it will cost for the department to move forward with independent counsel on these issues.

"What is clear is that both the department and its ratepayers have paid dearly for the failure of oversight and just transgressions associated with counsel that has previously guided these matters," McClain-Hill said.

Despite the city attorney's office publicly stating its outside counsel -- Paradis -- without the knowledge of anyone in the city went "rogue" in handing off a phony lawsuit to hand-picked opposing counsel, a DOJ statement and Paradis' plea agreement say at least one high-ranking official was at least aware of the scheme.