Fleishman-Hillard and the Los Angeles City Attorney have agreed to settle an overbilling lawsuit against the firm, which will pay $4.5M and waive $1.3M in unpaid invoices for PR services.

The settlement, pending approval by city agencies, covers F-H's work for the Department of Water and Power, Harbor Development, Dept. of Airports and the Convention and Visitors Bureau.

F-H said its internal audit of its six-year, $11M DWP contract and others found discrepancies in billing.

"On the basis of that investigation, the agency believes some senior executives of the Los Angeles office, who are no longer with the firm, caused certain bills to be presented to the city that appear to be improper and indefensible," the firm said in a statement. "Fleishman-Hillard has turned over the results of its internal investigation to the appropriate federal and county authorities, and the agency is continuing to cooperate fully with those authorities."

One ex-staffer for F-H has been indicted and another indictment is expected shortly.

Richard Kline, GM and senior partner for F-H in L.A., reiterated to O'Dwyer's that the firm has been "willing to do what is necessary to resolve the matter."

He said the size of the proposed settlement is substantially larger than the amount of the questioned billing for a few reasons. Kline cited future litigation costs, failiure to meet F-H's own standards and those of Los Angeles' residents, and the need to move to restore the firm's reputation in L.A.

A controller's audit of F-H work questioned $4.2M in billing, while an initial F-H audit flagged only $652K in unsubstantiated charges.

Kline also apologized on behalf of the firm to city residents and city officials.

"The agreement will not resolve all matters related to the events in Los Angeles, but it is a major step forward," said F-H chairman/CEO John Graham in a company-wide e-mail today outlining internal reforms regarding ethics and billing.

The move to settle the case comes over a year after the firm was first accused of overbilling city agencies, sparking widespread coverage of the back-and-forth between the firm, politicians and city agencies.

Related links:

CEO/chairman John Graham's e-mail to staff (4/19)...
F-H hits audit report, admits wrongdoing (11/17/2004)...