Dogged by an FBI probe leading to witnesses unwilling to testify in the case, the city of Los Angeles has moved is dropping its lawsuit against consulting firm PricewaterhouseCoopers over the botched rollout of a Department of Water and Power billing system that caused many customers to receive wildly inflated bills.
In a statement first reported by the Los Angeles Times, city attorney spokesman Rob Wilcox said key witnesses in the city’s case — David Wright, the former head of DWP, and Paul Paradis, an attorney who formerly did consulting work for the City Attorney’s Office on the issue — invoked their 5th Amendment right against self-incrimination, impairing the city’s ability to proceed with its lawsuit.
“In 2015, the city alleged fraud against PwC in procuring the significant billing system contract from DWP, and, in 2018, withstood PwC’s attempt to dismiss the case through the summary judgment when the court agreed the case could move forward,” Wilcox said.
Wilcox said the city’s claims were set for trial early next year, but DWP’s ability to prove damages “has been severely undermined by the unavailability of key witnesses who have invoked their 5th Amendment right against self-incrimination.”
Wright and Paradis also key figures in an ongoing FBI investigation of the city’s handling of the DWP billing rollout and the ensuing legal battles.
“Unable to overcome the current circumstances, the city is dismissing its case,” Wilcox stated.
The city was trying through the legal action to recoup potentially hundreds of millions of dollars resulting from the 2013 overbilling fiasco. Dismissing the lawsuit could leave the city — and DWP ratepayers — on the hook for those costs and other litigation stemming from the billing rollout.
A 2018 DWP document estimated that the associated costs to comply with the settlement could be as much as $300 million, The Times reported.
New DWP General Manager Martin Adams said Friday the agency is “very disappointed by the turn of events that has led to the withdrawal of litigation that was aimed at holding PWC accountable for their actions.”
“The fact is, we were left with no good legal options to pursue claims due to circumstances beyond the city and the department’s control,” Adams said. “Based on this development, our board has directed that all efforts be taken legally to hold other parties who put us in this position responsible, including those we believe improperly benefited at the expense of our customers through their involvement in the settlement and related work. This includes recovering any payment that may have been unlawfully obtained by anyone in these matters.”
Consumer Watchdog President Jamie Court told The Times that the decision to dismiss the case is an effort to “silence” the investigation. He also questioned whether it was politically motivated, given that City Attorney Mike Feuer has publicly said he is considering running for mayor in 2022.
“The city shouldn’t be allowed to dismiss this case before there’s full disclosure. Ratepayer money is being left on the table,” Court said, according to The Times.
The city sued PricewaterhouseCoopers in 2015 over the company’s handling of the DWP billing system rollout. The botched rollout led to many customers receiving over-inflated bills, prompting a class-action lawsuit and a $67 million settlement.
But the city’s lawsuit against PricewaterhouseCoopers was eclipsed by more recent allegations of fraud and double-dealing by attorneys hired by Feuer to sue the consulting firm, The Times reported. The allegations culminated with a July FBI raid of the DWP’s headquarters and the city attorney’s office.
PricewaterhouseCoopers’ attorney, Daniel Thomasch, told The Times Thursday that the consulting firm intends to pursue monetary sanctions against the city for litigation misconduct.
The firm’s “defense has revealed that the DWP perpetrated a fraud on the court, on (PricewaterhouseCoopers), and on the DWP’s own customers, in its attempt to cover up its own failures,” Thomasch said.
Also on Thursday, the city filed court documents seeking to freeze legal fees given to two attorneys who worked on the class-action lawsuit brought against the DWP over the billing errors, The Times reported. The filing marks the first time that the city moved to recoup money following revelations about the alleged misconduct by attorneys.
Wilcox said in his statement, “As the first step toward returning to the ratepayers’ attorney fees paid to Jack Landskroner, former class counsel in the DWP billing cases, the city, in conjunction with current class counsel, took legal action to freeze those fees and compel Mr. Landskroner to establish what, if any, amounts he should be entitled to retain.”
According to Los Angeles Superior Court documents, the next status hearing related to Landskroner and other matters has been scheduled at 11 a.m. Nov. 26.
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