PR EXEC ADMITS FRAUD, AGREES TO HELP BUILD CASE AGAINST OTHERS AT FIRM.

Byline: Beth Barrett Staff Writer

A former Fleishman-Hillard executive has admitted to bilking Los Angeles' Department of Water and Power out of tens of thousands of dollars and will cooperate with prosecutors in criminal cases against his old boss and another public relations executive under a plea agreement announced Thursday.

Steve Sugarman, 41, of Los Angeles, a former senior vice president with the P.R. firm who served as a spokesman for Mayor Richard Riordan, will enter the guilty plea next month to three counts of wire fraud. He admitted to either directly increasing or causing another ``co-schemer'' to increase the number of hours DWP was billed by more than $68,000 as part of a larger conspiracy to defraud the utility, according to the criminal information.

All the overbillings are alleged to have been at the direction of Douglas R. Dowie, the former head of the public relations firm's L.A. office and an insider in Mayor James Hahn's administration.

Laurie Levenson, a professor at Loyola Law School and a former federal prosecutor, said prosecutors typically use an ``insider to help make their case against those under indictment'' and then try to get cooperation from the others in an expanding investigation.

``It certainly looks like Mr. Sugarman is in that role,'' Levenson said. ``The squeeze play is typical and this could be the start.''

The criminal information said Sugarman, Dowie and others, who were not named, would fraudulently inflate clients' bills if the legitimate billings didn't meet the monthly forecasts under its $3 million a year DWP contract.

``These increases in the (Fleishman-Hillard Los Angeles) billings were known as 'write-ups.' The write-ups would falsely increase the amount of billable time reported as having been spent performing various services or would record time for services that actually had not been provided at all,'' the information said.

Sugarman, who was Riordan's press secretary before joining Fleishman- Hillard in September 1997, left the company in early February 2002 to start his own firm.

``Steve has accepted responsibility for his role at Fleishman-Hillard and is fully cooperating with the government in its investigation and prosecution of others who may have been involved,'' said his attorney, Ellyn Garofalo, with the Westwood firm of Liner, Yankelevitz, Sunshine & Regenstreif.

``He entered into the agreement because he felt it was the right thing to do and to make amends for whatever may have occurred at Fleishman-Hillard.''

While Sugarman faces a maximum sentence of 15 years in prison and a fine of $750,0000, prosecutors have agreed to recommend a more lenient sentence so long as he continues to completely cooperate.

``He'll plead (guilty) to the three-count information and has agreed to fully cooperate,'' said Assistant U.S. Attorney Adam D. Kamenstein.

``In exchange for that, the government will inform the court at the time of sentencing about the nature and extent of Mr. Sugarman's cooperation, and if various other conditions in the plea agreement are satisfied, the government will move the court to impose a sentence below that which would otherwise be called for under U.S. sentencing guidelines.''

Sentencing is solely up to the court, however, so the judge could impose anything from probation to the maximum sentence.

Dowie, along with John Stodder, who succeeded Sugarman in charge of the firm's public affairs department, were previously indicted by a federal grand jury on conspiracy and wire fraud charges in connection with bilking the DWP of more than $300,000, as well as allegedly overbilling other clients.

The counts against Sugarman were the same as three of the 16 felony counts in the indictment against Dowie filed June 2.

Dowie, 57, of West Hills, pleaded not guilty to all 16 counts, while Stodder, 49, of Palos Verdes Estates, pleaded not guilty to 11 wire fraud counts in an earlier indictment. Trial dates for both are tentatively set for Aug. 2.

Dowie's lawyer, Tom Holliday of Gibson Dunn & Crutcher, said his client denies he directed anybody to falsely bill. He said the allegation in the information that the overbillings were done at ``Dowie's direction'' were vague.

``If they had Sugarman saying, 'Doug Dowie told me to falsely bill,' that would be a quote in this indictment and it's not. I don't think they have it,'' Holliday said.

Stodder's attorney, Jan Handzlik, said the Sugarman guilty plea shouldn't affect his client because the two didn't work for Fleishman-Hillard at the same time.

Sugarman is scheduled to be arraigned on July 5 on the charges. It is alleged the three counts grew out of a broader scheme he participated in to defraud the DWP of more than $120,000 through January 2002, according to the plea agreement. The entire scope of activities can be considered in sentencing, though not all are charged.

Fleishman-Hillard held a $3 million-a-year contract with the DWP as well as public relations contracts with the Harbor and Airport departments. Dowie worked closely with Hahn's top aides on numerous projects, including the mayor's trip to China.

Fleishman-Hillard's regional president Richard Kline, who replaced Dowie after he was fired as head of the Los Angeles office, said the firm has been cooperating fully in the investigation and ``deeply regrets'' any improper actions that occurred in the L.A. office.

The firm has agreed to repay the city nearly $6 million to settle a lawsuit growing out of the overbilling allegations.

Beth Barrett, [phone]

beth.barrett(at)dailynews.com