TRIAL TO START IN PR PROBE PAY-TO-PLAY CLAIMS SPARKED INQUIRY.

Byline: Beth Barrett Staff Writer

With City Hall still under the investigative spotlight, the only people charged with felonies in the lengthy probe of political corruption in Los Angeles are set to go on trial this week, accused of overbilling the Department of Water and Power for public relations services.

Trial begins Tuesday for former Fleishman-Hillard executives Doug Dowie and John Stodder on federal conspiracy and wire fraud charges alleging they bilked the DWP out of more than $300,000. A third executive, Steve Sugarman, has pleaded guilty and agreed to testify against the other two.

The charges grew out of a sweeping federal-state investigation into accusations that then-Mayor James Hahn's administration engaged in ``pay-to-play'' practices to squeeze political money from city contractors.

Dowie, who headed the public relations firm's Los Angeles office, arranged significant contributions to campaigns for Hahn and other city officials and got a $3 million-a-year DWP contract while providing free P.R. advice to the mayor and others.

District Attorney Steve Cooley and U.S. Attorney Debra W. Yang's offices said the investigation into pay-to-play allegations is continuing, although only the Fleishman-Hillard executives have been charged.

``Early in 2004, this office and the U.S. Attorney's Office combined forces and resources in investigating public corruption of some Los Angeles City officials and operations,'' Cooley said in a statement.

``This unprecedented district attorney/U.S. attorney partnership in Los Angeles resulted in federal indictments naming the former chief of Fleishman-Hillard's L.A. office, Douglas R. Dowie, and a senior vice president, John Stodder, in an alleged fraudulent billing scheme involving the DWP. ... Other matters remain under investigation.''

Added U.S. attorney spokesman Thom Mrozek: ``It's moving forward.''

Dowie, 58, a former managing editor at the Los Angeles Daily News and ex-chief of staff to former state Assemblyman Richard Katz, has pleaded not guilty to the 16-count indictment returned June 2.

Stodder, 50, pleaded not guilty to 11 wire fraud counts in an earlier indictment, as well as to one conspiracy charge.

Sugarman, who also served as a former spokesman for Mayor Richard Riordan, pleaded guilty to three counts of wire fraud in connection with inflating DWP billing hours by tens of thousands of dollars.

The trial before U.S. District Judge Gary Allen Feess is expected to last up to four weeks. Discovery already has included more than 1 million e-mails and other documents, including billing records and work sheets.

But questions remain about where the investigation of pay-to-play is going, if anywhere.

Laurie Levenson, a Loyola Law School professor and former federal prosecutor, said it's unusual for a major investigation to gain momentum after two years have passed.

``It looks like it's dying a slow death,'' Levenson said. ``You can't be sure. But unless you're lucky, things don't (usually) get hotter down the road.''

Levenson said the Dowie-Stodder trial could be a last-ditch effort to obtain additional information, noting the eve of trial conventionally is the time of ``maximum pressure.''

``If it doesn't happen soon, it's hard to believe it will happen,'' she added. ``It's an awfully long bluff.''

Dowie once played a prominent civic role and was in regular contact with Hahn's inner circle, in particular Troy Edwards, the former young and inexperienced deputy mayor overseeing the three proprietary departments - Harbor, Airports and Water and Power, according to e-mails.

Edwards, who resigned March 25, 2004, after testifying before a county grand jury, could not be reached for comment.

At the peak of his career, Dowie was valued by Hahn and other local political figures for his skill. He was making a base salary of $330,000, along with stock grants, a car allowance and bonuses, according to documents filed in a wrongful termination suit he filed against the company after being fired Jan. 5, 2005.

The opposition to a motion for summary judgment in that civil case notes that Dowie was honored in February 2004 with the American Jewish Committee's Civic Leadership Award at a banquet attended by Hahn and other political leaders, as well as the firm's senior executives. The event was co-chaired by Fleishman-Hillard Chairman John Graham and former President Bill Clinton's Chief of Staff Leon Panetta, along with then-Gov. Gray Davis and former Commerce Secretary and U.S. Trade Representative Mickey Kantor.

Dowie had cultivated close ties to a number of local politicians, including City Controller Laura Chick, who began questioning the DWP contract with Fleishman-Hillard in summer 2002.

Chick was central to bringing pay-to-play allegations to Cooley's attention, but now says she has doubts that the investigations will pan out.

``I've been told these are the hardest cases to prove, and almost (can't be) unless people are wired, and there are real offers of money or favors. And I don't think it got to that level.''

Chick said that while she hoped nobody had ``crossed the line,'' she felt there were sufficient questions and ``things that needed further exposure'' to indicate ``tough indictments'' might be forthcoming.

``I knew things didn't smell right. There were some ways of awarding contracts that were skirting the lines. I wanted the funny business to be cleared up and to go away,'' she said.

``The good news has been, it had a chilling effect and changed the style of behavior.''

Bill Boyarsky, a city ethics commissioner and former journalist, said City Hall has been quiet regarding the pay-to-play investigations, adding that, in general, investigations ought to be concluded ``ASAP'' in fairness to those affected.

And while the specter of pay-to-play investigations undoubtedly has made people ``more watchful'' and less inclined to hide their political financial dealings, the accused also have rights, Boyarsky said.

James Acevedo, a former Harbor Commission member and Valley power broker, said he hasn't heard anything about pay-to-play in months.

``I think it was good politics, that's all.''

Bill Carrick, Hahn's campaign media consultant and strategist, said he hasn't heard anything.

``I would have heard in the echo chambers,'' said Carrick. ``I think it was always about this contract at Fleishman-Hillard.''

Carrick said he believes the pay-to-play investigations were the ``catalyst'' for Antonio Villaraigosa to challenge Hahn - who vehemently denied any wrongdoing and said any criminal action should be punished - because of his perception that the mayor had been made vulnerable.

He said the lives of several people swept up in the investigation have been ``made miserable'' by unproven allegations. Some of those individuals include Edwards, Ted Stein, former head of the Airports Commission, and former DWP Commissioner Leland Wong.

``It's a very unfair system.''

Beth Barrett, [phone]

beth.barrett(at)dailynews.com