L.A.'s Outside Legal Bills Surge

*Most of the law firms give to Hahn, Delgadillo campaigns

By Patrick McGreevy, Times Staff Writer

The city of Los Angeles paid $18.9 million last year to 71 law firms for outside legal assistance, twice the amount spent five years ago, city records show.

At the same time, 50 of those firms and their attorneys have poured hundreds of thousands of dollars into the campaign coffers of Mayor James K. Hahn and City Atty. Rocky Delgadillo, who have had key roles in deciding how much legal work to farm out and who should get the business.

The law firms and their attorneys have contributed $1.12 million since 1998 to candidates for city office and political committees they control. Those donations include $244,875 to Hahn, $154,500 to Delgadillo and $77,500 to Hahn's anti-secession campaign committee, according to campaign finance data analyzed by The Times.

In many cases, the records show, contracts were approved or expanded by the city within weeks of a political fundraiser held by the benefiting law firm.

With the city's in-house legal staff being significantly larger than it was five years ago, the sharp rise in attorney contracts going to political donors â€" and the timing of fundraisers â€" has some ethics reform advocates asking whether some of the contracts were necessary only to keep politicians in office.

"It's on its face a conflict of interest," said Benjamin Bycel, former executive director of the city Ethics Commission. "It's, in effect, buying government contracts, and it erodes the public trust in those doing the public's business."

Asked if the contracts were rewards for political contributions, Hahn said in an interview last week, "Absolutely not."

Delgadillo also denied that political supporters had received favorable treatment.

The mayor has said in recent months that he believes a troubling appearance is created when city contractors raise money for the politicians who have a say in hiring them.

In February, he proposed banning city contractors, including law firms, from contributing to, or raising funds for, city politicians, including while bidders are competing for contracts. At the time, he said he was concerned that the practice created "the potential perception that fundraising influences the contracting … process and creates an unlevel playing field."

In the interview, the mayor said he also had concerns about the big increase in spending on outside law firms, especially when there has been an expansion of the city attorney's staff. That staff has grown from 781 to 820 in the past five years, with lawyers accounting for most of the hires. The office's budget rose 42% during the same period, to $86.4 million.

A review of records since 1998 found that seven of the 15 law firms paid the most by the city were also among the top firms contributing to city candidates. Four of the five law firms that contributed the most were registered as lobbyists for clients seeking favors at City Hall.

O'Melveny and Myers was the city's biggest legal contractor last year, with a city paycheck of $2.26 million. It is also the law firm that is the biggest source of campaign contributions to Hahn and Delgadillo. The firm's political action committee and O'Melveny attorneys provided $49,300 to Hahn and $42,100 to Delgadillo during the last five years.

The firm received an $850,000 contract approved by Delgadillo in March 2002 to help defend the city against a class-action lawsuit brought by female LAPD officers who alleged that they were victims of sexual harassment. The contract was bumped up to $1.2 million two months later, increased to $2.5 million seven months after that, raised to $4 million in June 2003 and increased again to $6.3 million this January as the class action was split into several individual lawsuits.

The City Charter gives Delgadillo the power to sign off on requests for outside legal help. He hired an executive to review his department's legal billings after two law firms charged the city $1.5 million to defend then- Councilman Nate Holden against sexual harassment charges. A separate city audit questioned $560,000 of the billings, saying the firms double-staffed meetings, billed for 23.75-hour days and overcharged for clerical work, photocopies and faxes.

Contracts of more than three years' duration, including those awarded by the quasi-independent harbor, airport and water and power departments, go to the mayor for review and the City Council for approval. Although the mayor has no direct control over shorter contracts let by the three so-called proprietary departments, he appoints members of the commissions that approve the contracts.

The proprietary departments have been responsible for almost all of the increase in spending on outside legal contracts in the last five years. Their contracting practices are the focus of federal and local grand jury investigations. Dist. Atty. Steve Cooley has said he is looking into whether the awarding of contracts has been tied to campaign contributions, a practice referred to as "pay to play."

The Department of Water and Power's bill for outside attorneys went from $1.1 million five years ago to $5.4 million last year. Frank Salas, the DWP's acting general manager, said much of the increase was due to the energy crisis. The agency hired the law firm Van Ness Feldman, which billed the city $2.5 million last year to help the DWP defend itself against allegations by the state that it had engaged in price gouging during the electricity crisis.

Federal regulators investigated the state's complaint and concluded their inquiry without bringing charges against the agency.

"We have been exonerated," Salas said. "It was money well spent."

At the harbor, where outside legal bills have gone up the most, from $684,000 in 1998 to $5.6 million in fiscal 2002-03, the city has been hit in the last few years with a flurry of lawsuits and challenges alleging that the port is violating environmental rules.

One of the biggest lawsuits, brought by the National Resources Defense Council and San Pedro homeowner groups, cited environmental issues in challenging a 30-year lease with China Shipping at the port. The resulting settlement required the city to spend $60 million on improvements.

The firm hired by the Harbor Commission for the case, Morrison & Foerster, has billed the harbor department $2.2 million so far. Attorneys for the resources council and other plaintiffs incurred expenses of $1.1 million â€" half as much â€" and won the China Shipping case on appeal.

Julie Masters, lawyer for the resources council, said the city attorney's staff assigned to the port could have settled the case sooner at a lower cost. "They could have decided not to litigate against the community and instead spend that money on mitigating the environmental problems," Masters said. "It was a bad use of public funds."

Delgadillo acknowledged that better risk management and improved community relations with the port could have headed off that suit and saved the city millions.

Many contracts are awarded to political donors around the same time as their fundraising activity occurs. City contracting records showed that in several cases, major contracts were awarded to law firms within weeks of the firms having hosted fundraisers for city officials.

Seven contracts were recommended for approval by Hahn's staff in the city attorney's office immediately before he became mayor in July 2001. Five of the firms receiving those contracts were sources of contributions for Hahn's mayoral election in the months before the approvals.

One of the five was Manatt, Phelps & Phillips. In addition to its work for city agencies, Manatt was hired to provide legal service by Hahn's 2001 mayoral campaign committee, and by a committee he created in 2002 to oppose the San Fernando Valley's attempted secession from Los Angeles. Manatt partner Lisa Specht was co-chair of Hahn's 2001 mayoral campaign, and Manatt partner George Kieffer was policy chairman of the campaign.

Manatt has been paid $1.66 million by city departments in the last three years.

In March 2001, a month before the mayoral primary, Kieffer was co-host of a Hahn fundraiser at the City Club on downtown's Bunker Hill. Three days later, Specht was host of a cocktail reception and fundraiser for Hahn at her Beverly Hills home. She raised $9,000 for Hahn from 10 Manatt attorneys.

In April, the same month as the primary, Hahn's office requested and evaluated competitive proposals from law firms to advise the DWP in a water-related case.

In June, four days before a runoff election for mayor between Hahn and Antonio Villaraigosa, Specht â€" whom Hahn later appointed to the city Recreation and Parks Commission â€" delivered $5,000 more in political contributions to the Hahn campaign, most of it from Manatt attorneys. (Manatt lawyers also gave Villaraigosa nearly $12,000 in the mayoral race, and the firm gave him $500 for his successful City Council campaign last year.)

After Hahn won the runoff, a top Hahn deputy recommended Manatt for the DWP legal services contract, worth up to $2.25 million. The DWP board approved the pact July 3, three days after Hahn became mayor.

Kieffer said last week in an interview that there was no connection between the contributions from Manatt attorneys and the contracts from the city.

"It's hard to speak for all law firms or lawyers where we would simply have no knowledge, but I don't see it," Kieffer said of whether contributions made a difference in who got contracts.

Hahn denied any connection between his office's recommendation that Manatt receive a DWP contract and the money the firm's attorneys donated to his campaign.

"If they were selected as a law firm for a particular case," the mayor said, "it was because the [city] attorneys thought they would do the best job."

In December 2002, the DWP board, whose members are appointed by Hahn, approved a $180,000 contract with Manatt, without any competitive process, to provide training on employment discrimination issues.

Manatt, which is also a lobbyist firm seeking to influence the DWP and other agencies for clients, received two additional DWP contracts more recently. In November 2003, the DWP board awarded Manatt and another firm a contract worth up to $2.25 million over three years to provide "legislative consulting services" in Sacramento.

Three weeks later, 10 Manatt attorneys, including Specht, contributed $5,350 to Hahn's reelection campaign.

Kieffer said that the contract was awarded only after a competitive process and that Hahn was not involved in the screening.

Delgadillo has also benefited from fundraising within weeks of his office signing off on contracts, most recently involving Lewis Brisbois Bisgaard & Smith.

The law firm was given a $100,000 contract by the city airport department in 2000 to help fight a wrongful-eviction suit by a tenant at Van Nuys Airport.

The contract was amended in 2002 to pay $350,000 and include work on development at Ontario International Airport.

On Oct. 20, 2003, the law firm held a fundraiser for Delgadillo at the Palos Verdes Peninsula estate of Robert Lewis, a partner in the firm. Attorneys for the firm provided $3,900 worth of catered food, flowers and valet services for the fundraiser. Twenty other attorneys with the firm contributed $10,000 to Delgadillo's reelection effort, all with the law firm serving as an intermediary.

Less than two months later, on Dec. 9, 2003, Deputy City Atty. Tom Gutierrez signed off on an amendment, approved by the Airport Commission without new competitive bidding, that increased the amount to be paid to Lewis, Brisbois, to $1.1 million. Lewis said additional work required on the Ontario project justified the contract extension.

"There is no causal connection between the fundraising we do and the business we get," Lewis said. He said he and other attorneys at his law firm had a natural interest in civic affairs.

"I was born and raised in Los Angeles," Lewis said. "We want to be involved."

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