Additional Allegation of Fraud by PriceWaterhouse Coopers Filed in Court Motion in Connection with its Role in Customer Information and Billing System Implementation

LOS ANGELES (June 30, 2016)— Earlier today, the Los Angeles City Attorney, on behalf of the City of Los Angeles and the Los Angeles Department of Water and Power (LADWP), filed a motion in LA Superior Court seeking permission to file an Amended Complaint detailing an alleged fraudulent conspiracy operated by PriceWaterhouse Coopers, LLP (PwC) and several of its senior managers. The alleged conspiracy was recently discovered through an ongoing investigation into PwC’s role as the primary contractor implementing LADWP’s Customer Care and Billing System (CC&B). This legal action, which seeks to recover tens of thousands of dollars in ratepayer funds that were illegally obtained by PwC through its fraudulent conspiracy, is in addition to the charges of fraudulent inducement and breach of contract included in litigation initially filed by City Attorney Mike Feuer on behalf of the City and LADWP in March 2015.

The alleged conspiracy detailed in the court papers filed today consisted of PwC and several senior-ranking PwC Managers, including the PwC Partner-in-Charge of the CC&B System implementation project for LADWP, engaging in a three-year long conspiracy to defraud the City of Los Angeles and the LADWP by repeatedly submitting intentionally falsified PwC time records in a manner not able to be detected by LADWP to obtain payments for work that PwC never performed from 2011 through at least 2013. The alleged fraudulent conspiracy is detailed in the court filing and includes payments authorized by PwC and its senior managers to reimburse their subcontractor for payments made for the services of escorts and prostitutes, lavish hotel stays, two bachelor parties and thousands of dollars for “bottle service” liquor at Las Vegas hotels and clubs in July 2011 and May 2013.

After learning of the alleged fraudulent conspiracy, the Board of Water and Power Commissioners directed LADWP Executive Management to pursue all appropriate remedies, up to and including the possibility of debarment, which if initiated could result in PwC being debarred as a government contractor for the LADWP for a maximum period of five (5) years.

LADWP General Manager Marcie Edwards made the following statement regarding today’s court filing:

“PriceWaterhouse Coopers not only misrepresented their qualifications and delivered a disastrously flawed billing system to LADWP, but based on the allegations in the court filing made today, they did so while violating the public trust and engaging in reprehensible and potentially criminal conduct. Even worse is the fact that the alleged fraudulent scheme was carried out by the PwC Partner-In-Charge and PwC’s Senior Managers working on the billing system project. Their alleged conduct is outrageous and our customers deserve to be repaid every dollar that the flawed billing system and fraudulent billings have cost them,” said General Manager Edwards.

Background

In March 2015, the City and LADWP filed a civil lawsuit against PwC.  The Complaint in the lawsuit alleges that PwC fraudulently induced the City and LADWP to enter into a contract to replace the LADWP’s Customer Information System (the “CISCON Contract”) and, after having been awarded the CISCON Contract, that PwC breached the terms of the CISCON Contract by failing to successfully perform several of the tasks that PwC was contractually required to perform.  As a result, LADWP was unable to properly bill many of its customers, leading to widespread problems experienced by LADWP customers and costs borne by ratepayers to fix the billing system after it went live in September 2013.

In March 2016, the Court ruled in favor of the City and LADWP when it rejected PwC’s attempt to dismiss the City and LADWP’s fraudulent inducement allegations. The Court’s decision was significant because it allows the City and LADWP to attempt to recover all of the damages incurred by the City and the LADWP as a result of PwC’s misconduct.

PwC’s defective implementation of the LADWP’s CC&B Billing System caused a nightmare for hundreds of thousands of LADWP customers and its employees as LADWP managed the fallout from this defective implementation. While LADWP has made tremendous progress in lowering call hold times and in remediating the defectively implemented CC&B Billing System that PwC delivered, the LADWP has also continued its investigation into PwC’s misconduct in connection with the lawsuit.

NOTE: The motion and amended complaint will be posted on www.ladwpnews.com under Hot Topics when available from the Court.

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