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LA City Attorney Failed to Disclose $242 Million DWP-funded City Slush Fund, Says Consumer Watchdog Legal Appeal  

Tue, 03/26/2019 - 09:45
Posted in:

Activity is Consistent with Growing Ethics Probe

LA City Hall

Los Angeles, CA – Los Angeles City Attorney Mike Feuer supported a deceptive notice to ratepayers in a class action settlement over the transfer of hundreds of millions of dollars in what amounts to a City slush fund, according to attorneys for Consumer Watchdog.

On Monday, Consumer Watchdog filed its final court papers in an appeal of a class action settlement in which the City Attorney’s office did not provide any notice to Angelenos or the court of the $242 million transfer.  Though the $242 million transfer was not disclosed to consumers in time to exercise their right to opt-out or object to the settlement, the settlement barred consumers from challenging it in court. Read Consumer Watchdog’s opening brief here: https://www.consumerwatchdog.org/sites/default/files/2019-03/Opening%20Brief.pdf

The Court of Appeals filing comes as scrutiny intensifies over public corruption at the City Attorney’s office involving the settlement of another DWP ratepayer case. Two City Attorney special counsels secretly represented both the ratepayer plaintiff and the City/DWP defendant. The City Attorney failed to inform the court, the public or ratepayers that attorneys he hired represented parties on both sides of the case. City Attorney Mike Feuer’s Number Three deputy, Thomas Peters, resigned over the weekend, the third resignation in two weeks in connection with the scandal. Consumer Watchdog called for all three resignations and that of top deputy Jim Clark at the beginning of March when it learned about the scandal.

DWP billing errors have been a perennial problem for Angelenos, with outrageous examples, like a family being overcharged $60,000 for a leaky toilet.The special counsel quickly settled the action, with little scrutiny and no investigation and no real changes to DWP’s practices.  The City Attorney’s special counsel Paul Paradis received $36 million no-bid contracts in the settlement from DWP.  Read Consumer Watchdog’s letter calling upon Attorney General Xavier Becerra to take over a public corruption investigation at the City Attorney’s office: https://consumerwatchdog.org/sites/default/files/2019-03/LtrBecerraJonesCase3-12-19.pdf

“The cozy relationship between the City Attorney, DWP, and co-opted private lawyers is costing Angelenos hundreds of millions of dollars and year. The illegal cash transfers between DWP and the City gives the City Attorney a strong incentive to shield DWP from scrutiny from the courts and the people of Los Angeles, even if it means consumers will continue to face outrageous rip-offs,” said Ben Powell, staff attorney for Consumer Watchdog. “It’s like a scene out of Chinatown, unfortunately, it’s all too real.”

Consumer Watchdog objected to the class action settlement over the $242 million transfer in December 2017.  The trial court approved the settlement and the case is now awaiting decision by the Second District Court of Appeal in Los Angeles.  The case is Eck, et al. v. City of Los Angeles, Appeal No. B289717.  Read the brief filed yesterday here: https://consumerwatchdog.org/sites/default/files/2019-03/Reply%20Brief.pdf

The settlement purported to resolve a dispute regarding surcharges embedded in the electricity rates of City of Los Angeles residents, which resulted in hundreds of millions of dollars in annual financial transfers from the DWP to the City. Illegal taxes fueling such transfers have been the subject of a voter revolt expressed in multiple ballot initiatives over the last four decades.

On December 12, 2017, before final approval of the Settlement and approximately two months after notice of the settlement was provided to Angelenos, the City authorized an additional $242 million transfer from LADWP. City residents were not given notice of the $242 million transfer even though the City had line-itemed the anticipated revenue as early as April 20, 2017, and the City Attorney’s office, which represented the City and LADWP in the litigation, was aware of the transfer and signed off on its legality on November 17, 2017 and December 5, 2017.

 

Timeline

 

Apr. 20, 2017
Unbeknownst to consumers, the proposed City budget, dated April 20, 2017, anticipated a $242 million transfer from the DWP.

Sept. 14, 2017
The court preliminarily approves the settlement. The Settlement Agreement does not mention the $242 million transfer.

Oct. 12, 2017
Postcard Notice is mailed. Long Form Notice is posted to settlement website, and internet and publication notice is provided. None mention the $242 million transfer.

Nov. 16, 2017
The DWP Board receives staff recommendation to transfer $242 million to City of Los Angeles for FY 2017/2018.

Nov. 17, 2017
City Attorney’s Office signs off on the $242 million transfer: “Approved as to form and legality.”

Nov. 28, 2017
DWP Board authorizes transfer of $242 million to the City of Los Angeles.

Dec. 5, 2017
City Attorney’s office once again signs off on transfer.

Dec. 6, 2017
The Final Approval and Attorney Fees briefs are posted to the settlement website to allow Angelenos the opportunity to consider them before deciding whether to object to the settlement or opt-out. No notice of the $242 million transfer was provided on the settlement website.

Dec. 12/13, 2017
Two weeks prior to Opt-Out/Objection deadline, the City Council adopts an ordinance approving the $242 million transfer on December 12, 2017. The ordinance is signed by Mayor Garcetti on December 13, effective January 26, 2018. No notice of the $242 million transfer was provided on the settlement website.

Dec. 27, 2017
Deadline for consumers to decide whether to object to the settlement or opt-out.

Feb. 14, 2018
The court approves the settlement. The “Released Claims” and “Release and Waiver” provisions of the Settlement Agreement purport to release all claims pursuant to the ’08, ’12, and ‘16 Rate Ordinances and any financial transfers between LADWP and the City through the date of the Final Fairness Hearing February 14, 2018.

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