Little did Los Angeles Department of Water and Power officials know that when they installed a new billing system in 2013, it would lead to and expose corruption in the highest levels of city government.
The story revolves in two areas: (1) filing, and then trying to cover up a corrupt class action that the City Attorney’s Office had filed on behalf of the City, and settled in its favor, and (2) awarding over $40 million dollars in City contracts to a cyber security company newly formed by a lawyer employed by the City Attorney’s Office, which occurred through a “fixed” bidding competition and in violation of the City’s open bidding process.
The new billing system developed by PricewaterhouseCoopers (PwC) for DWP was rolled out prematurely, despite a warning from the State Auditor that the system would not work.
It was disaster. Residents started complaining and several class action lawsuits were filed.
The City Attorney’s office, under Mike Feuer, sued PricewaterhouseCoopers (PwC), alleging that the malfunctioning system was negligently installed.
To deal with the many customer class action lawsuits, the City Attorney’s office, under the direction of Thom Peters, Jim Clark and Mike Feuer, came up with the idea for a “friendly” class action lawsuit.
A “friendly” lawsuit meant that City chose the person and the lawyers, Jones v City, in order to receive a more agreeable settlement, which is unethical.
The fraudulent lawsuit was eventually exposed but not before attorneys for the City, at the direction of Thom Peters and Mike Feuer, had paid millions in legal fees and $800,000 in extortion to a secretary working for one of the City’s outside counsels, Paul Kiesel.
The law firm PwC took LA City to court and in depositions uncovered the bogus lawsuit. Feuer then dropped the $100 million lawsuit against PricewaterhouseCoopers.
Attorney Paul Paradis, the attorney hired by the City to prepare a complaint against itself and PwC, turned himself, agreed to plead guilty and then in April 2019, went undercover for the FBI and the U. S. Attorney’s Office.
Over the next 15 months, Paradis met with top city and DWP officials and made tapes, and video recordings – while wired. He turned the information over to the FBI.
In one of them, he spoke to the head of the DWP David Wright, who confirmed that the City Attorney’ Office had lied when they denied that they had filed a lawsuit against the City itself.
Wright has pled guilty and faces jail time. His guilty plea explains that he participated in numerous conversations with Jim Clark of the City Attorney’s Office because Clark was the author of the City’s friendly lawsuit. (Clark left that office in August 2020.)
DWP CYBER SECURITY:
At the same time that Jones v City, the class action lawsuit was underway, DWP, which had not upgraded its security and could easily be exposed to a cyber threat needed to hire a company to upgrade security.
When companies in the Southern California Public Power Authority (SCPPA) are approving a new contract, it goes through a competitive bidding process. The vote is later approved by DWP.
Paul Paradis was developing a company that could work with cyber security. David Wright, the DWP head, planned to leave his job and come to work for Paradis.
The company, initially Aventador, now Ardent was involved a three-year, $30 million no bid contract with LADWP to perform remediation work on the faulty billing system—and to perform cybersecurity-related work for LADWP.
As of March 2019, Aventador had received at least $21.9 million of public funds under the contract, without participating in the normal bidding process.
To receive the new cyber contract, it would need to go through a competitive bidding process against other companies.
But Ardent, formerly Aventador, knew it would be awarded the new contract. How did it know it would get the contract when competitive bidding had yet to be done?
According to the FBI tapes, Mayor Eric Garcetti and members of his office knew that Ardent/Adventador would get the cyber contract.
In one tape from Paradis to the FBI: “Heading to meet Josh right now [Joshua Perttula is a personal advisor and friend to Garcetti]. Just had approx. 15–20-minute conversation with Wright. Mayor’s office knows about bid rigging to steer Ardent contract and actively involved in setting pricing strategy. Call recorded.”
And “both Wright and Josh have now repeatedly admitted on recordings that the Mayor’s office, including the Mayor’s Chief of Staff Ana Guerrero and Deputy Mayor Barbara Romero, is actively involved in the fraudulent scheme to award the SCPPA contract to Ardent and that these two individuals are particularly involved in setting the $ amount of the contract to be awarded because of their ‘concern over the optics.’”
Perttula admitted on video that the mayor’s office and DWP Board all had actual knowledge that DWP was using the SCPPA contracting process to create the false appearance that the contracts to be awarded to Ardent and the other two vendors were the result of a competitive evaluation process when they all have actual knowledge that this is not true.”
Former LADWP Chief Cyber Risk Officer David Alexander “admitted to fixing the process to select Ardent as the vendor for DWP and also admitted the DWP has been falsifying regulatory records since 2007 to cover up its non-compliance with CIPT standards and other regulatory requirements.”
Garcetti denied those allegations in a May 4 Knock LA story (“Former City Lawyer Says Garcetti’s Office, DWP Steered Bogus Contracts] that they [the office] had no role in the SCPPA process and “It should surprise no one that a convicted criminal [Paradis], who has already confessed to defrauding the public for his own personal gain, is extending that fraud with a desperate attempt to deflect blame and minimize his own wrong doing.”
The commissioners, who are appointed by Garcetti, and are supposed to provide oversight on all contracts because they represent the public, were also involved in the awarding of contract, according to the Paradis tapes.
LADWP Board President Cynthia McClain-Hill and former board President Meldon Levine were named in the filing “Both Mel and Cynthia state Ardent had already been selected by them to perform cyberwork for LAPD (April 15), despite the fact the board was not set to vote until April 18.”
In the Knock-L.A. story, McClain-Hill said, “any suggestion that I was in any way involved in the so called ‘rigging’ of the SCPPA contract is patently false.”
TAPES BECAME PUBLIC THROUGH COURT FILING
How did the FBI tapes become public? In one word – Feuer.
Paradis, the sole owner of Ardent Cyber Solutions, is now a debtor in Chapter 7 bankruptcy in Arizona.
Feuer filed a lawsuit against Paradis in an Arizona bankruptcy court for almost $24 million in June 2021.
As of March 2019, Aventador had received at least $21.9 million of public funds under the contract. In December, Paradise filed to dismiss. The Court granted his motion in February, but allowed the City to file an amended complaint, which it did in March.
Paradis, who has pled guilty to a bribery charge, responded on April 29 with a complaint against Mike Feuer, saying that he should be disbarred because the City’s suit “depicts Paradis in the worst possible light. . . .and that the amended complaint was known to Feuer to be false.”
Paradis points out that Feuer knew that Paradis was working at the direction of the FBI and the community safety crimes section of the USAO. Paradis said Feuer knew that Paradis had provided “evidence of corruption, contract bid-rigging and cybersecurity violations involving the LADWP and high-ranking officials in the Mayor’s Office.”
In Paradis’ court filing, he provides written summaries of the numerous undercover operations. (Visit: click here.)
To date, four people have been charged.
Paradis pled guilty to a bribery charge for accepting an illicit kickback of $2.2 million.
David Alexander pled guilty to a single count in a plea agreement with the United States District Court for making false statements.
David Wright pled guilty to federal charges of conspiracy and bribery in December 2021 and was sentenced to six years in federal prison in April.
Thomas Peters, who worked in the L.A. City Attorney’s office pled guilty to one count of aiding and abetting extortion,