LOS ANGELES – City Attorney Mike Feuer today announced that his office has filed a civil lawsuit against Price Waterhouse Coopers alleging the company fraudulently misrepresented its capabilities to implement a new billing system for the LADWP in order to secure a $70 million city contract and subsequently failed to deliver. The complaint alleges that as a result of the company’s lack of skills and experience to perform the work in the contract, the LADWP’s system was unable to properly calculate and bill tens of thousands of customers, resulting in the loss of hundreds of millions of dollars in revenue.
“Our residents have a right to know that their ratepayer dollars are being spent efficiently and responsibly,” said City Attorney Mike Feuer. “If, as we allege here, contractors misrepresent their qualifications and fail to live up to their obligations, we will hold them accountable.”
In 2009, the LADWP issued a request for proposals (RFP) in an effort to modernize its nearly 40 year-old customer care and billing system. The complaint alleges that Price Waterhouse intentionally misrepresented and failed to disclose important facts in its response to the RFP in order to secure the contract. Specifically, the complaint alleges Price Waterhouse overstated its knowledge, expertise and skills necessary to convert the LADWP’s current billing system and implement a new software platform for the Department’s customers.
The complaint also alleges that Price Waterhouse misled the LADWP by stating it had a “100% success rate” in implementing the new billing system and falsely touting the success of similar work performed for the Cleveland Water Department. In fact, Price Waterhouse’s failure at Cleveland Water caused the company to incur severe financial losses as a result of improper billing of customers.
In addition to allegedly inducing the LADWP to reward the contract to Price Waterhouse, the company subsequently failed to successfully perform several of the key tasks it was required to perform under its contract including successfully completing critical reports and customer billing conversion programs necessary for the billing system.
As a result of Price Waterhouse’s alleged misconduct, the complaint alleges 11.25% of all LADWP’s meters were rendered unable to function properly and the LADWP was unable to bill approximately 180,000 of its customers, many for a period of more than 17 months, resulting in an estimated loss of millions per month in lost revenue. In addition, the LADWP was forced to retain other IT and billing system consultants to perform the work Price Waterhouse was paid but failed to perform, further exacerbating LADWP’s financial damages.