Los Angeles Utility Workers Get Extra Pay in Overtime Scam

The Los Angeles Department of Water and Power (LADWP, or simply DWP) is an enormous municipal utility, serving nearly 4 million residents.  More than 200 billion gallons of water flow through over 7,000 miles of its pipes each year.  The technologies for water and electricity service are complex; the resources are scarce; and the access to sources is influenced by politics.  Under such circumstances, opportunities to line one’s pockets abound.  Roman Polanski’s movie, Chinatown (1974), set in 1937 against the backdrop of a corrupt water-diversion scheme, was based on the real-life Owens River Valley scandal of 1908.  Now the DWP faces a major scandal of a much different kind, this one involving its own heavily unionized employees.


DWP officials recently announced the results of an internal payroll audit, triggered by unusually high overtime payments.  The audit revealed that department employees received more than $100 million in such payments during March 2005-February 2006, with a major portion of that sum based on unusual or fraudulent claims.  About 90 percent of the current 9,000 full- and part-time employees belong to Local 18 of the International Brotherhood of Electrical Workers.  Whether or not the local’s leaders were aware of the massive incidence of overtime padding, it adds up to a scandal all the same.  And the leaders aren’t talking, if the Local 18 website (www.ibewlocal18.com) is any guide.


LADWP is an agency short on manpower and long on unfinished tasks.  Demand for water and electricity are up thanks in large measure to continuing population growth.  Last July, California officials declared a Stage 2 power emergency, as demand on the state grid exceeded 50,000 megawatts.  By contrast, even during the summer 2001 statewide power crisis, peak demand was no higher than the adjusted equivalent of 37,000 megawatts.  Los Angeles is the most populous service area in the state.  And to keep pace with demand, especially with pressing infrastructure needs, the DWP has raised rates and unveiled a 10-year, $2 billion systems upgrading plan.  But even so, the work force has diminished.  Currently, DWP has about two-thirds the number of full-time workers it did back in 1993, the year before the Northridge Earthquake.  Training people for new positions is time-consuming.  “(I)t takes four to five years to train someone to fill the jobs,” says Local 18 Business Manager Brian D’Arcy.  That puts existing full-time workers in the sweet spot when it comes to claiming overtime – accurately or not.


The DWP audit revealed that during the March 2005-February 2006 period, employees charged nearly 2 million hours of overtime.  That figure should look pretty suspicious.  In fact, the audit found that nearly 15 percent of employees declared overtime on the very day they took an absence; 32 individuals reported same-day overtime and absences more than 10 times each.  In some cases, employees charged overtime for in-house training beyond their normal schedule.  All told, nearly 3,500 employees charged overtime in amounts exceeding 15 percent of their regular pay.  The Board of Water and Power Commission, the policymaking body for DWP, knows something is very wrong.  “It’s a scam,” said Commissioner Nick Patsaouras.  “It’s like the wild, wild West in there.  Nobody questions anything.  Some employees charge overtime for attending an in-house training?  What’s going on here?  It’s crazy.”


Part of the problem is that DWP, like any utility, operates round the clock.  The department needs to retain its workers, and if it can’t find replacements, overtime becomes a necessary fact of life.  Under the federal Fair Labor Standards Act, eligibility for overtime pay – 1.5 times the regular wage rate – kicks in once an employee works beyond 40 hours in a given week.  A heavy workload means a higher likelihood of eligibility for large numbers of workers.  Additionally, Los Angeles has had unusually hot summers in recent years.  “We are seeing temperatures at the hottest in 50 and in some instances 100 years, which means the system as a whole is stressed,” said Joseph Desmond, undersecretary for energy affairs at the California Resources Agency.  “There have been some outages, primarily as a result of equipment failure.  This is to be expected.”  But a third factor is that IBEW Local 18 is a hardball negotiator, winning raises of up to 28 percent over five years from the City of Los Angeles, making members among the best-paid city employees.  Even more importantly, the union won generous overtime provisions.  That means padding will be less likely to detect.


Auditors recommend that managers refuse to allow non-emergency or nonunion-mandated overtime on the same day as an absence.  They also recommend minimizing the use of overtime in the same week as absences.  DWP has begun scrutinizing overtime payouts each month.  It also fired the security and janitorial staff managers.  Among the DWP’s 232 security officers, 228 had racked up a combined $5 million in overtime during the audit review period.  Yet long-term problems won’t go away.  Rising demand, heavily driven by immigration, is straining service-delivery capacity.  The Mono and Owens Lake basins, the traditional main water sources, are slowly drying up, causing the DWP to examine alternatives, including making a direct connection to the California Aqueduct and building a desalinization plant in Playa del Rey.  Many pipelines are wearing out and eventually will require replacement.  As for electricity, replacing power lines, still mainly above ground in residential areas, will be a massive task over the next several decades.  One has to wonder if IBEW Local 18 will be on board for belt-tightening.  As Jack Nicholson’s character in Chinatown, Jake Gittes, put it, “This business requires a certain amount of finesse.”  (Daily News of Los Angeles, 2/21/07; other sources).