By Jennifer Langston and Scott North
Herald Writers
2002 The Daily Herald Co.
A California management consultant has billed the Snohomish County PUD $750,000 over the last two years, including charges for stays in a four-star hotel, valet airport parking and expensive car rentals, according to documents obtained by The Herald.
Nearly a third of those consulting and travel costs came during a year in which the utility increased its electricity rates by more than 50 percent, leaving it with the highest rates in the state and its customers struggling to pay sky-high bills this winter.
A review of invoices by The Herald found that the PUD twice paid consultant Laurence Akiyoshi $65,000 for the same work after failing to notice he had mistakenly double-billed the utility. The error has been corrected and the money will be refunded, the PUD said Friday.
Akiyoshi, of Woodside, Calif., was hired by the district to work on a number of projects, including fixing problems in the PUD’s customer service department.
He has charged the PUD $750,000, and so far has been paid about $635,000. The district is disputing some of the difference, and last month launched its own internal audit after noticing what it considered unnecessarily high travel expenses in some of his recent billings.
Akiyoshi has logged upward of 1,300 hours of consulting work since December 1999, at a fee of between $400 and $425 an hour. Adding in his paid expenses, the consultant has received roughly $200,000 more than PUD general manager Paul Elias, records show.
Elias defended the consultant’s contract, saying sometimes a utility needs specific, outside expertise, and often that doesn’t come cheap.
Over the life of his contracts, the cost associated with bringing Akiyoshi from his home in California to Everett to meet and work with PUD employees has totaled roughly $210,000, including air fare, lodging, meals and paying for the consultant’s time while he was traveling here, The Herald found.
PUD commissioners said they were not aware of the details of the contracts signed with Akiyoshi, or the fees he had been paid, until early this month. They said they would review results of the audit, which is expected to take another several weeks.
Commissioner Don Berkey said he was surprised to learn that a single consultant had been paid hundreds of thousands of dollars more than the PUD’s highest-paid employee. He also had questions about why the utility didn’t catch Akiyoshi’s double billing, and wondered whether procedures used to scrutinize expenses were followed.
Berkey said that without a more thorough review he couldn’t judge at this point whether the consultant’s charges had been reasonable.
"We would expect that he would receive a fair price and keep his expenses to a minimum," he said. "My question would be, did we make a reasonable judgment that this guy produced work that would be worth $400 an hour, and did we get what we paid for?"
The utility has questioned $35,000 in charges under Akiyoshi’s latest contract, which is to help design and evaluate results of an employee morale survey. The contested expenses include billed hours, last-minute plane ticket charges, valet parking at the San Francisco airport, extra meal charges from stays at the Alexis Hotel in Seattle, high-priced car rentals and an $800 copying charge from Kinkos.
Akiyoshi and Elias have worked together on projects at other utilities over the last decade. Akiyoshi has been retained by the PUD on four separate contracts, including interviewing candidates for two top positions at the utility and helping focus the PUD computer systems department.
The bulk of his consulting work involved identifying and solving problems in the utility’s customer service department. That contract had an initial limit of $85,000 but ballooned to $530,000 over a two-year period, based on the complexity of overhauling and turning a troubled department around, officials said.
Elias defended the work done by Akiyoshi, pointing to dramatic improvements in the PUD’s customer service department. Employee grievances have dropped 27 percent.
In a national survey conducted this year to gauge utility customers’ satisfaction with how questions were answered and problems were addressed, the PUD scored higher than the national average and higher than Seattle City Light, Elias said.
It’s difficult to put a price on an intangible thing like a well-functioning customer service department, but it’s crucial in being able to keep ratepayers happy and control costs, Elias said.
When he was hired by the utility, that department had a reputation for being dysfunctional and unfocused and had significant morale problems.
"We needed some help in this area, (Akiyoshi) came highly recommended, and he got results," Elias said. "I wish it were less, but … I think ultimately the customer is going to be best served by it."
But Elias said the problems with potential overbillings and questionable expenses show that the utility needs to do a better job of scrutinizing contracts and consultants’ billings. He also said the district probably needed to tighten specifications on what types of expenses the utility would reimburse. He said, for instance, he would prefer consultants stay at hotels in Snohomish County rather than in Seattle so the economic benefits from those visits flows to the community.
"Absolutely, we should question expenses," Elias said. "It’s my expectation that they are scrutinized, but I can’t tell you specifically the degree in detail all contracts, including Laurence’s, are done. … If changes need to be made, absolutely, we need to protect our customers."
Jim Lazar, an Olympia economist who has worked with utilities for two decades and used to consult for the PUD, said it seemed unusual to him that a utility would rely so heavily on such a highly priced consultant.
There are a number of top experts in their field who do command those prices, but they tend to be senior partners in well-known accounting, investment banking or legal firms. In many cases, Lazar said, they’ll fly in for a day and leave the bulk of the work to junior people who don’t charge as much.
During a two-year period, Akiyoshi’s hourly billings added up to 26 weeks of full-time work. He spent 60 days working virtually full-time with people in the customer service department, records show.
Lazar said consulting contracts in the utility industry tend to be largely based on prior contacts and involve people who are known by managers.
"In the Pacific Northwest, that is an extraordinary rate to be paying any consultant, but it’s not unheard of," he said of Akiyoshi’s billings. "What’s unusual about this is to buy hundreds and hundreds of hours of someone’s time who doesn’t seem to have a global reputation and isn’t associated with a major firm."
PUD watchdog and former employee Dave Aldrich said the PUD already has highly paid employees by Snohomish County standards. He also questioned why they would need to call so frequently on a special hired gun with such a high hourly rate.
He asked how the utility could justify reimbursing $34,000 in hotel bills and more than $6,000 in meals when its customers were cutting back on medicine and food just to keep warm.
"Frankly, it’s scandalous that when so many PUD customers are having a difficult time paying their electricity bills that the highly paid general manager has hired a longtime acquaintance at $400 an hour to help with matters at the utility that should be handled by existing personnel," he said.
Gary Zinter, a semiretired Boeing employee who soon will be working at QFC’s deli department, recently got a notice from the PUD threatening to shut off his electricity. He was outraged, because he thought as long as he was making sincere efforts to pay off his $352 bill that he wouldn’t be threatened.
So he said he was extremely upset to learn the PUD had paid someone $8,500 for parking, particularly when there are thousands of senior citizens cutting back on heat this winter to save money.
"I would be up in arms, and I am," he said. "I wish I had that money. I wish I was wined and dined and everything."
Akiyoshi, who has been an organizational consultant for 23 years and has worked for companies including Hewlett-Packard, Levi Strauss, Charles Schwab and Kodak, said in his field he is actually a bargain. Other consultants charge up to $5,000 a day, he said, adding that he reduced his usual fee by about $100 an hour while working for the PUD.
He said the kind of work he does — identifying root problems in the way an organization is structured or the way it functions and implementing changes — is a time-consuming and expensive commitment on the part of any company or utility. But once the changes are made, they’ll save the company money over the long run, he said in a telephone interview.
Akiyoshi said he is upfront with clients about his travel requirements and expenses. What might be a "reasonable and customary" expense to someone in one line of work might be entirely different to someone else, he said.
He said the duplicate invoice for $65,000 was an accounting mistake on his part that would likely have been caught by his tax accountant, and that the money will be reimbursed immediately. Akiyoshi said he is working with the PUD to provide more information on the charges that have been questioned, but disagrees that they were excessive.
Commissioner Cynthia First said she wouldn’t expect a consultant to stay at a bed and breakfast in Everett, and, as a lawyer who bills by six-minute intervals, she knows some expenses that save time actually save clients money in the long run.
Without reviewing the contracts and invoices in detail, she wasn’t prepared to comment on whether the charges or expenses paid on the utility’s dime were reasonable. That’s what the audit that the utility is conducting right now will show, she said.
She did say that she understood Akiyoshi had made excellent strides in turning around a stressed-out department.
"I can’t really put a value on his services, except I know that department is running much, much more smoothly," she said. "I don’t know if his charges were out of normal for his level of expertise."
You can call Herald Writer Jennifer Langston at 425-339-3452
or send e-mail to langston@heraldnet.com.
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