Almost four years after firing an investigator who questioned whether hired-gun lawyers from a politically connected firm were bungling the city of Los Angeles’ defense in a lawsuit, the city has lost that case and may have to pay the plaintiffs up to $30 million.

Last week, a jury awarded $12.3 million to construction company Dillingham-Ray Wilson for work done a decade ago on the Hyperion treatment plant project, part of the city’s effort to clean up Santa Monica Bay.

The city spent a total of $10.6 million on its contract with the private lawyers, according to Jonathan Diamond, a spokesman for City Attorney Rocky Delgadillo.

And on top of that, the plaintiffs will seek $15 million in penalties from the city at a hearing set for Monday, as well as attorneys’ fees and costs at a future hearing, attorneys said.

Dillingham-Ray Wilson files the lawsuit in 1999, alleging the city owed the construction firm and its subcontractors $66 million for work on the project, including 20 egg-shaped digesters, pipelines and other structures. The suit alleged a breach of contract by the city and acting bad faith.

Diamond said the city withheld payment because it felt it was owed that amount for liquidated and false claims damages. He cited billings from the company that included a trip to Hawaii, tuxedo rentals and a trip to New Orleans for a concrete conference.

Lawyers from Brown Winfield & Canzoneri, a donor to many local politicians, were hired by the city to handle the case. In court documents, they characterized the construction company’s claims as “exaggerated” and alleged violations of the California False Claims Act.

Two of the lead attorneys, Nowland C. Hong and Michael S. Simon, who have since moved to Wickwire & Gavin, did not respond to telephone calls seeking comment.

Suspicions about their work were raised in 2002 by a special investigator for City Controller Laura Chick.

Daniel Carvin, who previously worked for the IRS and the Metropolitan Transportation Authority inspector general, raised concerns about the law firm’s billing practices, as well as how the lawyers were handling the case. He sought to investigate the contract more fully, according to Carvin’s attorney, Louis J. Cohen.

Three months after joining Chick’s office, though, Carvin was fired. Chick has since pushed so hard to examine the city’s contracts with outside law firms that City Hall insiders believe she created a rift between her and Delgadillo.

Chick, who has received contributions from Brown Winfield and its employees, declined to comment from this story.

Last year, the city agreed to pay Carvin $490,000 to settle Carvin’s wrongful termination suit.

Upon hearing about last week’s verdict, Cohen laughed and faulted the city for taking the side of a “preferential campaign contributor law firm.”

“Instead of taking my client’s concerns seriously and evaluating the legal team, they fired my client,” Cohen said. “This really vindicates what my client was concerned about.”

Diamond denied the law firm’s contributions to Delgadillo had anything to do with why they won the contract, noting that the city entered into the contract several months before Delgadillo took office. The City Council approved the contract in January 2001, when Chick was a councilwoman.

“There’s a procedure for contracting with outside firms,” Diamond said, adding that Hong and Simon had done previous work on Hyperion-related litigation.

Failure to keep adequate records explaining why law firms are chosen for contracts is an issue for which the city attorney’s office has received much criticism. In January, the state auditor released a report on the matter.

Diamond would not say why Carvin’s concerns were not addressed. “We’re not going to comment of someone who was involved in litigation with the city,” he said.

As for Dillingham-Ray Wilson’s suit, lawyers for the plaintiffs argued the city’s allegations of false claims were baseless. They also believe this case to be the first time the city has lost a false claims suit that went to trial.

Timothy L. Pierce, a partner in Thelen Reid & Priest’s Los Angeles office, said public agencies use such allegations as a go-to threat weapon, hoping companies would rather settle than risk being branded as liars.

“The problem is that they do it every time,” Pierce said. “It’s just a reaction in every case.”

Diamond disputed that notion.

“When there is belief that there were false claims, then, yes, we allege violations of false claims. It’s done when we believe there’s merit to it,” Diamond said.