Tuesday, August 21, 2007

Problem contracts and controversies:

2005: Gabon – The Gabon energy and Water Company (SEEG), which is 51% owned by Veolia,
was reprimanded by the Gabonese Government in early 2005. The Government blamed SEEG
for recent water shortages in the capital city accusing the company of not wanting to invest in the short, medium or long for the production, transport and distribution of water.82 To deflect criticism SEEG purchased a full-page advertisement in the government newspaper L’Union to offer apologies and claim that service had almost returned to normal.

2004: Lee, Massachusetts – After 4 years of lobbying by Veolia Water North America, town
representatives of Lee, Massachusetts voted 41-10 against granting the corporation a 20 year
contract to run the municipality’s public water and wastewater systems. Community organizers
waged a successful campaign against the privatization of the essential services, raising doubts
about the company’s promise that current employees would keep their jobs.83 Resistance to
privatization in a small community like Lee is a good example of how large multinationals are
vulnerable to well organized and persistent action.

1996-2004: Angleton, Texas – The City of Angelton terminated its contract with Veolia Water North America, saying that the company did not provide the promised level of service. The company had been running the city’s wastewater treatment plant and maintaining the city’s streets since 1996. Since the contract was terminated, the city and Veolia Water North America have been embroiled in a number of lawsuits.

2002 – 2004: Indianapolis, Indiana – Indianapolis authorities are realizing the mistake they made when they bought a 130-year old water utility from NiSource in 2002 and handed it over to US Filter instead of keeping it a public utility. Since US Filter was awarded the contract, lawsuits have been filed and customer complaints have gone up by 250% for the water utility, which serves over 1 million.

Within one month of requesting management proposals, US Filter was granted a contract. Opponents criticized the excessive secrecy and “fast-tracking” surrounding the agreement. At its first opportunity, the company, limited by the contract from firing employees in the first two years, began to cut corners by slashing employee benefits. A report by Public Citizen, member of the Indianapolis Citizen’s Water Coalition, states that “non-union employees lost their valuable "defined benefit" pension; health care coverage was reduced, vacation time, personal days, sick days and holidays were all reduced. The employees claim that over $9000 in annual benefits have been lost or $4.3 million per year. Employees are angry and fearful as talk of the first layoffs in 130 years circulate. CEO Jim Keene told employees, ‘Being fair does not mean having a job for life’.” The employees have brought a federal lawsuit against the City charging breach of contract.

A second lawsuit against the City was filed in April 2003 by three local taxpayers challenging the
legality of the contract. They claim that the City ignored the law by establishing the Department of Waterworks to oversee the water utility without the permission of the Department of Public Utility

– an Indiana State law ensures that any new utilities in the county must fall under the supervision of the local public utility office. They also claim that the Citizens Gas & Coke Utility would have been in a better position to manage it as a public water utility. Since taking control, net income of the utility has dropped 19% and revenue has dropped 25%. The founding member of the Indianapolis Board of Waterworks, who wrote a letter to the media condemning the 2002
purchase, quit after the Board passed a resolution limiting its members from speaking with the
media regarding the utility.

In the summer of 2002, almost 16,000 customers were over-billed by successive computer
glitches by the US Filter-owned billing company.

Recently, US Filter’s decision to cut back on fire hydrant testing was made public when frozen fire hydrants prevented the control of a fire, which engulfed several buildings.

The Indianapolis Star noted that the company was taking steps to repair the damage it had caused – “Apparently unaccustomed to working with community groups,
USFilter convened a citizen’s advisory group, as is required by its agreement with the city, but
had no members with experience in water utility or environmental matters”.

2003: Poughkeepsie, NY – Repeated failures of US Filter to remedy the foul odours coming from the water treatment plant they operate have prompted City officials to look elsewhere for potential bidders when the contract expires in 2005. The plant has had to be shut down several times over the last year during special events. US Filter has said it plans to bid for the contract again.

1998-2004: Rockland, Massachusetts – In February 2004, the town of Rockland Massachusetts
terminated its 10 year $1.2 million contract with US Filter to run the town’s sewage treatment
plant on the advice of the state Office of the Inspector General. The Inspector General
determined in 1998 that the contract was tailored to US Filter to the exclusion of other bidders. Rockland Town Administrator Bradley Plante sent a letter to Veolia Water North America President Michael Stark stating that there was “clear evidence that indicates collusion between former superintendent Gregory Thomson and US Filter Regional District Manager Sause which resulted in a violation of the competitive bidding process”.

The termination of the contract came on the heels of an audit of the town’s sewer department,
which found widespread misuse of town money at the plant. The audit detailed about $77,000 in
fraudulent invoices charged to the town between 1998 and 2002.92 To make matters worse, when the contract ended, Veolia Water North America allegedly helped themselves to a large amount of equipment without paying the city. Town officials say the company should pay $1.6 million for what they allegedly took.

In September 2004, Gregory Thompson pleaded guilty to charges of embezzlement and was ordered to pay back the $336,000 he admitted stealing from the town. Thompson said that he and Michael Sause, a district manager for US Filter, submitted phony invoices to the company and intercepted reimbursement checks. According to Thompson, the two also stole funds US Filter had reimbursed to the town from wage, equipment, maintenance, and electricity accounts. Sause is accused of working with Thompson to steal over $160,000.

1999-2004: New Orleans – In August 2004, five years and $5.7 million later, the Sewerage &
Water Board of New Orleans ended its flirtation with privatization. Throughout the 5 year
process of consultations and studies, US Filter remained one of the top potential bidders for a
$1.5 billion contract to run New Orleans’ water and sewer systems. The initial bidding process by Suez’ United Water and US Filter, now Veolia Water North America, was voted down in October 2002 after heated public opposition. The drive to privatize was revived in January 2003, but only one bid from US Filter was put forward raising fears that the city would not get a competitive price for the contract.

There were also persistent rumours that US Filter may have had an ‘inside track’ for the contract.
There was speculation that US Filter was confident that they would be awarded the contract so
they ‘stuck around’ for the revived privatization drive in 2003. This confidence is believed to come from the company’s efforts to hire consultants close to Mayor Ray Nagin and Eddie Sapir, the City Councilman who serves on the water board and spearheaded the privatization drive.

1 comment:

Inflection Point Solutions said...

Many utilities deal with money problems because of lack of communication, accountability, and realistic goals. Having an eye on your systems is critical in all the stages.

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