Tuesday, August 21, 2007

When Chaos Meets Corruption, Atlanta

By the time it was all over, it wasn’t even front-page news.
Atlantans had to turn to page 2D on March 4, 2003, to read
that their City Council ended its 20-year relationship with
Suez subsidiary United Water 16 years early. This is not to
say it wasn’t big news. Maybe journalists were just tired of
writing about it.

New Year’s Day, 1999 marked the beginning of the largest
water privatization in U.S. history – a $428 million deal
that United Water promised would cut Atlanta’s water costs
in half. Everything would improve: repairs, maintenance,
billing, customer service, emergency response – you name
it. “Atlanta for us will be a reference worldwide,” Suez’s
Chair Gérard Mestrallet said at the time, “a kind of showcase.”

It was also Suez’s coming-out party in the U.S. Eight
months later Suez announced its purchase of United Water,
the nation’s second-largest water company, elevating its
strategic alliance to an all-out merger.

Two years into the deal, the U.S. Conference of Mayors
bestowed Atlanta and United Water with its Outstanding
Achievement Award, remarking the deal “exemplifies the
type of corporate citizenship that makes cities stronger and

Clearly, the mayor’s organization spoke too soon.
Only 18 months later, in August 2002, the city was so fed
up with United Water’s poor performance that it threatened
to terminate the contract if the corporation didn’t turn
things around within 90 days. Due in part to dramatic staff
cuts, maintenance backlogs were “unacceptable,” repairs
were delayed, and responses to emergencies were “consistently
and habitually inadequate and potentially hazardous.”
The city was losing millions of dollars because United
Water wasn’t reading, installing and maintaining water
meters frequently enough, nor was it collecting enough late

The city accused United Water of submitting bills for work
it didn’t do – even working on other contracts and trying to
win new contracts while on Atlanta’s dime. And the company
refused to release certain billing records.

Scandal broke two months later when former Mayor Bill
Campbell, who had signed the original deal, announced he
never signed documents authorizing $80 million in extra
payments United Water had requested. Though the public
knew Campbell was under investigation at the time, few
knew what would follow.

After a lengthy probe, Campbell was charged in 2004 with
multiple federal corruption charges, including accepting
$12,900 from United Water to pay for a trip to Paris with a
female companion, and taking United’s $6,900 campaign
contribution at a time he was not eligible for re-election.

At Campbell’s trial in early 2006, it was suggested that
one of Campbell’s top aides may have forged the letters.
Campbell was convicted of tax evasion in March 2006, but
acquitted of racketeering and bribery. He is currently awaiting

United Water was not charged.
It was not corruption, though, that doomed United Water,
but the corporation’s performance. Only half of the expected
savings were realized. Fire hydrants were repaired
at half the speed required. And a backlog of 14,000 work
orders had amassed.49 Still, a week after Atlanta officials announced
plans to cancel the contract, a privatization advocate
with the libertarian Reason Foundation said, “It’s still
the model. Just do everything completely opposite of what
Atlanta did.” It is hard to see how that would be an argument
for other cities to follow suit.

Three weeks after Atlanta rescinded the contract, which
United Water called “amicable,” CEO Michael Chesser left
the company after just 15 months on the job. Atlanta officials
didn’t view the termination this way. The City Council
rejected United Water’s proposal for a gag order forbidding
Council members from discussing the final negotiations. “I
am not going to bite my tongue,” said Council member Felicia

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