Michigan EFM Outsources Water Treatment to Company Indicted By DOJ

Thursday, June 9th, 2011 | Posted by Chris Savage

Savaged: Michigan EFM Outsources Water Treatment to Company Indicted By DOJ For Felony Violations of the Clean Water Act

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by Chris Savage
A2PNotes: This is filed under “Scoops & Scores” because you read it here first.

Innocent until proven guilty? Better safe than sorry? What would you do? In 2009, Democratic Governor Jennifer Granholm appointed Fred Leeb as the Emergency Financial Manager (EFM) for Pontiac, a city by all accounts in a true financial emergency. In June 2010, after Leeb resigned, Michael Stampfler (pictured left) was hired to replace him. This past week, Stampfler became the first of Michigan’s EFMs to utilize one of the enhanced powers granted them by Republicans, who passed the legislation that became Public Act 4. Under this new law, greatly expanded by Governor Rick Snyder, EFMs now have the ability to essentially dismiss elected officials, as Joe Harris has done in Benton Harbor, Michigan, and also to break union contracts at will. Until this week, no contracts had been broken by an EFM — until Stampfler did so with the Police Dispatchers union.

The city of Pontiac received state approval to cancel union contract protections for 11 police dispatchers, allowing the city to complete the process of eliminating its police department in an effort to close its more than $10 million budget deficit.
Monday’s action will make them the first Michigan public employees to have a contract tossed under the law signed by Republican Gov. Rick Snyder in March granting expanded powers to state-appointed emergency financial managers, the Detroit Free Press reported. Emergency financial manager Michael Stampfler proposed eliminating the police force last year.
“We reached the conclusion there really is an impasse,” said state Treasurer Andy Dillon, who said he met with the dispatchers union twice to work out an agreement. “We dug into it pretty deep to make sure his request was worth being approved.”
~SNIP~
Two city police unions had already agreed Stampfler’s plan to shut down the department, and he fired the city’s police chief in March as the city moved toward shifting law enforcement responsibility to the sheriff’s department effective July 1.

It should be noted that Andy Dillon was the former Democratic House Speaker and considered by many to be more Republican than Democratic.
Historic and unprecedented as Stampfler’s move is, it is matched, and likely surpassed, by another of his actions recently that has gone largely unreported by the media, significant details of which have gone completely unreported. Last Friday, in addition to dissolving Pontiac’s Planning Commission and replacing it with hand-picked, unelected members, Stampfler privatized the water treatment services and hired United Water Services to takeover that role.

Emergency Manager Michael Stampfler issued three orders Friday afternoon, irking elected officials as what they argue is an example of his circumventing their offices. The documents announced layoffs in the water and wastewater department; a deal with United Water Environmental Services; and the reestablishment of a new Planning Commission.
~SNIP~
The city’s wastewater treatment plants have been operating under a consent judgment since 2009 following allegations of violating the federal pollution permit by the Department of Environmental Quality.
A list of employees to be laid off will be distributed June 6. Their final day of employment will be June 30.
The contract with United Water will become effective July 1 and it is projected to save Pontiac an estimated $2.8 million in the first year, with additional savings in the next five years.
A month-to-month agreement with United Water was part an order issued March 30. It announced the company would serve as the temporary head of the city’s Department of Public Works and Utilities.
The new contract will include performance goals, including compliance with state and federal laws.

Privatizing water treatment services is something Stampfler is not unfamiliar with. According to his resume, Stampfler did the same thing for Portage, Michigan during his stint there as City Manager.
But that last bit there? The part that says the “the new contract will include performance goals, including compliance with state and federal laws?” That’s a pretty good idea. In fact, when you’re dealing with United Water, it may be the item you want at the top of your priority list. Why? Because United Water was indicted by the U.S. Department of Justice last December for violating the Clean Water Act.

United Water Services Inc., the former contract operator of the Gary Sanitary District wastewater treatment works in Gary, Ind., and two of its employees, were charged today with conspiracy and felony violations of the Clean Water Act in a 26-count indictment returned by a federal grand jury, the Justice Department announced today.
United Water Services Inc., and employees Dwain L. Bowie, and Gregory A. Ciaccio, have been charged with manipulating daily wastewater sampling methods by turning up disinfectant treatment levels shortly before sampling, then turning them down shortly after sampling.
~SNIP~
According to the indictment, the defendants conspired to tamper with E. coli monitoring methods by turning up levels of disinfectant dosing prior to E. coli sampling. The indictment states that the defendants would avoid taking E. coli samples until disinfectants had reached elevated levels, which in turn were expected to lead to reduced E. coli levels. Immediately after sampling, the indictment alleges, the defendants turned down disinfectant levels, thus reducing the amount of treatment chemicals they used.
~SNIP~
The case was investigated by the Northern District of Indiana Environmental Crimes Task Force, including agents from the Criminal Investigation Division of the U.S. Environmental Protection Agency, the FBI and the Indiana State Police. The case is being prosecuted by the U.S. Attorney’s Office for the Northern District of Indiana and the Justice Department’s Environmental Crimes Section.

As anyone who has read the news lately knows, E. coli can be quite dangerous, even deadly. The Clean Water Act specifically requires testing for this bacteria because it poses such a public health threat. United Water and several of its employees are accused of raising chlorine levels just prior to sample over 60 times over a five year period. This gave the impression that the levels of E. coli were lower than they actually were. The effluent from this water treatment plant is discharged into the Grand Calumet River, which empties into Lake Michigan with its recreation areas and swimming beaches. The potential for human contamination was significant.
United Water, in an arrogant display of heartless business-speak issued this statement:

The government’s claim is, at best, a disagreement about operating and monitoring methods, with no allegation of environmental harm. Trying to make a crime out of this disagreement is an abuse of prosecutorial discretion.”

An abuse of prosecutorial discretion? For busting a company for potentially putting the general public in grave danger? If there was never a risk of E. coli contamination, what would be the need for the increased levels just before sampling? Make no mistake, according to emails obtained in the investigation, officials at the company knew about the problem as far back as 2003.
This isn’t just raising a fuss domestically. Because United Water is owned by French-based GDF SUEZ, international labor unions have filed a complaint, as well. In their complaint, they note the hubris of United Water:

We emphasise that there have no convictions at this point and United Water has not been found guilty; the indictment was only issued five weeks ago and the case must now wind its way through the American jurisprudence system. We also note here that the Gary, Indiana, Sanitation Board terminated United Water’s contract last March.
But in investigating this matter, we are highly troubled by the public comments made by both United Water President (Robert Iacullo) and the company’s Senior Vice President for Corporate Communications (Richard Henning) following the indictment. Both state publicly that the alleged felony violations are mere technical disagreements, with Mr Iacullo calling it “an abuse of prosecutorial discretion.”
We find their responses repugnant and we find it contrary to the spirit contained in the Global Framework Agreement, as well as contrary to decent civic respect and corporate social responsibility. If the U.S. government’s charges prove true, the discharge of untreated, or sub-standard wastewater into waterways poses a serious public health threat.

The trial against United Water hasn’t begun yet. The Utility Workers Union of America has a webpage, UnitedWaterIndictment.net, where news and updates are posted.
So, back to Pontiac. How can privatizing the water treatment services save a city nearly $3 million in one year? Perhaps it is because Michael Stampfler hired a company that (a) is clearly willing to cut costs without regard to public health if federal investigators have it right, and (b) because of their reputation, have had to lower their price, so to speak. Chances are lower profit margins may incentivize the company to cut corners even more.
Emergency Financial Managers are generally good at what they do. They are typically trained as accountants and business optimizers. They know how to trim and cut and lean out organizations to squeeze every last drop of profits out of them. Unfortunately for the residents of Michigan, things like parks, public safety and the protection of natural resources don’t produce profits and generally are presented as “costs,” just as Ann Arbor’s own would-be-EFM Roger Fraser, with the help of John Hieftje and Council members such as Tony Derezinski, Stephen Rapundalo, Christopher Taylor, and Sandi Smith have done recently. When we begin to put a price tag on the very things that make our cities, society and state good, safe, livable and lovable, while putting CPA-like EFMs in charge, you can expect that these things will suffer in order to save money, even if it puts our citizens at risk.
And that is exactly what has happened in Pontiac, Michigan.
Grateful acknowledgement to surelyujest of Daily Kos for the connecting the dots and providing much of the research for this article.

For more of Chris Savage’s writing, visit Eclectablog.com.