Indianapolis Department of Waterworks and City Government and Regulation and Local Government and Veolia and Water and Government & Economic Development and Government

Water employee: Veolia falsified records to get bonuses

December 28, 2010
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A supervisor at Indianapolis Water has told state regulators the private operator of the city-owned utility falsified records to earn performance bonuses.

Tom Plummer’s testimony, filed Tuesday with the Indiana Utility Regulatory Commission, is part of a ratepayer group’s effort to stop the city from paying Veolia Water a $29 million contract-termination fee.

The IURC is weighing the city’s request to sell the utility to Citizens Energy Group for $1.9 billion.

Consumer Ratepayers, a group that includes Plummer and 10 other water customers, on Dec. 17 alleged Veolia effectively defaulted on its management contract with the city on numerous occasions.

As such, the city could terminate the contract “for cause” and not pay Veolia the $29 million, they contend.

Underlying the complaint is their attempt to win money for salaried water employees they allege had their benefits gutted following the city’s purchase of the water utility eight years ago and subsequent management contract with Veolia.

Their complaint is the first relatively contentious filing in the IURC case and threatens to at least slow the commission’s deliberations on the sale request.

Plummer is identified as a 31-year employee who now works as operating supervisor in the utility’s central control station, which distributes water to eight counties in the metro area.

“I have personal knowledge of false record-keeping by US Filter/Veolia,” Plummer testified, referring to the previous name of Veolia’s water operations.

“Several Indianapolis Water employees told me that they were asked by (Veolia) personnel to alter records in order to make it appear that (the company) had earned an incentive payment when in fact the unchanged records would not have supported the claim for the incentive payment,” Plummer said in the complaint.

He alleges that Veolia earned $294,000 in 2003 because it reported that it met a one-hour response criteria for 106 water emergencies, “this in spite of the fact  that there were over 600 water-main breaks” that year.

“It was clear that many more of those main breaks would have been emergencies if not for under-reporting. Many employees have told me that (Veolia) personnel asked them to alter times recorded and events logged in so as to falsely show that the repair call was responded to within one hour, when in fact it took longer,” Plummer said

He pointed to a 2004 investigation by federal and state regulators into Veolia’s operations, when the number of emergency calls jumped to 485 from 106 in 2003.

“Except for more honest record-keeping, it would be difficult to imagine that many more emergencies in just one year,” he added.

A 2005 memo by a Veolia manager showed that the Environmental Protection Agency, with assistance from the Indiana Department of Environmental Management and the FBI, were conducting an investigation of Veolia’s Indianapolis operations.

Ultimately the U.S. Attorney’s Office in Indianapolis did not file charges.

Nevertheless, the ratepayer group argues that the city has ample instances of impropriety to terminate Veolia’s contract for cause and therefore not pay it $29 million for the remainder of its 20-year contract with the city.

Plummer and the other members of the ratepayer group ask the commission to require the city to pay salaried workers money for benefits that they allege were eliminated or reduced after the city bought the utility from Merrillville-based NiSource eight years ago. At the least, Indianapolis Water customers should receive that money, they say.

Plummer’s group pointed to numerous statements made by city officials, including a July 2001 letter to water employees by then-Indianapolis Mayor Bart Peterson, which states that the new management structure “will honor all employee benefit agreements, including the current bargaining units and collective bargaining agreements.”

The group filed with the commission a review by Indianapolis accounting firm Isenberg & Chivington that pegs damages resulting from reduced benefits over a projected 26-year period at $47.7 million.

Non-union water company employees had sued over the benefit reductions previously. But ultimately a court found the city could not be held liable because the promises were made to employees before the city took control of the waterworks.

“Obviously, the IURC has the authority as an independent agency of government to make the city comply with commitments made to the IURC when the city obtained commission approval to buy the waterworks,” Plummer said.

The ratepayer group estimates that non-union employees have been denied about $16.5 million in benefits since the city acquired the water utility in 2002.  Indianapolis water customers should receive at least that much in the form of a rebate, should the commission elect not to order that amount paid to non-union employees, the group says.

A spokesman for Veolia said the claims by the ratepayers group “are baseless and some are factually inaccurate.”  The company is preparing a response to be filed with the commission.

City officials said the $29 million termination fee amount was agreed upon through mediation and provides that Veolia will continue to manage the water utility until the deal with Citizens is closed. That’s not expected to come until the first quarter of next year at the earliest.

Citizens said it expects to hire nearly all of Veolia’s 436 employees at the water utility.

Mayor Greg Ballard championed the sale as a way for the city to free up more than $425 million for city infrastructure improvements. Proponents also say the deal will save $60 million a year by consolidating the water utility under Citizens’ gas, steam and chilled-water operations.

Asked as part of his testimony whether Plummer anticipates his job could be in jeopardy, he said “I don’t anticipate that retribution will occur.”

“What’s right is right, and the non-union employees at Indianapolis Water were lied to … . We just want what was promised to us, promised to the City-County Council and promised to the IURC,” he said.

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