Water Industry News

Mike Stump, Katherine Maraldo go to prison

January 04, 2005
By Martha Carr

It's been more than a year since former New Orleans Sewerage & Water Board member Katherine Maraldo was convicted in federal court for scheming to rig the renewal of a contract to run the city's two wastewater-treatment plants.

But Maraldo, 55, didn't see the inside of prison barracks until Monday, when she reported to a minimum-security women's penitentiary in Bryan, Texas, to begin her five-month sentence, according to her attorney, Randy Schaeffer.

Maraldo and Michael Stump, the man accused of bribing her, were convicted in June 2002 in Texas Southern District Court in Houston for attempting to influence the renewal of a water board contract held by Professional Services Group, or PSG. Each was found guilty of one count of conspiracy and three counts of mail fraud. Stump was PSG's president at the time.

Maraldo, however, was allowed to remain free on bond for more than a year while her attorney appealed the case to the 5th U.S. Circuit Court of Appeals based on the failure of the District Court to provide a complete transcript, Schaeffer said. The pair's sentencing was postponed eight times because court reporter Jackie Smith failed to produce a transcript, a key element in the appeals process, records show. Smith spent a week in jail in March 2003 for failing to complete transcripts for other cases in her care, and it wasn't until last summer that a transcript of the 16-day PSG trial was successfully cobbled together by another court reporter, Schaeffer said.

Meanwhile, the U.S. Justice Department, which prosecuted the case, filed a counter appeal saying Maraldo's sentence was far below federal guidelines, Schaeffer said. Though both Maraldo and Stump were found guilty on the same seven counts, U.S. District Judge Kenneth Hoyt sentenced Maraldo to five months in prison, five months of home confinement and a $5,000 fine, while Stump received 21 months in prison and $25,000 fine, court records show.

Both will be on probation for three years after their release from prison. Though the crimes occurred in New Orleans, the case was tried in Houston, where PSG was based.

Both sides eventually agreed in September to withdraw their appeals and abide by Hoyt's original sentence, Schaeffer said. It was a highly unusual compromise, but then again, the case was far from normal, he said.

"In my 31 years of practicing, I've never seen a case dismissed on appeal like this," Schaeffer said. "But the Maraldos didn't want to go through another three-week trial in Houston, and the government didn't want to do all that work if it ended up with the same conviction."

Justice Department spokesman Bryan Sierra confirmed the deal.

Stump's attorney, David Gerger, could not be reached immediately Monday. But court records show Stump originally reported to prison in December 2003 but was released in March after the appeals court ruled the defendants should not be detained until a certified trial transcript was produced, Schaeffer said.

The 65-year-old former PSG executive was scheduled to report Monday to an all-male prison in Fort Worth, Texas, to complete his sentence. The prison houses both low- and high-security inmates, according to the U.S. Bureau of Prisons.

Stump was found guilty of buying Maraldo's support in the mid-1990s for a five-year extension to the company's multimillion-dollar contract to run the city's two wastewater-treatment plants.

Maraldo, who was appointed to the water board by New Orleans Mayor Sidney Barthelemy in 1988, was chairwoman of a committee that oversaw the contract. She left the board in 1997.

Prosecutors said PSG rewarded Maraldo for her support by funneling about $72,000 to her partner in a pricey real estate project in the Oak Harbor development near Slidell that they were having trouble selling.

PSG also tried to find a buyer for the Oak Harbor property at an inflated price, paid for attorney Sal Anzelmo to provide legal help in Maraldo's attempt to unload the property, and paid Maraldo's legal bills in a personal lawsuit against the water board, prosecutors said. In that lawsuit, Maraldo received an injunction preventing Barthelemy from removing her from the board because she was working as a state employee at the time.

Anzelmo was charged in the scheme but was acquitted on all counts.

In exchange, Maraldo used her position as chairwoman of the board's sewer and water committee to push for the five-year extension, the prosecution said. The proposal had the support of the board's staff and passed Maraldo's committee, but it never won the backing of the full board.

The contract is now held by Veolia Water North America Operating Services Inc., formerly known as USFilter Operating Services.

USFilter, which was not accused of wrongdoing, was acquired by Vivendi -- PSG's parent company -- in 1999 and started running the New Orleans treatment plants as part of the contract.