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Audit details sewer scam

By Patrick J. Cronin / pcronin@cnc.com
Friday, March 12, 2004

Long awaited report outlines misappropriation of funds

The long awaited forensic audit on the Rockland sewer department has been released and it raises more questions than answers.

Former Rockland Superintendent Gregory Thomson and USFilter Regional District Manager Michael Sause have already been indicted for embezzling more than $370,000 from the town. Not only does the forensic audit detail the actions of Thomson and Sause, it outlines numerous misappropriations of funds by USFilter, the company hired to run the town's sewer plant.

Several Rockland officials said while Thomson and Sause were the only ones indicted, they believe more people may have known about the scam or may have been involved.

"I still have a lot of questions," said Selectmen Chairman Larry Ryan. "Someone else had to have known what was going on. It just seems obvious there was an awful lot of abuse of these accounts by an awful lot of people involved. With all these checks circulating around, people had to know."

The forensic audit was ordered five months after Thomson was indicted by a Brockton Superior Court grand jury in 2002 for embezzlement. In November of 2002, selectmen hired the firm of Melanson, Heath & Co. While the audit was expected to be completed in two weeks, it dragged on for more than a year and a half.

One of the main reasons officials decided to conduct the fraud audit was because there were questions regarding money that was supposed to be returned to the town by USFilter under the terms of the contract.

Officials said under the first contract signed in 1994, the sewer department gave USFilter $50,000 for preventive maintenance and repair and $100,000 each year for equipment replacement and facility maintenance.

They added under the second contract, signed in 1998, the sewer department gave the company $75,000 for maintenance and repair, and $100,000 for equipment/ capital replacement. According to both contracts, "At the end of each fiscal year, all unexpended funds from the allowances shall be returned to the sewer department."

It appears no money was ever returned to the town.

The audit reveals the reason the money was not returned to the town was because it was going in the pockets of Thomson and Sause.

Thomson would fill out a request for money and submit it to the project manager. One of the requests stated "please have this check processed as soon as possible and sent Fed Ex to the Rockland Sewer Department via overnight mail."

The project manager, Aram Varjebedian, would send the request to Sause who would make the payment.

Varjebedian refused to comment on the forensic audit but directed the Mariner to his legal council Maria Durant, of Dwyer and Collora in Boston.

"We have worked fully with the DA's office and have cooperated with their investigation," Durant said.

More than 40 checks were processed and deposited. Only seven were deposited into the joint account of Thomson and Sause at the Wainwright Bank in Boston, according to the audit. The remaining checks were all deposited into Thomson's personal checking account at the North Abington Cooperative Bank.

When the money wasn't going into the pockets of Thomson and Sause, it was used inappropriately, according to the audit, which reported an additional $76,593.51 that was supposed to come back to the town was used inappropriately by USFilter.

Auditors said the first year of the new contract in 1998 was the "cleanest on the ones investigated."

Money that was supposed to come back to the town in that first year was used to purchase a Vac Unit for the park department. The auditors stated there was no documentation that the Rockland Sewer Commissioners approved the purchase or that competitive bid procedures were followed for such a purchase.

Money was also used to purchase a new copier for $8,000 for the treatment plant in the first year of the contract. The Request for Proposal to run the sewer treatment plant required the operator, USFilter, to supply a copier.

Sewer department employees were also treated to a lavish Christmas party at the town's expense in that first year. According to the audit, payments were made to D'Andrea Food for $410, William Donovan for $500 and John Dibeneditto for $275 for the staff party. The money was taken out of the equipment/capital replacement account. Employees were also treated to a $420 pizza party and $1,249 worth of new working boots that was charged to the equipment/capital replacement account.

The audit also indicates money that should have been returned to the town was used to purchase charge cards for Best Buy. While the auditor was unable to see all the receipts from the charge cards, Thomson allegedly spent about $10,000 at the store.

The charge cards from Best Buy were also used by Thomson to purchase three computers, according to the audit report. Thomson purchased one computer for his assistant, one for his office at the sewer department and the last one for his home. Thomson also purchased the computer software game named Deerhunter.

Auditors said there were two checks made payable to Project Manager Aram Varjebedian for $1,661.62 and to Thomson for $558.35 with no documentation and why they were receiving the funds.

"I can't comment on the audit because there is no specific documentation that backs up anything it says," said Durant, speaking on Varjebedian's behalf. "I can tell you that nobody has contacted Mr. Varjebedian or myself to speak to us about what the auditors found. We have received no contact from the town and frankly it's very surprising. We would have been more than happy to cooperate with the auditors just like we did with the DA if they have bothered to ask."

The second year of the 10-year contract with USFilter showed even more wrongdoing as the original $1.2 million contract was increased by $50,000.

The auditor found two checks made out to the Town of Rockland in the amount of $140 that were deposited into a USFilter account. Although these checks were not large, the depositing of checks made out to Rockland into any account other than the town treasury is in violation of municipal statues, noted the auditor.

The forensic audit also indicates that donations made to various town groups, including a $200 check to the Rockland Police Department, a $175 check to the Rockland Golf Course, and more than $2,000 to numerous community organizations, was money that was supposed to be returned to the town as part of its contract with USFilter.

The audit also indicates money that should have been returned to the town was used to purchase charge and gift cards from Home Depot. While there were several USFilter employees who used the charge cards, the audit stated Thomson was by far the most frequent user racking up $7,125.90 in charges. The gift cards were allegedly given to numerous USFilter employees, including the project manager.

The third and fourth year of the contract with USFilter resulted in more mismanagement of funds, according to the audit.

Town money was used to donate $1,000 to the Rockland High School Superbowl Champs in 2000. Sewer employees were also treated to another Christmas party at the town's expense when the company rented the Sons of Italy hall for $1,500.

Home Depot charges increased to $17,954.83, of which $16,640.64 were allegedly made by Thomson, according to the audit.

Auditors said there may have been more fraud and abuse in the last year, but they were unable to complete their investigation because of inadequate documentation.

The auditors also noted that the town's contract with USFilter, which was signed in 1998, was not properly procured and didn't follow proper bidding procedure. Rockland officials have since terminated the contract after a receiving a recommendation from the state inspector general's office that contract was no longer valid.

Auditors said the bid process was tainted from the beginning because Thomson and Sause were the ones who wrote the Request For Proposal.

The auditors also noted that there was no evidence that the town's chief procurement officer participated in the bid process. According to Rockland's bylaws, the chief procurement officer is the town administrator. Kevin Donovan, who was the town administrator at the time, said he had no involvement in the process.

"From what I recall, the sewer commissioners had taken it over," said Donovan. "I think that is the issue that they didn't follow the proper procedures and just did it on their own."

It appears Thomson and Sause actually began their embezzling scheme shortly before a new contract to run the town's sewer plant was put out to bid.

According to the forensic audit, the embezzlement began in 1997 when Thomson wrote a letter to USFilter Regional District Manager Michael Sause requesting a check for $50,000. In the letter, Thomson said he was planning to establish an account in the name of the Rockland Sewer Commission.

The audit reveals that an account was in fact set up at the Wainwright Bank in Boston but the only people who could withdraw money from the account was Thomson and Sause.

"The $50,000 was deposited into that account and the proceeds were soon dispersed for the personal benefit of the two individuals," stated the audit.

Ryan said the audit raises a lot of serious concerns that need to be addressed.

"I never expected the audit to be as involved as it is," said Ryan. "It seems as if the sewer commissioners didn't oversee anything... They put too much trust in the wrong people and those people took advantage of that trust."

The auditors pointed out that the sewer commissioners were supposed authorize the expenditure of funds in those accounts.

Selectman Mary Parsons said while selectmen can make recommendations to sewer commissioners they really have no power over them because they are an elective board. It will be the sewer commissioners job to make sure that the department gets cleaned up.

"We have no authority over them," said Parsons. "We can make suggestions and recommendations but they have the ultimate authority in that department."

Ryan said Thomson and Sause are more than welcome to make a plea bargain to avoid a lengthy prison term. The only catch is that they will have to name names.

"I don't want to leave any stone unturned," said Ryan. "I have a lot of questions that are unanswered. I don't understand how someone can request large amounts of money without any documentation without anyone knowing what was going on."


Audit findings

The following appropriations in the first four years of the town's contract with USFilter were revealed in the recently released forensic audit conducted on the Rockland sewer department:

Year 1

Staff Christmas Party: $1,185

Work Boots: $1,249.93

Christmas Trees: $7,259

Pizza: $420.76

Year 2

Rockland Police Association: $200

Rockland Golf Course: $175

Checks to Rockland: $140

Christmas trees: $9,495

Tee Shirts: $2,597.25

Logo: $902

Sweatshirts with logo: $992

Canopy Tent: $1,285

Gift Cards: $1,350

Year 3

Sweatshirts with Logo: $2,293.50

Jackets with logo: $1,798

Christmas trees: $9630.85

Rockland High School: $1,000

Sons of Italy: $1,500

Checks to Rockland: $15,033.43

Work Boots: $3,575

Gift Cards: $3,575

 

Year 4

Logo clothing: $3,477

Christmas Trees: $9,127.21