Cleaning up sewer mess

By Patrick J. Cronin / pcronin@cnc.com
Friday, March 26, 2004

Rockland Selectmen Chairman Larry Ryan said he recalls hearing rumors swirling around town regarding the sewer department back in 1996.

But the rumors paled in comparison with what was detailed in the recently released fraud audit on the sewer department. The fraud audit revealed how former Rockland Sewer Superintendent Gregory Thomson and former USFilter regional district manager Michael Sause embezzled money from the town, as well as various misappropriations of funds by the company hired to run the town's sewer plant, USFilter.

"I didn't expect everything to be as involved as it is," said Ryan.

While Thomson and Sause await trial at Brockton Superior Court for embezzling more than $350,000 from the town, Rockland officials said they're moving forward with trying to correct the wrongs that were made and to institute safeguards so something like this doesn't happen again.

Selectmen have already terminated the town's 10-year contract with USFilter. The decision to terminate the contract stemmed from the results of the fraud audit that revealed that the Request For Proposal was designed by Thomson and Sause to ensure USFilter was the only company to get the contract with the Town of Rockland.

USFilter has agreed to run the sewer plant on a temporary basis until a new contract is put out to bid. USFilter Vice President Steven Kruger told officials the company wanted to stay on and would work with the town to settle the matter.

Ryan said a lot of the auditor's recommendations have already been implemented to set up safeguards in the sewer department.

Sewer Commissioner Chairman Robert Corvi has decided not to run for election at the April 10 annual Town Election.

Ryan said he spoke with Sewer Commissioner William Stewart concerning the future of the sewer department.

The sewer department has been following all the proper procedures and its meeting minutes are now up to date.

Selectman Mary Parsons said officials want sewer commissioners to ensure there are checks and balances, but that will be up to them to see if it's set up.

"We have no authority over the sewer commissioners," said Parsons. "They're an elected board. We can make suggestions but everything is under their authority. It happened under their watch and they need to straighten everything out."

Parsons said the town needs to be paying more attention to the annual audits and following procedures.

In the last five years, auditors hired to perform the town's annual audit offered numerous recommendations on how the sewer department could improve its accounting practices.

In 1999, auditors noted the sewer department had a lack of internal controls and stated, "sewer department personnel are not properly maintaining detail of sewer department transactions. Although details of revenues and expenditures are separately maintained at the department level, there are no reconciliations performed to the general ledger."

In 2002, auditors stated, "management should formally review and update internal control policies and procedures to ensure the town's assets are safeguarded and financial transactions are properly recorded."

The illegal contract between the town and USFilter didn't make its way to the town accountant's office until two years after it was signed.

Former Town Accountant Jack Franey said he and other officials were always fighting with sewer commissioners on issues.

Ryan said while selectmen and the sewer commissioners have been adversarial in the last 10 years, it needs to stop.

"We all need to be looking out for the best interest of the town," said Ryan.

Rockland police said their criminal investigation began at the end of May, 2002 after Thomson's bank, Abington Cooperative, discovered a $5,700 check made out to him, the sewer commissioners and the Town of Rockland that was deposited into his personal account. One of the attorneys from the bank notified Abington police who in turn notified Rockland police.

According to Kaufman Rossin & Company, the only way the banks can be held liable is if a company can prove that they were at fault.

The liabilities of banks and customers for losses resulting from fraudulent checks are governed by the Uniform Commercial Code. The code consists of a set of laws first written in 1952 and since adopted by every state.

In the past, the code stated banks are liable for all check fraud losses. Now, that is not the case.

In 1990, new revisions to the code put the burden back on the party it deems the most responsible for the loss.

The code states banks can be held liable when a check has an altered dollar amount or altered payee, when there is an incorrect MIRC encoding and when a forged drawer's signature has been used.

According to the code, businesses may be held liable if there is negligence in operations, a lack of proper controls and inadequate check stock security

Ryan also blames USFilter for not having proper checks and balances. In fact, Ryan told USFilter officials that he still has concerns with some of their employees at the plant.

Several officials said if one lesson can be learned from this scandal is that everyone needs to paying closer attention to what's going on.