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Rockland, MA terminates contract with USFilter
charging bid rigging

By Patrick J. Cronin
Saturday, February 14, 2004

Rockland's contract with USFilter, the company hired to run the town's sewer plant, has been terminated.

Town Administrator Bradley Plante sent a letter to USFilter President Michael M. Stark last week stating there is "clear evidence that indicates collusion between former superintendent Gregory Thomson and USFilter Regional District Manager Michael Sause which resulted in a violation of the competitive bidding process."

Thomson and Sause were indicted last year and charged with embezzling more than $300,000 from the Rockland Sewer Department.

"The contract has been terminated and there will be no further payment made on the contract," Plante stated in the letter.

The termination of the contract comes on the heals of an investigation by the Massachusetts Office of the State Inspector General. The Mariner reported last month the state inspector general was reviewing the town's contract with USFilter, which was signed in 1998, and how it was procured.

The investigation by the state inspector general was spawned by the results of a forensic audit on the Rockland Sewer Department which revealed numerous legal problems with the town's contract with USFilter, misappropriations of town money by USFiilter, as well as how money was allegedly stolen from the town.

After reviewing the matter in November, State Inspector General Gregory Sullivan recommended that Rockland officials terminate the current contract and re-bid for the services through a new procurement process.

At the time, officials decided against taking any action.

According to minutes from the Rockland Sewer Commission, sewer commissioners voted at their Nov. 12 meeting to take no action on terminating the town's contract with USFilter. Sewer Commissioner Robert Corvi, Sr. discussed the matter with Selectman John Llewellyn and said the commission had no intention of doing anything regarding the contract until the case is settled.

In January, the state inspector general's office issued another letter to the town, once again recommending that the town terminate its contract with USFilter.

"It is sound public policy and fiscally prudent to exercise your legal rights to abandon a contract that you have determined is tainted by scandalous activity, poorly serves the financial interest of your community, and has given rise to an appearance of misfeasance in the use of public funds," stated Sullivan in a letter to selectmen and the sewer commission. "It is the expectation and recommendation of this office that, consistent with the opinion of your counsel and the advice of your forensic auditors you will now act to establish a new contract for sewer operation services that is properly procured, consistent with the best interests of your citizens, and untainted by its association with allegations of criminal wrong-doing that have engulfed the relationship between Rockland and USFilter."

After receiving the second letter dated Jan. 30 from the state inspector general, selectmen decided to terminate the contract.

Plante, acting as the chief procurement officer for the town, said the contract violated Massachusetts General Laws Chapter 30B and as a result is no longer valid.

Christi Kaluza, a spokesperson for USFilter, said the company disagrees with the town's opinion the contract violated the competitive bid process and that it wasn't properly procured.

"USFilter believes the grounds for termination are false," said Kaluza. "We met with town officials to discuss this matter and we will keep on meeting with them to we resolve the issue."

Kaluza said the contract was properly procured and the state inspector general's office approved the contract when it was signed in 1998.

"That is an inaccurate statement," said Jack McCarthey from the state inspector general's office. "Given the facts as we now know them, we would have never approved that contract."

McCarthy said their office may have been asked to review a certain aspects of the contract in 1998, but not in its entirety.

McCarthy said the forensic audit revealed the contract between USFilter and the Town of Rockland was not properly procured and violated the competitive bidding process.

"There was no competitive bidding," said McCarthy. "The Request for Proposal eliminated others from bidding on the contract to run the town's sewer plant."

Thomson, who is being accused of embezzling more than $370,000 from the town's sewer department, was the one who wrote the 1997 Request For Proposal to run the town's sewer plant.

At the time, Thomson, who was previously a sewer commissioner, was just hired as the town's first sewer superintendent. The Request For Proposal mentioned Professional Services Group, which later became USFilter, by name twice. The Request for Proposal also stated "all proposers are required to supply a belt filter press and must be equal to or better to the one that is currently in operation." The companies bidding were also required to have a staff of 10 employees to run the Rockland Sewer Plant.

There were two companies interested in running the town's sewer plant; Professional Services Group, also known as USFilter, and Woodward and Curran.

The Request For Proposal was sent to Professional Services Group and its Regional District Manager Michael Sause, who was recently indicted with Thomson for embezzling more then $370,000 from the town in 2002 and 2003.

Woodward and Curran stated they were interested in running the plant but disagreed with commissioners concerning the number of employees needed to run the town's sewer plant. While Woodward and Curran assured officials that they could run the plant with less, Thomson refused to change the requirement.

Woodward and Curran also couldn't supply a belt filter press and as a result did not bid on the contract.

With Woodward and Curran out of the picture, Professional Service Group, or USFilter, was the only company left to bid to run the town's sewer plant. The company bid $1.2 million to run the town's sewer plant, which was the same amount that sewer commissioners budgeted in their annual budget that was prepared in 1996, according to sources

Sewer Commission minutes from 1996 to 2001 reviewed by the Mariner shows only one mention of the 1997 Request For Proposal. Minutes from a 1996 meeting state that "the request for proposal is nearing completion." The minutes have no mention of the process and why USFilter was selected to run the sewer plant. The minutes also have no mention concerning the sewer commissioners vote to award the contract to USFilter.

Former Town Accountant Jack Franey said the sewer department ended up purchasing the belt filter press from Professional Services Group four months after the company was awarded the new contract. Several officials question why the town didn't purchase the equipment before it went out to bid to find a company to run the town's sewer plant.

Even though the contract states USFilter is required to have 10 employees running the town facility, it currently has eight, according to the audit.

Kaluza said there wasn't any wrong-doing and that USFilter was not going anywhere. Even though they're not getting paid currently, Kaluza said USFilter will not pack up its bags and leave the town stranded.

"We will continue to work with the town to get this matter settled," said Kaluza. "We have worked with the town throughout the entire Mike Sause and Greg Thomson scandal and we will continue to work with the town on this matter."

Not only did the fraud audit reveal that the contract may not have been properly procured, but it also details numerous misappropriation of town funds by USFilter.

After the contract was signed, it appears several provisions in the contract were not followed.

One of the main reasons why officials decided to conduct the fraud audit was because there were certain questions regarding what money was spent by USFilter and what money, if any, should have been returned to the town.

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.

Sources said the money allegedly stolen by Thomson and Sause was the money that was supposed to come back to the town.

The remainder of the money that was supposed to come back to the town, according to the audit, was used to make donations to local Rockland organizations. USFilter also used the money for gift cards and parties, according to the audit.

Kaluza said no money was inappropriately spent and if it was, it was at the discretion of the Rockland sewer commissioners.

"All relevant actions undertaken by PSG and USFilter in connection with charitable contributions and rebating funds to the Rockland Sewer Commission were done at the direction of the Rockland Sewer Commission and its agents," said Kaluza. "The company was not in a position to review or verify the commission's use of the returned funds."