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The second EPA Shade
Meeting -- full text < Page 1 | Page 2 | Page 3 | Page 4 > Got a comment? Make it here.
MOORE: What effect -- following up on Fred's question, what effect would a guilty plea by the city to a criminal charge have in a civil suit that could possibly be filed against the city by an environmental group or something like that, Save The Manatees or the Sierra Club or who knows? NOBLE: One of the things that we have been very careful to do in this plea agreement is to keep any allegations or any conclusions of pollution, environmental degradation, any sort of contaminated media, if you will, component of the case completely out. They will not agree to language in a plea agreement that says there are no adverse environmental impacts from this action. That, we are not able to get included in such a document. However, we do have agreement that they're not going to put the typical allegations that you would see in here in a charging document that there has been environmental harm, there has been environmental degradation. BLACK: We're not being asked to admit any of those. NOBLE: They are agreeing that we can simply admit to permit violations. It allows us to walk to the media, to anyone who is asking, to the Sierra Club, any of the environmental organizations that these are permit violations. MOORE: Because a plea of guilty would be admissible in a civil case. RODNER: The underlying conduct stops short of -- MOORE: Right. I want to make sure we forestall that happening. ANDERSON: One thing to add -- and Marty just reminded me of this. We believe most of the targets of the investigation are now former employees. When we did the contracting out of utilities management we obtained separation agreements and releases from all but one, I believe, of the affected employees. My recollection is that the release language contained in those documents is sufficient to cover any claim by them for reimbursement of legal expenses on any subsequent prosecutions. Again, I don't have it there, but my recollection is that that release and separation agreement was pretty broad. NOBLE: All right. To wrap up, as Bob introduced, our collective recommendation to the city is to enter into this plea agreement after finalizing some very minor revisions that we have had discussions with the city manager on, and those are of a technical nature to the remedial components of what upgrades the United States would like to see to some of our monitoring and discharge requirements. Again, those are very -- I would characterize relatively minor. There is an expenditure that goes along with those that Marty's going to touch on in just a moment, but we do not anticipate that the U.S. Attorney's Office will have an objection to that once we can articulate what the rationale is for that. I want to just put into final context what we are proposing to enter a guilty plea to here. All three of the counts, the monitoring as well as the discharge counts, all three are related to permit violations. Seth related that the government has a very low burden of factual proof and, quite frankly, a very low burden of legal proof with respect to those requirements. They've got four simple requirements to prevail in this case. They have a person -- the city qualifies by definition under the Clean Water Act as a person -- violated a permit condition. This is our Florida MPDES permit to operate the wastewater treatment plant. The third requirement, that that permit condition implemented a relevant provision of the Clean Water Act. That's expressly stated in our permit. That is also a given. The fourth requirement is the one that is a little bit difficult to grasp, that the city did so knowingly. We all have notions of criminal law that you had to have an intent to act intentionally to violate the law. When we get into the realm of the world of environmental crimes, that common notion of intent to violate the law is not present. This is a knowing crime, it's not an intentional crime. All employees -- all that the city had to know is that the conduct which occurred which constitutes a violation of a permit condition, that that conduct knowingly occurred. It's essentially that our employees knew, they showed up to work, operated the plant, and filled out the Discharge Monitoring Reports. There is no requirement in this case that the government even prove that our employees or the city knew that that conduct was illegal at the time. Again, that's a very difficult notion for most of us to come to grips to when you talk about a criminal conviction. We all think in terms of criminal convictions with intentional conduct, you knew you were violating the law. That is absent under a knowing violation for Clean Water Act criminal convictions. We have already gone over the math. We are at the lower end of the spectrum on days charged, lowest possible end of the spectrum on the penalties. A very minor increase in either one of those and the penalties begin to go up astronomically. I can tell you from past experience a $100,000 plus penalty under a Clean Water Act criminal conviction for a wastewater treatment plant with multiple days of violations is as lenient as it gets. Usually when the days charged are multiplied out by even a mid-range penalty computation you very quickly end up in the millions of dollars. As Seth reiterated, the federal government is not in the business of trying to break the financial bank of municipalities, but the city is going to be held up here as an example of what a utility needs to do to stay out of the criminal system. Bob, that's really all I have. What we would, I guess, request at this point is just authorization to go finalize the plea agreement with the U.S. Attorney's Office if that is appropriate so that we have some -- a finalized document to bring back if that's appropriate. ANDERSON: Do you think we'd be able to finalize all of that language in time for city council to formally act on it in two weeks or do we need a little more time in order to finalize? NOBLE: It largely depends on whether the U.S. Attorney's Office and EPA can get -they're going to have to go to DEP and get their involvement. I think it's possible. RODNER: I think it's possible, but the good news is I think we'll know one way or the other within the next couple of days, or before the weekend we can tell you whether we can keep it on track. ANDERSON: What we'd like to do is if, indeed, the consensus is for us to finalize the plea agreement and bring it to you then for formal approval at the next council meeting, which will be March 22nd, and if indeed the finalization of the language takes a little longer than it will just be bumped to the first meeting in April. HAMMETT: Does that require a motion? ANDERSON: No. CALAMARAS: I would think we'd do a consensus where everybody agrees to what we're going to be doing. Then at the council meeting we'll have to do a formal motion and then -- ANDERSON: Well, we won't even bring that up today. If the consensus is for us to bring the finalized -- to authorize Seth and Ron to go and finalize now the terms and conditions of the plea agreement. I'm not asking you to commit to approving it, I'm just asking you to authorize us to finalize it to bring it to you, put it on the agenda for the March 22nd meeting for you to -- at that point in time it will be distributed to you, you'll have a chance to review it, if you have questions we'll address them, and then there will be a presentation to you at the 22nd, and then we will be asking you to take a formal vote to accept the plea agreement. Unless there's an objection to that, that's the timeframe that we'll work under just with the understanding that it might be bumped back one meeting if, indeed, it takes a little more time to finalize the language. MOORE: At some point I'd like to read the plea agreement. ANDERSON: Yes. Our intention is that we hope to have it distributed to you at least a week prior to the meeting where we're going to ask you to take formal action on it, and if we can't meet that we'll just bump the meeting back. Okay? No objection to that? MOORE: I'm assuming that you have verbally related all of the terms in the agreement? NOBLE: Absolutely. ANDERSON: The only other thing, just a question. When.. we- do agenda this for formal action by the Venice City Council, do you want the entire legal team at that meeting to do some sort of presentation or be available to answer questions or do you just want me to be prepared to handle that? I just don't want to go one route and then have you want somebody -- BLACK: Let me just make a couple comments. This has been a very critical issue. There are potentially individuals that may face criminal prosecution above and beyond even the charges we've discussed today. Those individuals may or may not appear as we head to the DEP Consent Order hearing and suggest to you not to enter into this agreement. So with that in mind, I want to remind you all that that did occur so you can be expecting -- it's hopefully not likely because it's probably not in their best interest to do that, but they've done that before. My recommendation would be to have them here, at least one representative from the outside legal team to assist with it. So if someone does appear it helps provide a more unified front having the outside assistance and help from that perspective. That-would be my personal recommendation. ANDERSON: Just to defer to Marty, we'll have members of the legal team here to address anything that comes up at the meeting for formal adoption. Fair enough? Marty, do you have some comments about the administrative -- ? SIMMONDS: We are agreeing that they will be present? ANDERSON: Yeah, that the entire legal team will be present the next -- SIMMONDS: Put them on the agenda very early. ANDERSON: Yes, sir. SIMMONDS: We don't want to keep $400-an-hour people sitting in the audience. NOBLE: I think we have had a substantial raise. BLACK: A couple things that I wanted to just go over with you based on the comments. We're going to start with the money first. The criminal penalty's anywhere from $110,000, $135,000 to over $1 million, depending on the judge. I personally am optimistic because if the federal government was trying to be more punitive and the investigative folks were not recognizing that, we would not get the recommendation we have. Other communities in much worse financial shape than we are have had more significant fines and penalties imposed on them for violations of the Clean Water Act. I think from the actions of the city they truly are reflected in that agreement. In the plea agreement itself there are a couple different items. Some of them deal with how we report the DMRs because one of the basic issues is we had one individual signing and then submitting with literally no clear oversight for responsibility. Since we entered into the contract with OMI for contract management, one of our operators prepared those reports and an official licensed operator for OMI reviewed those reports submitted so there was a check and balance. That is one of the things they're looking for is to create and memorialize that check and balance. We put that in place already with OMI so even though they're asking for it we've already accomplished that with the transition to OMI. There are system improvements, basically, where they're asking us to meter and provide a means to calculate the total amount of effluent that we distribute or disperse through the system. In other words, we need to be able to come up with how much wastewater does the plant treat and how do we dispose of it. Right now the way our system is designed is it was almost engineered where you cannot through a final mechanism calculate out where the water that comes into the plant. We know that. We literally have built a system where there are discharges that occur that are not metered so there's really not a firm way to know that. They're asking us to put meters in wherever we discharge so that there will be an ability to hold us accountable for what we discharge in what locations. Most systems have that so that accounts for where the water goes so that way you know if you've got leaks or other components. So from an operations perspective it's worthwhile. Those meters are going to cost us several thousand dollars and there's about 15 or 20 of them. My expectation, if we're successful in having the judge impose the lower standard for the criminal penalties, is that the implementation of this combined with the work that we already have to do with the Consent Order, because there is some overlap, is going to require another $3,000 to $4,000 in capital expenditures or capital related expenditures to have full implementation. I will tell you that I just received a draft audit. When you receive the audit you may see a number in there that shows that there is a $2.4 million deficit in the utilities department. That is because the journal entities that move our capital dollars into that operating account were not completed. It's a direct result of the new Government Accounting Standards Board requirements. In 2003 in the audit -- some of you received this. We were carrying a $1.6 million deficit at that point. In effect, our finance operations have lagged. They've not moved money from when they've received capital contributions from new customers. They've lagged by anywhere from three to six months so that what ends up appearing in the audit appears as deficit when, in fact, we've collected the funds, we've just not moved it from a journal entry perspective. We actually have in our capital reserve account approximately $3.8 million. SIMMONDS: That's your equity account. That is not a reserve account identified for any specific purpose, correct? BLACK: That's correct. SIMMONDS: Well, let's not use that terminology. BLACK: I'm going to retrain you because we've got to use the Government Accounting Standards Board terms now, and that's what they are and that's the way it appears in the audit and that's the way it's got to appear in the budget. It's an unallocated reserve. SIMMONDS: Then call it that, an unallocated reserve. BLACK: I'm going to call it both because from a records perspective and everything else, if someone tries to go find where we have an unallocated reserve you could never find it in any of our audits or in our budget documents because GASB says we have to call it a capital reserve account. That's where the dollars are. SIMMONDS: That's essentially all the bucks we've got? BLACK: That's all the bucks we have. That's $3.8 million. That's as of September 30th of '04. Now we've collected some additional contributions as we've added new customers somewhere in the neighborhood of $600,000 to $800,000. I wanted to share that with you because when we get to the judge and the judge says your fine is $1 million, in the realm of possibility, we'll be looking at making a loan from one of our other accounts using the general revenue account or one of the others because we'll not have the resources to cover that magnitude of a criminal penalty out of the utilities account. If we're successful in moving forward and having this minimized, as it's been recommended by the federal authorities, we should be fine even with the other capital items we'll need to make. If that number grows exponentially, which the judge has that option, we could be facing the need to move money. Now my expectation is we won't have to as far as a loan perspective, but I wanted to share with you how close we are on that budget so at least you have that in your mind. To me, if anything, it confirms we should move forward with this plea agreement expeditiously because the longer we wait the greater we're at risk to either not be in good standing with the regulatory agencies and not be able to move forward and not be able to make some of the corrective actions we would like to make in the system. That's all I have. ANDERSON: Are there any questions? SIMMONDS: When can we talk about this? ANDERSON: To whom? SIMMONDS: What I'm concerned about is we're coming up to a wet season. What happens if we're at the extent of our permit and we're up to our eyeballs and we're retaining water and we have to discharge some -- ANDERSON: Let me jump in here. Remember this is a closed attorney-client session which is limited to settlement negotiations regarding the EPA criminal investigation. If you've got concerns about our wet weather discharge and permit capacity, you just need to discuss that with the city manager outside of the closed attorney-client session. SIMMONDS: And we can bring that up without endangering or compromising -- ANDERSON: That's operational. BLACK: Please make no comments to the media or anyone else about these issues until we're finished. ANDERSON: Are there any questions or issues that we haven't addressed or information that you need from us? We know we've given you an awful lot today and you're going to be required to make a formal decision on this plea agreement in two or four weeks. If you have questions today, please ask them. If you have questions between now and the time of formal action, talk to me and we'll get you the answers that you need. MOORE: Immediately you know the press is going to contact city council members. I would suggest. as we've done in the past, we simply say I can't comment and refer them to the city attorney. ANDERSON: Marty, is that how you want to address that? MOORE: I think we need to deal with that. BLACK: We have let the media know -we've already delayed this once. My expectation, hopefully, is to have this finalized at the next meeting. We let the media know that we would let them know Monday as far as what our timing would be and if this remains on schedule based on whatever we hear from the U.S. District Attorney's Office. We have to involve them. We cannot make comments to the media outside of their involvement, and we shouldn't. This is an ongoing criminal investigation, not only of the city, but potentially of others. RODNER: I just want to echo what Marty and the judge said. Until this is approved in federal court, these are all moving parts. I think that any number of variables, including an ill-timed comment to the press, can upset the entire proceeding and rub someone in the U.S. Attorney's Office the wrong way or rub someone in probation the wrong way. I think it is critically important, as the judge suggests, that all media inquiries be directed to the city attorney, and that be scrupulously followed until this is finalized. And, frankly, even after this is finalized I think there should be a formal protocol for handling those types of situations. ANDERSON: And just so you understand, we've discussed this and we think that's the appropriate response, when the media contacts you to have no comment, direct them to me, but I will be handling that with the assistance of Marty and Pam Johnson. We already have in the works a press release. It is anticipated that when we're able to distribute the plea agreement for your consideration and review we will be issuing a press release at the same time to get out ahead of this. That's our intention. I would suggest, because you are going to get some inquires as to today's closed attorney-client session, just say you're unable to comment at this time and direct them to me and I'll handle the inquires. Okay? Anything else we can do for you this afternoon? MOORE: I think we ought to thank counsel for their advice and their work on this case. I think you did a good job. NOBLE: Thank you. It's our pleasure to be of service to you. ANDERSON: All right. We're going to take a short recess and then we're going to reconvene at four o'clock. [end of Shade Meeting]
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