Fulton County cheese maker to pay nearly $1M

PHOTOGRAPHER: Jason Subik

Cheese-maker Euphrates Inc. has agreed to pay nearly $1 million to the Gloversville-Johnstown Joint Wastewater Treatment Facility to settle a criminal probe of the company for allegedly defrauding the sewer system.

Wastewater Treatment Plant manager George Bevington said Euphrates has sent the sewer plant payments totaling $985,000 to settle concerns that Euphrates adjusted the sewer’s monitoring system over the last several years to illegally lower its sewer bills. He said the agreement made earlier this week ends the criminal probe and there will be no criminal charges related to the matter filed against Euphrates owner Hamdi Ulakaya.

“The issue is resolved. It was for a several year period and this is full payment for that period,” Bevington said.

Euphrates officials did not return phone calls seeking comment Wednesday.

Bevington said the city of Johnstown and Ulakaya have agreed to stipulations and an order of consent. He said he would give out copies of the order of consent documents, but only if a Freedom of Information Law Request for the documents is filed. He said Johnstown City Attorney Susan Palmer Johnson signed the documents.

Johnson did not return phone calls seeking comment Wednesday.

Fulton County District Attorney Louise Sira in July confirmed that a criminal probe of Euphrates by the Johnstown Police Department was under way after allegations arose that the company had masked the amount of waste it had been sending to the wastewater treatment plant.

The allegations arose from sworn depositions by former Euphrates director of operations Joseph Andrews and David Blakeslee, currently an electrician for Euphrates. Both were deposed May 20 by attorneys representing Pennsylvania-based Environmental Management Group International. EMG has filed a civil lawsuit in the U.S. Eastern District Court of Pennsylvania against Euphrates and its sister corporation, Agro Farma, both controlled by Ulakaya.

EMG’s lawsuit alleged breach of contract for the terms of service of an anaerobic digester built by EMG and leased to Euphrates for the purpose of treating waste generated during the cheese-making process.

In his testimony, Blakeslee said after he started working for the company in 2005 he became aware of a policy to cut the electric power to the permanent monitoring station installed by the waste treatment facility in a shed on company property. The purpose of the monitoring station was to gauge the amount of pollutants contained within Euphrates’ waste stream so that the company’s bill for sewage treatment could be calculated.

Blakeslee said wastewater treatment plant officials placed a padlock on the monitoring station, which made it more difficult to tamper with the monitoring process until he built an ammeter, a device that he said was able to determine when the monitoring station was turned on and taking samples of Euphrates’ waste. He said the ammeter was his idea but it was approved by his superiors at the company. He said it became the policy of Euphrates to cut power to the monitoring station when it was taking samples and to dump heavy waste saturated with whey — a milk component discarded during the cheese -making process — down the sewer drain while it was off.

“Whenever we knew the monitor was on, we shut the power off to the monitor. They never knew this was happening,” Blakeslee said in his deposition.

Andrews, who himself is suing Euphrates for breach of contract claiming the company owes him about $100,000, testified that he worked for Euphrates from November 2006 until he quit in April 2008. He said in his testimony he believed Euphrates defrauded the plant for over $1 million.

“You are taking a bill that you are saying is high, at $30,000, and if you weren’t [tampering with the monitoring station], the bill would be at a magnitude of five times higher than that,” he said. “The sewer bill would be well over a million dollars more every year if you didn’t do that. So, that’s why you do something like that. It doesn’t justify it. I’m just saying why.”

Andrews said on Wednesday he was pleased Euphrates agreed to settle at least some of its debt to the sewer plant, although he speculated the company probably should have paid more.

“I’m excited. This is money that’s due back to the taxpayers. For all those years that they cheated the sewer bills, all the rest of us had to pay that difference. When someone steals a dollar then the next 100 people have to pay a penny each to make up for that dollar,” he said.

Bevington said his organization has learned from the incident with Euphrates and will be working to tighten security of sewer monitoring stations to prevent similar fraud in the future. He said he would not reveal specific plans because he doesn’t want to give any other sewer users advance warning.

“We try very hard to produce fair and equitable sewer bills and monitor accordingly and we also have to look at how we do that,” he said. “Anytime something like this happens there is some blame to be passed around and I think part of the blame has to be on us and we have to do our job better, so I hope we can learn from this and maybe ensure something like this doesn’t happen in the future.”

Richard Handy, a member of the joint sewer board, said he isn’t sure yet what the board will do with the $985,000 settlement.

“You don’t know what’s going to happen. It’s going into our account and if it has to be used for whatever necessity arises we’ll do it, but if it’s available when we set the new sewer rates there is a possibility we could use it to help lower them,” he said.