Gloversville-Johnstown board may use settlement money to stabilize rates

PHOTOGRAPHER: Jason Subik

Some members of Gloversville-Johnstown Joint Sewer Board say its likely the board will vote to use the $985,000 paid by cheese-maker Euphrates Inc. to settle a criminal probe to stabilize sewer rates for several years rather than a one-time rate reduction.

The pay-out ensures no criminal charges will be filed against Euphrates owner Hamdi Ulakaya after allegations Euphrates employees under Ulakaya’s orders tampered with the sewer’s monitoring system over the last several years to illegally lower its sewer bills. Euphrates was the third largest customer of the Gloversville-Johnstown Wastewater Treatment facility in 2008, paying $181,424 for sewer services. The size of the settlement indicates the extent of the sewer fraud Euphrates is alleged to have committed.

Joint sewer board member Richard Handy said the board hasn’t officially decided what to do with the settlement money yet, but he doubts they will use it for any capital improvements.

“I think it’s going to go for rate reduction, but it will be spread over a few years,” Handy said.

Last year the board reduced sewer rates by 1 percent for residential users and 2 percent for industrial users. Residential raters are $2.50 per 1,000 gallons of wastewater. Industrial rates very according to the content of the waste.

The criminal probe of Euphrates was started after allegations from former Euphrates director of operations Joseph Andrews and David Blakeslee, currently an electrician for Euphrates.

Both were questioned 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.

Andrews and Blakeslee both alleged that it was the policy of Euphrates to tamper with the permanent sewer monitoring station located on the company’s property.

They said the tampering allowed Euphrates to dump tons of whey, a byproduct of the cheese-making process, down the sewer drain without the sewer plant recording it and billing the company accordingly.

Andrews alleges the true dollar value of the fraud was probably well over $1 million.

Handy and sewer board member David Thum agreed the fraud was probably greater than the $985,000 Euphrates paid, but both said it was more prudent to take the settlement rather than wait for the resolution of a criminal prosecution of Ulakaya.

“It could have been an extended period of litigation and the burden of proof would have been on our part and that’s very difficult to do,” Thum said.

“It’s a substantial amount,” he said.

Thum said Euphrates is also being required to make improvements to its permanent sewer monitoring station to ensure the fraud won’t happen again. He said Euphrates is supposed to have the improvements completed by June 1.

Handy said he still can’t understand why Euphrates defrauded the sewer plant.

“I’m not angry, but I’d just like to find out why it happened. If [Ulakaya] was in deep financial trouble you might see why they’d do it, but they weren’t financially strapped,” he said.