City Wastewater Contract Wasted $1 Million

Wastewater just got more wasteful. A company that until recently was under contract to collect and dispose of wastewater from Los Angeles streets overcharged the city by at least $1 million, according to an audit released Monday.

City Controller Wendy Greuel accused Express Environmental Corp. of "gaming the system" and called on the mayor and city attorney to bring a lawsuit if the money is not returned.

An employee who answered the phone at the company's Canoga Park office said the owner and chief executive officer was the only one authorized to speak on behalf of the firm, and was not available.

According to auditors, Express denied overstating the amount of wastewater it had collected, telling the auditors that performing a conversion from weight to volume would produce misleading results.

Greuel told reporters that a tip from the city's Ethics Commission prompted auditors from her Waste, Fraud and Abuse Unit to conduct an investigation.

"We uncovered serious wrongdoing and negligence, including: massive overbilling by Express, a lack of oversight by city departments, and a poorly negotiated contract by the city which resulted in millions of dollars of wasted taxpayer money," Greuel alleged.

Auditors said they found discrepancies after comparing the amount of wastewater that Express reported it collected versus the amount actually received by the treatment plants.

"We estimate that Express overbilled the city by as much as $1,014,414 from contract inception in April 2002 through September 2008," their report states. "Since the contract was in effect through March 2009, the actual overbilled amount is even greater, assuming the pattern of overbilling continued for an additional six months."

The city signed a contract with Express in April 2002. For nearly seven years, the company's vacuum-equipped trucks collected wastewater mixed with tar, grease, oil sludge and solid debris from pumps near the La Brea tar pits, as well as from facilities where garbage trucks are cleaned. The trucks then transported the wastewater to a treatment facility for disposal.

Greuel said that 75 percent of time, Express delivered less than it billed the city for collecting. In half of the cases, she alleged, Express overbilled the city by 10 percent or more.

"One major problem is that there was no city staff assigned to provide oversight," Greuel said. "In this case, the city left the fox in charge of the henhouse."

She urged the mayor and city attorney to recover the money, adding `if (Express) is unwilling to negotiate, we must file charges to force them to pay the money we are owed."

Greuel also criticized the way the city negotiated the terms of the contract with Express, saying the city agreed to pay anywhere from 35 cents to $1.35 per gallon of wastewater collected, while another local government agency recently negotiated a flat rate of 33 cents per gallon.

Express considered each work order as a separate transaction so it could charge the highest rates, according to the audit. Instead of deploying a 5,000-gallon truck once, it would deploy a 3,000-gallon truck twice, for example, Greuel said.

"Express worked the system to only charge the bulk rates of 35 cents or 75 cents per gallon only 2 percent of the time," Greuel said. "While they did nothing illegal, this is simply outrageous."

Express collected a total of $12.9 million from the city. Auditors said that's $6.2 million more than it would have collected if it had deployed its trucks more efficiently.

The city is no longer doing business with Express, but its new contract with another company is under similar terms. Greuel urged the city to review that new contract and either amend it or conduct a new selection process.

She called on all city departments to review their contracts and make sure they are all above-board.

Councilman Paul Koretz, chair of the City Council's Audits and Governmental Efficiency Committee, vowed to introduce a motion on Tuesday to strengthen the City Controller's Waste, Fraud and Abuse Unit.

"Even if on occasion, this unit brings embarrassment to a city department, program or contract, it's an embarrassment that will enrich us by shining a light on how we can provide better government, with honesty and integrity prevailing," Koretz said.
 

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