Smelly questions bubble over tax dollars, sewage deals

By Tony Cook

Monday, Sept. 10, 2007 | 6:59 a.m.

Dealing with sewage is messy business.

But so are the Clark County Water Reclamation District's dealings with two contractors that received more than $600,000 from the district.

Unusual arrangements with the contractors - Severn Trent Laboratories and FoundationBuilders Inc. - have become the target of a county audit and FBI inquiries after longtime employees at the district alleged double dipping, unauthorized payments and other improprieties.

Former sewer district boss Peter Archuleta hired Severn Trent Laboratories of Denver to manage the district's water testing lab in August 2003, when the state was threatening to not certify the lab because of quality control problems.

Because it was an emergency , district officials say , they did not use a competitive process in awarding the contract.

The one-year, $389,000 contract said Severn Trent employee Brett VanDelinder would manage the lab 40 hours per week at a rate of $90 an hour. It also stated that Severn Trent employee Tim O'Shields would manage the project and provided for flights from Denver, meals and lodging in Las Vegas for both men.

But eight months into the contract, the district hired VanDelinder as an employee and began paying him a yearly salary of $85,000. The district's payments to Severn Trent, though, did not stop and were not reduced throughout the term of the contract.

In fact, the amount paid to Severn Trent exceeded the amount permitted in the contract, according to a Sun review of district documents and company invoices.

Clark County commissioners, who serve as the district's board of trustees, must approve contracts above $25,000. Although the contract in question was capped at $389,000, the district ended up paying Severn Trent $412,930 - nearly $24,000 beyond the amount commissioners authorized.

District General Manager Richard Mendes stressed Friday that those deals occurred before the county hired him in November 2005. But he said his understanding was that VanDelinder resigned from Severn Trent in April 2004 before becoming a district employee.

Invoices, though, show that Severn Trent continued to collect $34,000 a month from the county during the rest of the contract.

"That's why we've asked for an audit," Mendes said.

He could not explain why Severn Trent was overpaid.

County Auditor Jerry Carroll said he began the audit last week. Such audits typically take three or four months.

Lab employees say they have been trying to get someone to look into the matter for a long time.

When Severn Trent was first hired to manage the lab, some employees became concerned that the district might outsource all lab work, including their jobs. They filed a grievance with district management, arguing that Severn Trent contractors had no right to direct and manage county staff.

Archuleta and three employees at the district's lab held a meeting to address the grievances. After the meeting, Archuleta acknowledged in a letter to a union representative that Severn Trent was "inappropriately signing time sheets at the discretion of district management. This practice will be discontinued immediately." He dismissed the employees' other complaints.

Employees told the Sun they suspect their grievances led to the hiring of VanDelinder as a district employee so that he could manage, discipline and schedule them. The problem was, the district did not stop paying Severn Trent for his services, the employees said.

In October 2004 the employees sent a letter to then-County Manager Thom Reilly, repeating their complaints and raising new allegations of double dipping and unauthorized payments to Severn Trent.

When Reilly asked district staff to investigate, they referred the investigation to O'Shields - one of the Severn Trent employees in the contract - in January 2005.

In a subsequent letter to management, O'Shields said he had resigned from Severn Trent and was running a company called FoundationBuilders, which also received several contracts from the district. O'Shields also insisted nothing improper had occurred.

A management analyst for the district reviewed O'Shields rebuttal of the allegations and basically agreed with him. The analyst said VanDelinder had resigned from Severn Trent in April 2004 and that, "as such, the contract was mutually amended from approximately $34,000 monthly to $14,000 monthly for continued support from STL."

However, invoices show that the amount was not reduced until a new contract with Severn Trent began in August 2004 - four months after the district had hired VanDelinder . That means the district paid for the same service twice for at least four months.

Some district employees question how the allegations were handled.

"How can you have the person that you are making accusations against do the investigation?" said Billy Clark, a lab chemist.

"It was not an independent audit," Mendes acknowledged.

The second Severn Trent contract - for $70,000 for lab management through Dec. 31, 2004 - raises additional questions.

Although VanDelinder had been a district employee for four months, the contract lists VanDelinder as the sole Severn Trent employee who would provide services.

Archuleta hired Severn Trent two more times, for monthly stints in January and February 2005, for $14,000 and $25,000, respectively. Those deals were not approved by commissioners. Both again list VanDelinder as the Severn Trent employee who would provide services - during a time when VanDelinder continued to be paid as a district employee.

There also is a discrepancy on the cover sheet of the second contract. On a copy of the contract from the county clerk's office, the Severn Trent contact is listed as O'Shields.

But when the Sun requested the document from the district, the district supplied a copy in which the contact was listed as "Bob Hanisch," even though Hanisch's e-mail address is listed as [email protected].

Mendes could not explain the discrepancy but said he would look into whether the contract's cover sheet had been changed.

That could be a crucial detail in determining the propriety of a separate batch of contracts with FoundationBuilders, a company O'Shields said he started after leaving Severn Trent at the end of the company's first contract in August 2004. The question is whether O'Shields simultaneously profited from STL contracts and FoundationBuilders contracts.

FoundationBuilders earned $128,012 from September 2004 till February 2007 for developing employee performance manuals, conducting lab audits and giving leadership and ethics seminars. Some of that work arguably could fall under the lab manager's job duties.

Several of FoundationBuilders' invoices do not cite a contract or purchase order. Instead they say authorization was "verbal." In several other cases, O'Shields cites a "Notice to Proceed" letter that the district said this week it could not locate in its records.

Mendes said oral authorization is not permitted under district policies.

"There is no such thing as 'verbal' authorization," he said. "There is always something written, like a contract or purchase order."

Another fact raising questions about O'Shields' claim that he resigned from Severn Trent before starting FoundationBuilders is that the invoices for Severn Trent contracts continued to list him as project manager after his supposed resignation date.

Last May, lab employees again brought their concerns to district management. By then, Archuleta had been asked to leave because of unrelated issues and Mendes had been on the job five months.

Mendes said Friday he wants to wait for the audit to be completed before making any judgments.

But he was so concerned about the matter that he went to the FBI in late May or early June to inform law enforcement about the allegations and to provide agents with copies of the contracts.

Since then, the FBI has contacted at least one district employee to follow up on the allegations.

The FBI did not return a phone call from the Sun but generally does not disclose whether it is conducting an investigation.

VanDelinder referred the Sun's inquiries to Severn Trent's attorney, who did not return a phone call. O'Shields also did not return a phone call.

Mendes said the district has made changes to ensure such problems do not arise again. Among other things, it has a new financial management system that does not allow payments beyond those authorized and it seeks bids on potential emergency work, Mendes said.

"It's hard for me to go back and speculate on what was going on," Mendes said. "Had they gone to the auditors at the time, a lot of this may have been avoided."