The second EPA Shade Meeting -- full text
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IN ATTENDANCE, MARCH 8, 2005:
Mayor Dean Calamaras
Council Members Fred Hammett, John Moore, John Simmonds, Rick Tacy, Vicki Taylor, Bill Willson
City Manager Martin (Marty) Black
City Attorney Robert Anderson
contracted attorneys Jon Thomas, Seth Rodner and Ron Noble
court reporter / transcriptionist Dollie Steele.

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CITY ATTORNEY ROBERT ANDERSON: Good afternoon. Once again we're here to do a closed attorney-client session. This is in accordance with Florida Statute 286.011(8). We've done this before, but, again, I just wanted to let you know about the ground rules.

We're here to discuss the ongoing EPA criminal investigation and some settlement discussions that the city has had with the U.S. Attorney's Office. Remember under the private attorney-client session rules, Dollie is here as our court reporter. She's going to do a verbatim transcript of everything that goes on in this meeting today, and I anticipate that we're going to be here probably for an hour and a half, two hours. So there is going to be a verbatim record of all that is discussed.

Some of the things that we're going to discuss today are fairly sensitive so, again, you just need to exercise a fair amount of caution as to comments, especially as they relate to the involvement of maybe former employees and their involvement in this situation because, again, there will be a public record of all that's said here at some point in time and I'm sure those employees will be taking a look at that record at some point in these proceedings.

As far as introductions, all of the members of the legal team that have been assisting the City of Venice are here today to provide you with some input. We've got a presentation for you and then we're going to open it up for discussion and any questions you might have. We have Jon Thomas, who's been working with the City for quite some time on environmental matters. We brought Jon Thomas in fairly early when the EPA commenced this investigation to kind of guide us through the process and provide us with assistance, and he's been an ongoing asset throughout this entire proceeding.

Next to Jon is Seth Rodner. He's an attorney with Fowler White. When we decided that we needed additional assistance once we got into discussions with the U.S. Attorney's Office on how to resolve this, the suggestion was that we contact both Seth and his partner Ron Noble, also with the Fowler White firm in Tampa. Seth, his background is the criminal side, and Ron is the environmental. They've been the ones who have been having the ongoing negotiations with the U.S. Attorney's Office and the EPA to try to negotiate for us a plea agreement to bring this to final resolution. Dollie, of course, is our court reporter and she's going to take down what we've got here.

I know that we've talked about this matter for quite some time, but I just want to give you a brief review of where we are and how we've gotten to where we're at at this point in time. As you all know, we have been the subject of an ongoing criminal investigation by the EPA and the U.S. Attorney's Office for quite some time. DEP has been involved to some degree and, in fact, they enlisted the services of the FBI for certain aspects of their investigation. What they've focused in on is they believe that the City of Venice has violated the Clean Water Act. There's basically five areas that they believe we have violated.

One would be they allege that there have been illegal discharges to Curry Creek; there's been a failure to monitor all of those discharges by the City of Venice; that certain records, monthly operating reports, have been falsified; that there's also been some illegal discharges to Knights Trail Park; and there were some allegations that in their investigation there was some obstruction of justice by city employees.

Some time ago the new development in this matter was that the Assistant U.S. Attorney, Judy Hunt, advised me that she was prepared at this point in time to take to a Federal Grand Jury and seek an indictment of the City of Venice for felony violations of the Clean Water Act, but she was going to afford the city an opportunity to resolve this short of that indictment by negotiating a plea agreement. You'll recall we then had a private attorney-client session to discuss that development, and at that point in time it was decided that we would engage a legal team to provide assistance to the city to pursue those negotiations with the U.S. Attorney's Office to analyze the evidence that they had in support of the allegations and then come back to you with a report. We're finally able to come back to you with a proposed plea agreement that will bring this to resolution and also an analysis of what we've been able to glean as far as the evidence that's available to the U.S. Attorney's Office in support of these charges and what our investigation has been able to come up with.

What we're going to do today is we're going to do a couple of things. Jon Thomas, because he's been involved since almost the initiation of the investigation by the EPA, he's going to go through some observations and what he has been able to glean in his interviews with city employees, his review of city records, and his discussions with the parties. Then we're going to talk about the criminal charges that are being brought against the city, the plea agreements, we're going to give you a recommendation. The city manager has some administrative issues as a result of the discussions and settlement proposal. Then we're going to take all the questions and any discussion that you have so that you're comfortable with this because we anticipate that we will be bringing this to you, this plea agreement for final action at the next city council meeting on March 22nd.

So with that, I'd like to turn it over to Jon Thomas and he's just going to give you an outline of what this is all about and what he's been able to glean in his investigation.

ATTORNEY JON THOMAS: Thank you, Bob. I guess one -- everything Bob said is true except for one little thing that in terms of the -- my retention. It's my understanding EPA started this investigation in the fall of 2001 so we're way out from that date at this point. I was retained, I think, about a year and a half ago. Other than that, everything was very accurately stated.

I know that the major question I think everybody has is how did we get here, and that's what we're going to try to help you all understand. The major allegations relate to the late summer of 2001 and discharges that occurred during that period. When I became involved in this matter there was both a DEP, Department of Environmental Protection, enforcement case that was brought or was pending, and this EPA investigation. What I found as soon as I got involved was that there was a prior disciplinary proceeding that had created an antagonism within the utility, and there were essentially two camps. There was one camp that was essentially whistle blowers and there was another camp that were -- I guess ended up being the targets of the EPA's investigation.

I think that what you should understand about this situation was that there were a very wide array of alleged violations that -- potential violations that both DEP and EPA were investigating. Those two agencies were working together, and they have worked together, throughout this process. Even after I became involved a year and a half or so ago, EPA continued to receive additional input from -- we believe from whistle blowers to the effect that there were other violations. So as we went through our own internal investigation what we found was there were new charges that were popping up here and there that EPA wanted information about. So those investigations and those charges generally relate to a perception by the regulators, those regulators that enforce the Clean Water Act, the DEP and the EPA, that the City of Venice had become a rogue utility; that, in fact, there were a cadre of employees within the utility who had taken it upon themselves to get rid of reclaimed water anywhere they could.

So they looked -- between EPA and DEP they looked at storage pond discharges, they looked at the ultimate outfall at Curry Creek, they looked at Knights Trail Park, and they looked at other accidents including spills or alleged accidents and how those spills were reported. So there was really a lot of things that regulators were concerned about. To them the perception was, and this was a perception fueled by some whistle blowers, the perception was that the City of Venice was intentionally trying to evade and avoid compliance with the Clean Water Act.

So what I did is I -- all we can do while the regulators are investigating is try to keep up with them. So we conducted our own internal investigation and with respect to many of the charges the information that I received suggested to me that it would be difficult for EPA to prove some of the things they were concerned with. I'm sure you're all familiar with the fact that those matters that the Department of Environmental Protection was interested in have been resolved in a Consent Order fairly recently. It is a fairly rigorous Consent Order and it covers a number of issues that the state was interested in, but also some issues that the federal government was interested in.

So we started out with a wide array in allegations from whistle blowers that there was this concerted and conspiratorial effort to avoid being charged with a violation of the Clean Water Act, that the city really had inadequate disposal capacity for its reclaimed water and was not doing enough. And that was part of the perception was that the city for some reason was not doing enough to enhance its ability to dispose of its reclaimed water. So those were the perceptions that I walked into and the circumstances that I walked into at the beginning of my involvement.

Early on we had a meeting with the prosecutor in Tampa and the then-city manager didn't help matters with some of his comments. It just kind of fueled the perception that the city really didn't care that much about violating the Clean Water Act, that the city maybe felt like it could find ways and it could get away with getting rid of reclaimed water illegally, and perhaps this was just the cost of doing business if the city did get caught and was called upon to pay penalties. So that was the lay of the land and I think that's what got -- that was sort of the mindset, I think, that made this a criminal matter as opposed to being potentially an administrative or a civil matter. EPA has the authority to pursue violations on an administrative basis which is below a certain monetary threshold penalty and they can pursue it on a civil basis which has a higher threshold or they can pursue it criminally if they feel like that's what's necessary. My co-counsel will talk a little bit about what it takes to make a criminal charge, but I will just submit to you that it's a very low threshold for EPA to pursue a criminal charge under the Clean Water Act.

It's not that kind of thing that we think about, beyond a reasonable doubt, standard of proof. Anyway, my co-counsel will talk more about that.

From all of these charges, many of them settled in the Consent Order process with the Department of Environmental Protection, the remaining charges tended to relate to the perception that the City was disposing of effluent reclaimed water in a number of locations. So ultimately after all of these investigations and narrowing of the issues some, we did receive a plea proposal and we're still working essentially with that same plea agreement that was proposed based on the same charges that were proposed in the fall. Those charges are -- there's three counts in this complaint or in this information that the feds have proposed to bring against the city if the city does not work out a settlement. The three counts relate to July and August of 2001 and September of 2001, periods during which the city did, in fact, discharge reclaimed water in Curry Creek and did, in fact, report discharging reclaimed water in Curry Creek.

The charges that the EPA has come down to after looking at all these issues are actually charges that the city has provided all the evidence that EPA needs to come back to. The reason that that's true is because the city through its permit is required to submit Monthly Operating Reports and Discharge Monitoring Reports at the end of each month.

In those reports the city has to identify whether it was discharging to Curry Creek because the city's permit allows a limited wet weather discharge. You've probably all heard that phrase many times by now. It's very limited. It's just 2.3 days in one month and 2.9 days in another month, being July and August, and that's really not a lot for a large system generating reclaimed water.

So what EPA wanted to prove was that the city discharged -- the discharge in the summer of 2001 started earlier in July and ended later in August. They had a perception that there were other discharges, including September, that were longer than they were reported. But because what happened in that interval was when EPA began to investigate, the city revealed that the meter at the outfall at Curry Creek that is intended to meter flow through the outfall was in disrepair. So there was no physical metering, there was no physical evidence of when the discharge started and when it stopped and how much flow there was. The reason that these charges under Count One and Count Two are so easy for EPA is because what they've charged is false reporting those discharges in July, August, September of 2001.

The false reporting is based on what was reported, and what was reported -- also and what was not reported. What was not reported was that the meter was broken, which that is an offense in and of itself. That should have been reported, but it was not reported. In fact, in the Discharge Monitoring Reports what was reported is that these discharges in July, August, and September were continuously monitored, which in this context means continuously metered. In fact, the city staff has thoroughly acknowledged in a number of documents, but not directly to the Department of Environmental Protection or to EPA, that the city was acknowledging and ultimately during the investigation did acknowledge that the meter was broken so it wasn't continuously monitored during those timeframes.

The second thing was the quantity discharged was reported and, in fact, what was reported in the Discharge Monitoring Reports was that the quantity discharged was exactly the amount that was allowed under the permit. So EPA after looking at all of this and really trying to get information by looking at all the different monitoring and metering stages within the system, trying to pin down and prove that there were more days of discharge during this period, and they may or may not be able to do that. We've looked at the evidence that they have, and they do have a confession. They report that they have a confession from the then-Lead Operator, John Brennan. They've also acknowledged that he subsequently recanted that confession, but the confession supposedly was to the effect that a number of targets had met and determined that they could get away with disposing of effluent, that there was excess effluent in the system, the ponds were full and they needed to get rid of some, and the confession allegedly was that they decided that they could get away with it and then go ahead and discharge and report it falsely.

So EPA may or may not be able to prove that there was discharges that were not reported, but what they are able to prove is that the discharges were reported as a definite amount, even though they were not metered, and that it was reported that the metering was continuous when, in fact, other evidence generated by the city and provided to EPA clearly demonstrates that the meter was broken. So for those first two counts some of the things we have is the Discharge Monitoring Reports handwritten under the column Frequency of Analysis, continuous, and handwritten under the Quantity the exact limit quantity. Also some of the things that we have, there was a newsletter being generated by Pat Wilson. In the newsletter she has pictures of them attempting to meter flow with a portable meter that they brought in and tried to couple onto the discharge pipe and then they would be able to monitor the flow. That was an admission that the meter was broken.

There was also a work order wherein a request was made to repair the meter, and that repair, although the meter was known to be and, in fact, admitted in interviews to me, it was known that the meter was broken. It was not repaired until October of 2001. So for three months during which there were two periods of discharge the meter was broken, it was reported as if the discharge was monitored and metered and quantities were filled in that were -- had to be at least estimated and it should have been indicated that they were estimated and it should have been reported that the meter was broken. So Count One and Count Two, the proof of those is basically the Discharge Monitoring Reports and work order and some other documentation, pictures of attempts to monitor and meter the flow.

So Counts One and Two, after looking at all these various potential charges and all these matters that were investigated, they've come down to three counts -- I've just described two of them -- and the evidence that they use in those two counts is essentially everything that the city has given them in terms of evidence that we might use to defend the city, there isn't a lot. On the other hand, it does appear that things were handled fairly in the open -- if the evidence that's been generated by city staff is correct, it was fairly open, but it was not disclosed to the regulators which is a major error at least in judgment.

ATTORNEY SETH RODNER: Jon, importantly, would you agree that the evidence upon which the government would need to rely to get a conviction on those first two counts does not include any witness testimony other than authenticating documents? In other words, they can build a case exclusively with the paper trail that the city has produced to them?

THOMAS: They can. Essentially what Counts One and Two allege are permit violations. The permit requires the metering, it requires the reporting, it requires reporting of quantities, it requires accurate reporting on those issues. And, in fact, the context of the Discharge Monitoring Reports, the person that signs the Discharge Monitoring Report is supposed to be a licensed operator. They're licensed by the State of Florida and they're trained and they take a test, and among other things in that training they're required to -- well, they're taught that this monitoring is critical.

The Clean Water Act does not -- it's an expansive law. It covers all municipalities, all the wastewater systems throughout the country, and all of those systems are reporting what has occurred during the preceding months. This is an honor system essentially. We use licensed operators to make the reports to EPA or to the Department of Environmental Protection. It's over a certificate which reads I certify under penalty of law that I've personally examined and am familiar with the information submitted herein. So it's very soberly signed. It's information that is clearly important and critical really to the enforcement of the Clean Water Act.

So in terms of proving these first two counts, the Discharge Monitoring Reports and the permit and some of the other evidence that I've described, including the newsletter and the work order to repair the meter, these are items that as Seth said really just require somebody to authenticate the documents.

There's a number of people, including people in this room, that could be called upon to do that. So that's really what is, I think, essential about Counts One and Two. Of course we're going to be here to answer any questions that you have.

Count Three alleges a knowing unpermitted discharge to surface waters at Knights Trail Park. That was something that came up -- was not identified really early in this investigation. There were hints about it, but I couldn't get any information-from-EPA about it until late in the game, and when I did what I learned was that EPA had become concerned when they looked at volumes and were getting information about an alleged discharge at Curry Creek that were not permitted. When EPA began to investigate those discharges, staff sort of suggested, well, we wouldn't have made those discharges because we've got this Knights Trail Park where we can dispose of a lot of effluent. Well, that caused them to look at Knights Trail Park.

They went out on one occasion and they did what's called a dye test. I understand my co-counsel has reviewed this dye test video or photographs of this dye test. What a dye test is is you put some dye in at the pipe and they found a pipe with a rupture in it. I think there's been some discrepancy about whether that was an intentional cutting of the pipe or maybe an accidental rupture of the pipe, but they put some dye at the pipe and watched it and videotaped it as it flowed to surface water, and it flowed right across the land and into the creek.

So the third count is a knowingly unpermitted discharge at Knights Trail Park, and the evidence for that is the dye test. They watched the flow and that's all they need really to prove that. They've charged two days because their dye test was conducted over two days, although they will tell you that they believe that type of discharge was occurring for a long period of time. So again that's --

CITY MANAGER MARTIN BLACK: That's the same one where we briefed you previously where the county had gone out and done an environmental assessment of the park. That's directly related to that investigation.

THOMAS: Right. The county was involved in that investigation and the county did cooperate with the prosecutors in that matter. The county did assert at one point that there was damage in Knights Trail Park. I think that one of the things EPA is interested in is that there were allegedly complaints from the neighbors whose properties were being flooded or perhaps their creek edges were being cut into, undermined by additional flow. EPA is curious because when it queries, the city has been unable to generate -- I don't know if this came out in the most recent production, but we were -- staff was subpoenaed to produce information about these complaints and were unable to produce any. Was any of that located?

ANDERSON: One of the last. In fact, I believe the last subpoena we received from the EPA requested any documentation that we had of complaints of adjacent property owners as to flooding from the Knights Trail discharge. I queried every department that might have received such a complaint. There was some knowledge of complaints having been made, but there was no documentary evidence to support any such complaints, and therefore we responded back to the U.S. Attorney and EPA saying I'm sorry, there are no such documents.

THOMAS: That triggers their concern.

ANDERSON: They've talked to Sarasota County, they've talked to some of those property owners, and those entities have said we made those complaints, if there's no record then it's disappeared. Of course I've told them I can't produce what doesn't exist at this point in time.

BLACK: One of those documents we were able to reproduce was actually a letter from the County Administrator to the City Manager's office, in effect a demand to cease and desist impacts to the park. If we were to obtain that subsequent to the investigation by the EPA and federal authorities and were able to get a copy of that from the county so we knew what was sent, we knew it was received, but there is no record of it that we were able to discover.

COUNCILMAN JOHN SIMMONDS: Mayor, as a matter of personal prudence I've got to leave for a couple of minutes. You got to log me in and out?

ANDERSON: We're fine.

THOMAS: So again, the good news is they only -- EPA has only decided to pursue or is willing to settle this case on the matter of two days of violations for the Knights Trail Park discharge. The bad news is that the evidence is on videotape. We don't really think that the videotape will lie, although its admission in evidence is always another question, but I'll let co-counsel talk about that, if at all. Really my investigation didn't go very far with regard to Knights Trail Park. It came up late in the investigation and the investigation was terminated before I was able to interview everybody involved in that.

Basically what I wanted to convey to you all is that what is currently in the plea agreement are three charges, all of which the federal government can make its case on the basis of documentary evidence without reliance upon city staff or former city staff to support that case. It doesn't even require the whistle blowers to step up in that matter. So I think in a nutshell what you have is the federal government has sort of chosen a tact which involves charging the city with those matters in a case of which it can make simply on the documentary evidence that they already have in their possession. I think the good news is that if the federal government is willing to waive pursuit of the other matters about which it has information and about which it continues to pursue information and may provide the basis for charges against individuals -- individuals who are no longer city employees.

ANDERSON: Thanks, Jon. What we're going to do now is Seth Rodner is going to talk to you about why we are in a criminal context and not the administrative or civil, and then he's also going to review for you the terms and conditions of the proposed plea agreement.

ATTORNEY RON NOBLE: And if there are questions as we go, we're in a very informal setting here so please feel free to ask. We don't need to hold questions until the end if there's something that's relevant right now.

MAYOR DEAN CALAMARAS: I've got one then. What we're dealing with is essentially clean water that's being discharged? We're not being accused of polluting?

NOBLE: This is treated effluent.

THOMAS: Highly treated, yes.

CALAMARAS: So we're not being accused of polluting anything, just discharging essentially what is clean water?

NOBLE: There is no allegation of environmental harm except for some impacts to Knights Trail Park, but none associated with the quality of the discharge.

CALAMARAS: What would have happened had they not lied about the discharges and just called the EPA and said, look, we've got all this stuff and we have no place to put it, we have to discharge it, what would have been -- why did they not do that?

THOMAS: I think that the city has done that at times. The city has honestly reported discharges that were outside of the limits of the permit, and the response -actually, the reporting goes to the Department of Environmental Protection, and the response by the Department has been to enter into Consent Order discussions. Typically when you have that type of situation occurring it's because a utility doesn't have enough disposal capacity. Disposal capacity is a certain amount that they can dispose of in a reuse system, sending it to golf courses and residential areas, and a certain amount at certain wet weather periods where discharge will be to surface waters. And so a Consent Order would have been probably been the result if that had been honestly reported, although I think it's possible there was a concern because this was a repeat fairly close in time. I think there was a 1999 Consent Order for a similar violation so the penalties may have been enhanced, but I think it would have been handled as an administrative matter by the State.

CALAMARAS: It's always amazed me that they would have lied about it when legally they probably could have done it anyway, done the exact same thing they did and then the penalty would have been -- been there, I guess.

THOMAS: That's probably the best defense that the targets have in this case is that it doesn't make any sense for us to have lied about this. That's what they were saying to me. They were saying why would we lie about it, we told the truth before, we took our lumps, the city accepted penalties before and was honest about these discharges, why would we start lying now. That's something that EPA has chewed on. But, I mean, there really is something that -- frankly, coming into this case that was my perception, why would they, and frankly it still doesn't make any sense to me, but it does appear -

RODNER: Although, I think to the extent they've articulated it to us, the government's theory is that not unlike many other cases, they feel that there was tremendous institutional pressure at the supervisory and management levels that was brought to bear upon the employees, essentially the spoken or unspoken message being, look, we can't afford another violation, we can't afford another consent decree, you need to move forward and make this work with the existing infrastructure no matter what the cost. It may or may not come as a surprise, but that is often the motivating factor in these corporate scenarios. It's not always the case that there is direct individual financial incentive and --

NOBLE: Well, not just the corporate scenario, but really the municipal context where you don't have employees who stand to profit individually from ongoing operations or making money.

THOMAS: But I think you'd have to throw in -- excuse me -- also that I got to believe that the individuals who may have made misrepresentations had no idea that this would be a criminal matter and that they could lose their livelihood and perhaps their freedom, but that is a reality.

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