THE AUDITORS' REPORT

The Connecticut State Auditors have now released their report on the financial violations and other concerns regarding the work done by Loureiro Engineering Associates for the Department of Environmental Protection at Hamden's Newhall site. Once you cut through the Auditors' typical benign, deferential tone, there are some very disturbing findings in this report. It will be interesting to see how the DEP tries to spin the fact that the Auditors have now asked the Attorney General’s office to take the next step and open up their own investigation into the DEP's illegal contracting and misuse of state funds.

As is often the case with politically-sensitive bipartisan reports like this one, the more important information is buried deep in the middle of the document. As a public service, we thought it might be helpful if we ferreted out some of the essentials. The full report is available on the Auditors’ website, but here are some of the critical passages:


1. “Our review disclosed that the Loureiro Engineering Associates has been billing the DEP for services rendered as far back as April 2003 exceeding the sixty (60) day maximum for emergency service contracts by almost three years.” (page 5 of the Auditors’ Report)

This confirms the fundamental concern we have raised from the beginning, that DEP illegally transferred funds to LEA by extending a no-bid contract designed for emergency response to hazardous spills (the Spills Contract). Legally, services were to be provided under the Spills contract for no more than 30 days, with an additional 30-day extension possible with the written approval of the Commissioner. No one, not even the Commissioner herself, has the authority to extend the contract beyond the 60-day maximum for emergency service contracts. Nonetheless, through seven addenda “approved” by a DEP employee with close personal ties to LEA staff, the supply of “services” under the contract lasted for over three years.

What does this mean? It means that every dollar spent on LEA beyond that sixty (60) day period, a sum totaling over $1.5 million dollars, was spent in violation of state contract and Connecticut state law.


2. The Auditors’ report also confirms that LEA was self-dealing the interim clean-up contracts at Newhall to its wholly-owned subsidiary, LEA-Cianci, and that LEA-Cianci billed the State for five times the small amount for which those services were originally contracted.

Regarding LEA’s award of a contract to LEA-Cianci, the Auditors’ report states the obvious: “a subsidiary of a prime contractor should not be hired as a subcontractor.” (p.5) The report also identifies a significant problem with LEA-Cianci's unauthorized work. According to the report, “although the original subcontract was for $18,050 and the scope was included under addendum four to the contract, as of July 11, 2006, LEA-Cianci had billed LEA a total of $92,499.” (p.5) We can only hope that this self-dealing won't continue as the multi-million dollar remediation of Newhall finally starts.


3. The Auditors also report that DEP employees have channeled hundreds of thousands of dollars in state bond funds to LEA without using any contracts or authorizations at all. According to the Auditors’ report:

“Our review disclosed that LEA has invoiced the DEP $1,641,241 for work completed through May 2006 [on contracts totaling only $1,177,804]. Written approval for this additional work totaling $463,437 has not been obtained as of June 28, 2006. However, what we found was that payments of $193,084 were made to LEA beyond the approved addenda and that the remaining amount of $270,353 apparently represents work already completed but for which written approval has not been granted and for which payment has not been made. As of June 28, 2006, LEA has submitted addenda 7A and 8 increasing the total contract value by an additional $590,152 which will cover services through June 30, 2006 (page 5)…We believe that the DEP should not allow its contractors to expend or commit funds without first obtaining written authorization to do so.” (page 6)

In summary, nearly half a million dollars was earmarked for LEA without even the semblance of official authorization. If prosecuted fully, that is the sort of thing that might put someone in jail and should certainly lead to a prohibition on all future contracts to LEA.


4. The Auditors report also reveals that the contracting improprieties continued even while DEP and LEA were under investigation. For example, a special provision in the new $5 million remediation contracts that the DEP began awarding in June allows the State to request a proposal from only one bidder, i.e. without any competition at all. According to the Auditors' report:

“This provision appears to have been included so that DEP could hire LEA to continue working on the Newhall Perimeter Project. As we stated above, we always question whether a decision that does not provide for multiple proposals is in the best interests of the State.” (page 9)

This is deeply disturbing. We’re quite certain that the State, our town, and our neighborhood are harmed by the fact that LEA's work at Newhall has never been put out to competitive bidding and its cozy ties with DEP employees have been enough to secure its steady supply of State funds. We are heartened by the Auditors’ decision to “refer this and other matters to the Attorney General’s Office for his review and consideration.” (page 9)

We hope that the AG's office will also hire some independent experts to examine the scientific flaws with LEA's work, not just its illegal contracting. That's something that the Auditors were not given the resources to do. They had to rely on the DEP's "expertise," and it's no surprise that the fox didn't tell them about all the trouble in the henhouse.

But the indictments of the Auditors' report are an important first step. The rest will come...all in good time.