Landfill Investigation: Cost of Employee ‘Theft’ as High as $24M
Tuesday, September 07, 2010
A GoLocalProv investigation has found that employees “stole” as much as $24 million at the state landfill. The alleged thefts are outlined in a key document that the Rhode Island Resource Recovery Corporation, which manages the landfill, submitted in its suit against the Travelers insurance company.
Resource Recovery is hoping to recover some of the lost money under an insurance policy that covered employee theft.
The key document, a “Sworn Statement in Proof of Loss,” outlines dozens of cases of alleged employee theft at the landfill that occurred between 1994 and 2007.
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The bulk of those involve land purchases in which there often was no appraisal and the purchase price was as much as $1 million more than the assessed value.
Resource Recovery accuses former Executive Director Sherry Mulhearn and Chairman A. Austin Ferland of failing to do “normal due diligence” on the deals and ignoring the possibility of using eminent domain to acquire the properties.
For example, in December 1995, Resource Recovery bought 50.5 acres from Michael Macera, Steven Macera, Robert Cece, and John Cece for $2.675 million, even though the land was appraised for only $500,000. Resource Recovery says it would have paid the appraisal value if it had used eminent domain to get the land, according to the document obtained by GoLocalProv. The agency is claiming the difference of $2.175 million—between the purchase price and the appraised value—is money it lost due to employee theft.
Former Mayor Macera Benefitted from Land Deal
In 2002, Resource Recovery paid $2.05 million for 67.9 acres from land owned by three people, including the current mayor of Johnston, William Macera. In 2001, the land had an assessed value of $212,400, but then the assessed value was bumped up right before the sale.
“Prior to the sale … the Town of Johnston (apparently at Mayor Macera’s request) reassessed the property for 2002 at $1,649,500, predicated upon the assumption that it would be used for a subdivision (even though it was adjacent to a major landfill),” the current executive director of Resource Recovery, Michael O’Connell, states in the Proof of Loss document.
In one purchase, Resource Recovery was stuck with the $700,000 cost of cleaning up hazardous waste, even though the sellers were supposed to take care of it, according to a draft purchase and sale agreement. One half acre of landlocked property was purchased for $410,000 with no explanation of what it would be used for. And the seller of another property was allowed to stay there for five years, at an annual rent of $500.
The alleged employee thefts also include conflicts of interest, an $11 million cost overrun in the construction of a tipping facility, and $12 million in excessive royalty fees to a company that produced shredded material to cover the landfill.
Officials Accused of Stealing Laptop, Christmas Wreaths Too
Resource Recovery claims a number of other “miscellaneous” thefts by former employees.
• the agency bought a laptop and then had it shipped to the Virgin Islands, where Ferland’s wife used it as her personal computer.
• in December 2005, large Christmas wreaths were removed from a Resource Recovery truck and put in Mulhearn’s car
• in some instances,employees were paid for days they didn’t show up for work
• Mulhearn and Deputy Executive Director Dennis aRusso took bonuses that were larger than what was allowed and never were approved by the board of commissioners
• fraudulent worker’s compensation claims
Thomas Holt, the attorney for Resource Recovery, could not be reached for comment, nor could representatives for Travelers Casualty and Surety Company of America. The case has yet to go to trial and is currently mired in a series of procedural arguments between Resource Recovery and Travelers in U.S. District Court.
Related Articles
- State Sues Travelers Insurance for $16 Million Tied to Landfill
- Follow-Up to GoLocalProv Investigation: AG Candidates Call for Action
- Landfill: State Sues Three Firms
- Something Rotten in Landfill Deal?
