In an echo of the VW emissions scandal, a Siemens power plant paid for entirely with public money was built on the basis of false claims about its energy saving potential.
Siemens claimed it would save Warren County NY at least $1.5m over 5 years. When a former Siemens employee questioned this, he was told he was not a team player.
A fraud investigation by the Warren County sheriff’s office found there was probable cause to charge a top county official with misconduct for his handling of the project, involving a cogeneration plant deal built by Siemens Building Technologies, based in Penn Plaza Manhattan.
Siemens is well known to be morally bankrupt. A 2008 investigation found Siemens’ culture of corruption extended far beyond the executive suite. As one investigator said “bribery was Siemens’ business model”. In fact, the company even had a handy accounting euphemism for its bribes: “nützliche Aufwendungen,” or “useful money”.
The Warren County investigation, which began in 2011 and ended earlier this year, determined that County Administrator Paul Dusek could be charged with official misconduct, a misdemeanor, for allegedly misinforming the county Board of Supervisors when he negotiated an energy-performance contract with Siemens in 2004, when he served as the county attorney, according to the sheriff’s department’s investigative file. The contract was tied to the cogeneration plant at the Westmount Healthcare Facility. As the county attorney at the time, Dusek was responsible for reviewing the contract and offering advice to the county board of supervisors on the agreement with Siemens.
However, Siemens intentionally overstated energy savings in the contract, and Dusek “repeatedly misrepresented his comprehension of Energy Performance Contracts to the board, other elected officials and the public,” according to a portion of the investigative report — about 150 pages — that was released by the sheriff’s department this week in response to a Freedom of Information Law request by the Post-Star newspaper in Glens Falls, which first reported the information.
In 2004, Warren County signed a contract with Siemens to finalize the building of the cogeneration facility designed to supply electricity to the Westmount Health Care Facility, the county’s former Social Services building and another annex. The cogeneration plant was installed at the county-owned Westmount nursing home in 2005. County officials celebrated the system as a money-saver at the time.
The equipment was fueled by natural gas purchased from National Grid, another energy company which has been exposed and fined for false accounting and overcharging consumers.
the equipment allowed the county to generate its own electricity for the nursing home and move the facility partially off grid. The equipment also generates heat used to warm the air and water inside the building.
The initial coast to build was $3.5 million and the county was expected to generate a savings of $1.5 million over the next 15 years, according to the documents. However, the figures were inflated to make it appear that Warren County was saving more than it actually was from the cogeneration plant, according to the sheriff’s department report. The records also revealed a former Siemens employee who questioned the savings was told he was “not a team player” and left the company because of the project.
The investigation determined that the energy savings reported by Siemens to Warren County were not accurate and “the Warren County Board of Supervisors entered into more than $10 million in Siemens‘Energy Performance Contracts’ as a result of the representations made to them by Siemens and… Dusek.”
Kevin Conine, a sheriff’s investigator, led the probe with assistance from the FBI and U.S. Attorney’s office. The investigation began after Queensbury resident Doug Auer, an engineer who criticized the deal, informed Conine about the alleged overstating of the energy savings. The investigators interviewed 32 current and former members of the board of supervisors and “none of the supervisors were told by … Dusek that he did not understand how Siemens measured savings, the fact would have affected the way they voted,” according to the documents.
Dusek, who was county attorney for 15 years before becoming county administrator in 2010, did not immediately respond to a request for comment Friday.
According to the sheriff’s files, investigators interviewed Dusek and he told them he “did not question Siemens promised-energy savings because he trusted Siemens.” Years after the deal, citizens and elected officials questioned the deal, but Dusek repeatedly defended it.
William P. Casey, who served as an engineer at Siemens, was also targeted in the police reports and investigators found what they described as probable cause to charge Casey with falsifying documents that listed the energy savings, according to the documents. Casey could not be reached for comment Friday. The report said Siemens could not be implicated in a fraud case because any statute of limitations had expired.
Siemens provided regular reports to the county board of supervisors claiming savings of as much as $300,000 a year, and the Albany engineering firm Clough Harbour & Associates provided a three-page report affirming the Siemens findings in April 2007. CHA and an accounting firm that reviewed the report were hired by Siemens to do the work, and CHA was a partner in designing the project. The police documents noted CHA was not an independent analyst because of its close ties with Siemens.
A Siemens engineer told the Times Union in 2005 that the company guaranteed the nursing home would save money each year from the cogeneration facility, or the company would write a check for the difference.
“It’s not smoke and mirrors,” the engineer said at the time.
The investigation characterized Siemens‘ alleged overstating of savings as “intentional deception.” Internal documents obtained by the investigators included a spreadsheet labeled “Contract $” with savings promised under the contract listed as $118,512. But another tab labeled “Actual $” calculated the savings at $68,262, according to the records.
In April 2014, the county hired a Boston-based engineering firm, EnerNOC, to independently analyze theSiemens contract and the firm disputed the savings calculations made by Siemens. In August 2014, the county health services committee conducted an independent review with a Queensbury accounting firm, McCarthy & Conlon LLP, and found the county was actually losing approximately $500,000 per year, according to the records.
In the face of the investigation, Siemens contends it met its commitments with the county.
“Siemens continues to believe that it has fully complied with its contractual obligations regarding the Westmount Health Facility cogeneration project,” the company’s spokesperson, Amanda Naiman, said in a statement. “Siemens disagrees with the conclusions in the Sheriff’s report regarding any allegation of wrongdoing, misconduct or impropriety by Siemens or its employees.”
Naiman also provided the Times Union with a letter that Siemens sent to County Attorney Martin D. Auffredou in May 2014 disputing EnerNOC’s audit, which said the audit relied on a fundamental misunderstanding about the terms of the performance assurance agreement with the county.
The records indicate Siemens was previously involved in a similar case and was ordered to pay a nearly $1.5 million settlement to the Binghamton school district for failing to provide energy savings it had contractually guaranteed.
The investigators examined any misconduct involving Warren County employees involved with the cogeneration plant. Hal Payne, who initially proposed the project in 2001 and served as the administrator of the Westmount facility when the cogeneration plant was approved, was treated to lunches or dinners on eight separate occasions, a NASCAR race and taken to Saratoga Race Course by Siemensrepresentatives, according to the sheriff’s report.
Payne did not respond to calls seeking comment Friday.
According to the records, Warren County District Attorney Kathleen B. Hogan wrote a letter to the state attorney general’s office in May requesting assistance with the case because she believed Dusek’s budgetary responsibility as county administrator presented a conflict with her office. The report said Attorney General Eric Schneiderman’s office declined to pursue a criminal prosecution against Siemens, but may pursue the case as a civil investigation.
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