EPA Raid on Upstate, Sept. 2010
SYRACUSE, N.Y. — Even after armed federal investigators raided its offices in 2010 and the New York Department of Health suspended its state certification in early 2012, Upstate Laboratories Inc. continued its lucrative business of testing water samples from landfills and wastewater treatment plants across the state.
Officially, state environmental regulators will not accept test results from labs the DOH has not certified. The rule is fundamental to the integrity of the program that was designed to protect the state’s waterways from industrial pollution. Yet the state Department of Environmental Conservation kept accepting Upstate’s test results for more than a year after DEC managers learned of the suspension and wrote emails saying the results should be rejected.
On the morning of February 27, 2012, the DOH notified the DEC that it had suspended Upstate Labs. A few hours later, Jason Fagel, an official at the DEC’s Division of Water, emailed other DEC managers: “For any regulatory entity that your division may oversee, like landfills, they should not be using Upstate to report monitoring results to DEC. If you notice this happening, DOH would like to know about it.”
Eric Obrecht of the DEC’s Division of Environmental Remediation emailed remedial contractors and engineers the same day saying, “If you have planned to utilize Upstate Labs to perform analysis … please use an alternate lab until this matter is resolved.”
But many of Upstate’s clients either didn’t get the message about Upstate’s suspension or simply assumed the DEC and DOH would look the other way. For example:
Chautauqua County, 30 miles south of Buffalo, filed its annual landfill report for 2012 with the DEC this past summer. It was based on water quality tests from Upstate.
Steuben County, which includes the city of Corning, relied on Upstate to collect and test water from its landfill monitoring wells throughout 2012 and it reported those results to the DEC. Last November, Steuben voted to rehire Upstate for the year 2013 for $152,552.
Madison County, 10 miles east of Syracuse, immediately terminated its three-year contract with Upstate in March 2013 after it received a March 4 email from the DOH stating that Upstate’s certification had been formally revoked.
Tompkins County, which includes the Finger Lakes city of Ithaca, also fired Upstate for breach of contract in March 2013, days after it learned the company was not certified. Tompkins officials said they acted in response to a one-page form letter that was part disclosure notice and part marketing flyer from Anthony Scala, Upstate’s president and CEO.
“Dear valued clients,” Scala’s March 7, 2013 letter began. “I have good news about Upstate and future services that can be offered our clients. Our sister lab, Enalytic, will be renting space and equipment from Upstate and hiring its employees.”
In the fourth paragraph, Scala wrote, “Upstate is no longer a certified laboratory in the state of New York….”
The notice appeared to catch many Upstate clients flat-footed, and many — if not all — cancelled their contracts over the next few weeks.
Four months later, on July 17, federal prosecutors in Syracuse announced that Upstate had pled guilty to one felony count of mail fraud related to the falsification of more than 3,300 laboratory test results from 2008 through 2010. The company agreed to pay a criminal fine of $150,000 and restitution to victims, as determined by the court. The fine may be waived if the restitution total exceeds the amount of the fine.
The plea agreement stated that Upstate employees had routinely back-dated sample results to make it appear that analyses had occurred within required time periods when they had not. It cited 31 public and private clients affected by the tainted Upstate tests, ranging from trailer parks and pizza restaurants to villages and towns to county waste divisions and landfills to the state Department of Transportation. Although prosecutors didn’t mention it, even the DEC’s Division of Environmental Remediation had awarded Upstate a $1 million contract.
Craig Benedict. Photo credit: Mike Greenlar, The Post-Standard (Syracuse)
Prosecutors never charged any individuals at Upstate with a crime. Asked why, assistant U.S. Attorney Craig Benedict said in a recent interview: “As a general matter we always look at who was responsible. An individual who was at a high level at the company died during the course of investigation. We can’t bring charges against a responsible person who’s no longer alive.
“We continued to pursue the corporation because the corporation is responsible for conduct of its officials.”
Benedict declined to identify the official who died. One possibility is David J. Lennon, a laboratory manager for Upstate who passed away in March 2012 at the age of 43. In a recent interview, Scala said Lennon survived only a few days after receiving a diagnosis of liver cancer.
Benedict also declined to say whether Scala had any role in the criminal activity.
David Lennon
Federal prosecutors built their case against Upstate on evidence obtained in a September 21, 2010 raid led by the U.S. Environmental Protection Agency on the company’s main offices in East Syracuse. About 50 officials, many armed and dressed in bullet-proof vests, arrived that morning with a search warrant. “There was like 10-15 cars lined up,” Scala told a Syracuse newspaper that day. “All black, SUV-type cars. A couple of them said EPA on them.”
This week, Scala said the EPA and federal prosecutors had destroyed a business that once had millions of dollars in revenues and employed dozens of people. “They took a company with 30 years of experience and put it out of business over one person’s allegations. And she got immunity,” he said. Scala declined to identify the whistleblower, but added, “She had committed the crime herself and had gotten fired … She called the EPA, the Department of Health, OSHA, the Better Business Bureau.”
Benedict acknowledged that a whistleblower triggered the EPA’s interest, but he also declined to identify her.
Federal prosecutors had been developing their case for more than a year when the New York Department of Health conducted its own unannounced inspections of Upstate’s offices and records in December 2011. Two months later, the DOH wrote a letter to Scala explaining that Upstate’s DOH certification had been suspended, effective Feb. 27, 2012.
The letter cited dozens of “deficiencies,” which fell into six general categories — most unrelated to the violation the company acknowledged in its July plea deal with federal prosecutors. The DOH issues related to the use of inadequate analytical methods, poor quality controls, overwriting of files and failure to provide proper audit trails.
The DOH offered Upstate an opportunity to correct the problems and have its certification reinstated, but its letter also stated: “A suspended laboratory may not perform any analysis on New York samples for which (DOH) issues a certificate of approval.”
Scala recently insisted that from that point on Upstate began subcontracting all environmental testing that it wasn’t authorized to do. But records reviewed by DCBureau did not reflect those subcontracting relationships. In any case, neither the DOH nor the DEC actively enforced an explicit ban on Upstate’s testing.
The DOH wrote rules for its Environmental Laboratory Accreditation Program in the 1980s amid a wave of concern over asbestos in public buildings, including schools. Labs were springing up to service contractors that eagerly sought asbestos cleanup jobs, said Mary Anne Kowalski, author of those early rules and supervisor of their enforcement until 1999. Labs worked hand-in-hand with contractors, first to identify the need for treatment, then to certify that the sites were clean. The ELAP program imposed strict standards on the labs.
As the ELAP program evolved, it offered separate certifications for various types of water and air quality testing. The ELAP standards are as important today as ever, Kowalski added.
“There are incentives (for labs) not to find problems,” she said. “If a client is seeking a permit, it is in the best interest of the lab with the work — if it wants to continue in that work — to have acceptable findings. I think that’s where DOH and DEC labs should be acting in critical cases, as monitors of what’s happening out in the field.”
But that type of rigorous oversight is a luxury in the world of tight state budgets.
In fact, deep cuts to the DEC’s budget and staff have contributed to a broad decline in state enforcement of water and air quality rules, according to a recent analysis by Environmental Advocates of New York.
“Throughout its history, New York State has led the nation in enacting regulations that protect public health, safety and the environment,” said the report titled “Turning a Blind Eye to Illegal Pollution.” However, data the DEC has reported to the EPA “suggest that baseline enforcement of environmental laws has waned considerably.”
The federal EPA designates the state DEC to issue permits and enforce federal pollution rules for 33,000 air, water and hazardous waste emission sources statewide. For example, the DEC has issued thousands of permits to discharge pollution into state waterways. Many of those State Pollution Discharge Elimination System permits are awarded to major industries and water treatment plants.
“New York’s water quality is under constant attack by permitted pollution discharges in addition to illegal discharges,” the Environmental Advocates report said. The DEC long ago gave up trying to monitor all the dischargers and instead resorted to what EANY called a “deeply flawed shortcut.” Since 1992 the agency has counted on the vast majority of dischargers to self-report honestly while it spot-checks a relatively few of the largest. In the past few years, those spot checks have been cut drastically. “DEC inspections of water pollution permit holders declined by 74 percent between 2009 and 2012, leaving polluter-produced monitoring reports largely unverified,” the report stated.
Gov. Andrew Cuomo
The main reason for the enforcement breakdown is budget cutting dating back at least to 2008, Environmental Advocates found. The group blamed Gov. Andrew Cuomo for exacerbating the agency’s budget woes since taking office in January 2011.
Only three weeks before Cuomo was elected, former Gov. David Paterson fired the DEC’s chief, Pete Grannis, for insubordination after an unsigned DEC memo addressed to the state budget office was leaked to the media. “Many of our programs are hanging by a thread. The public would be shocked to learn how thin we are in many areas,” the memo said.
Cuomo has not provided relief. Between fiscal years 2008 and 2013, the DEC’s divisions of air and water lost 235 full-time positions, or 28 percent of staff, Environmental Advocates reported. The Division of Environmental Enforcement lost 115 positions, or 21 percent. Those cutbacks have dramatically affected rates of cited environmental violations. Between 2009 and 2012, the number of high priority violations at DEC-regulated facilities plunged 50 percent, while formal enforcement actions took a similar dive.
Dave Gahl, Environmental Advocates of NY.
“The governor’s philosophy has been for his agency to do less with less, leaving it struggling,” EANY’s Dave Gahl said when the study was released in September.
The group further contends that Cuomo has rolled back water quality regulations on landfills and concentrated animal feeding operations, or CAFOs, as part of his administration’s “Open for Business” PR campaign.
Among the corporations that have thrived in that friendly political atmosphere is Casella Waste Systems Inc., a waste hauler and landfill operator with extensive operations in upstate New York. Casella has benefitted from the DEC’s controversial decision to allow imports of radioactive drill cuttings from natural gas wells in Pennsylvania to landfills in New York.
Landfills the company owns or operates near the Southern Tier communities of Elmira, Painted Post and Angelica have trimmed back loads of local waste in order to accommodate more out-of-state drilling waste. Although none of the landfills are authorized to accept even low-level radioactive material, Casella recently won DEC permission to expand its Elmira landfill. And the company is seeking DEC approval to speed up drilling waste imports at its Hyland Landfill in Angelica.
The Ontario County Landfill near Geneva, a Casella-operated facility that is not known to accept out-of-state wastes, also seeks to expand.
But a local citizens group, the Finger Lakes Zero Waste Coalition Inc., is challenging that growth plan on the grounds that the application to the DEC is based water testing results provided by Upstate Labs from 2006 through 2010. “The guilty plea (by Upstate Laboratories) raises legitimate and substantive questions regarding the validity of most if not all of the water quality testing data used to support Ontario County’s landfill expansion permit application,” Douglas C. Knipple, the group’s president, wrote the DEC in September. The Cornell University entomology professor argued that the county should have to provide data from an alternative source.
Knipple’s request is moot, according to Casella Regional Engineering Manager Carla Jordan. She told the Finger Lakes Times newspaper in Geneva that Casella had replaced Upstate as its testing lab with ALS Environmental in early 2012, and that results from ALS tests were similar to Upstate’s results.
Larry Shilling, a Casella regional vice president, confirmed in an interview in September that his company had replaced Upstate with ALS in “early 2012” — around the time the DOH suspended Upstate’s certification but well before many other Upstate clients were up to speed on its regulatory difficulties. Shilling said the switch was prompted by a phone call Casella received from the EPA.
While many Upstate clients remained loyal throughout 2012, a few began to peel away. For example, in November 2012, officials in Fulton County, which is about 50 miles northwest of Albany, rejected a low bid from Upstate for a three-year contract to test water quality at the county landfill.
Fulton officials had caught wind of Upstate’s regulatory problems. In addition, the landfill’s Liverpool-based engineering firm, Barton & Loguidice, recommended taking the second lowest bid, which was $20,000 more than Upstate’s, according to local news reports.
That was a significant shift for Barton & Loguidice, which for years had often worked in tandem with Upstate. In some cases, B&L had urged clients to hire the lab. For example, records show that after it analyzed Oswego County’s bids for an analytical lab contract in 2008, B&L recommended Upstate, the low bidder at $572,571.
B&L had worked closely with Upstate at several Casella facilities. In fact, records show that some chain of custody documents for Upstate water tests at the Ontario County Landfill were signed by B&L’s Darik M. Jordan, who is married to Carla Jordan, the Casella regional engineering manager.
Barton & Loguidice advised several counties, including Steuben, to drop Upstate in March 2013 after Scala sent clients his form letter concerning the company’s loss of certification. However, a B&L employee was present at a Steuben County Public Works Committee hearing five months earlier at which
Vince Spagnoletti
Vince Spagnoletti, the county’s public works director, urged that Upstate’s 2012 contract be extended through the end of 2013.
Spagnoletti’s push to renew Upstate’s county contract months after its DOH certificate had been suspended was notable because he had worked extensively with DEC water division officials on qualifying the Steuben County landfill for imports of Pennsylvania gas drilling wastes.
Upstate kept its prices lower than most of its competition, Scala said, and it developed a loyal network of supporters over the years. Scala’s account on LinkedIn, a social media website that promotes business connections, tends to reflect that loyalty. Among those endorsing Scala on LinkedIn are John Benson of Barton & Loguidice and Joe Boyles, general manager of Casella’s landfills in Angelica and Painted Post. In addition, Thomas Zgrodnik, a DOH consultant who has analyzed applications from environmental labs for ELAP certification, recommended Scala for “environmental compliance.”
Scala and Upstate also had an ongoing relationship with the DEC, but agency officials have been reluctant to discuss it. The agency’s media affairs officers have repeatedly declined to respond to emails and phone messages on the subject.
The DEC has also effectively denied a Freedom of Information request by DCBureau.org filed Aug. 15 for documents detailing Scala’s consulting relationship with the agency. At first, the DEC said it would respond by Sept. 23. Then it postponed its self-imposed deadline six weeks to Nov. 8. After it failed to respond at that time, it said it would need until Nov. 27.
Failure to deliver the requested information by the second deadline — Nov. 8 — amounted to a denial of the request, according to Robert J. Freeman, executive director of New York State’s Commission on Open Government. DCBureau appealed the denial to the agency’s general counsel, and that action is pending.
However, records held by the New York State Comptroller show that the DEC’s Division of Environmental Remediation awarded Upstate a $1 million contract related to oil spill cleanups, which was to run from August 2011 through July 2016.
In addition, Enalytic, the Syracuse laboratory that Scala described in March as Upstate’s “sister lab,” obtained a three-year subcontract that ended in September 2012 for air quality testing on a DEC remediation contract awarded to Mactec Engineering and Consulting of Nashville, Tenn. Documents related to Enalytic’s subcontract were signed by Carole Scala, Anthony Scala’s wife.
In his Mar. 7, 2013 form letter to clients, Scala extolled the capabilities of Enalytic. “It has already applied to the Department of Health ELAP program with a comprehensive application for all of the parameters of certification to make it a complete environmental laboratory,” Scala wrote. He went on to say that Enalytic had “state-of-the-art air testing capabilities” and 30 years of technological expertise through its relationship with Upstate. “We envision that the same people who know the characteristics of your samples and your client services requirements will still perform the same functions along with a new technical director.”
But in his recent interview, Scala said Enalytic had quit trying to win DOH lab certification and had ceased environmental testing entirely. “It ridiculous to try (for certification) because of how this state is,” he said. “It’s not about chemistry, it’s about politics.”
He said Enalytic decided earlier this year to drop its DOH certification for air quality testing and focus instead on non-environmental chemistry jobs for businesses. He cited the company’s work breaking down complex compounds and separating components such as aluminum oxide that can be difficult to isolate.
In August, records show Enalytic put its air monitoring equipment up for sale online at an asking price of $100,000. “Business is tough,” Scala said this week.