Veolia, Suez, Aqualia and Aguas de Valencia embroiled in several corruption cases in Europe

Veolia, Suez, Aqualia and Aguas de Valencia were selected by the Toulouse metropolitan government in October 2017 to present their bids for two concession contracts; one for the production and distribution of drinking water and the other for sanitation.

However, these four private companies are embroiled in several corruption cases for the award of public and concessions contracts elsewhere in Europe.

Note: On 29 May 2018, the tender commission [this commission of several elected representatives of the metropolis, examines and compares the bids and then chooses the one that seems the best] opened the envelopes containing the bids of the candidates. Aqualia and Aguas de Valencia not having sent their bids before this deadline can no longer get one of the two concession contracts.

Veolia

One of the most serious French corruption cases concerns the conditions under which the Syndicat Interdépartemental pour l'Assainissement de l'Agglomération Parisienne (SIAAP) awarded several public and concession contracts to a cartel of private companies, including Veolia and its subsidiary OTV. In particular, two public contracts and one concession contract are the target of investigations by the financial prosecutor's office and appeals to the administrative court: the contract to refurbish the Achères wastewater treatment plant, worth 773.76 million euros, awarded in February 2012 to a group of companies including OTV; the contract to refurbish the Clichy-la-Garennes wastewater treatment plant, worth 341.2 million euros, awarded in April 2015 to a consortium including OTV ; the concession contract for the operation of the Valenton wastewater treatment plant, worth 397 million euros, awarded in September 2017 to Veolia as part of a SemOp [a SemOP is a public-private company]. In all 3 cases, the bid accepted by SIAAP was for an amount higher than that of bids from competing European companies. This raises suspicions that there was "illegal taking of interest, corruption, influence peddling, collusion, misappropriation of public funds, abuse of social property". SIAAP has been involved for decades in the hidden financing of the right and the French Communist Party (PCF). In May 2017, the deputy general director of OTV (subsidiary of Veolia), a former PCF elected official, admitted while in police custody that he had received an annual budget of 800,000 euros to "entertain" elected officials who placed orders with OTV. Noting several irregularities in the award to Veolia’s contract for the operation of the Valenton wastewater treatment plant, the Prefect of Ile-de-France obtained its cancellation in November 2017 and the SIAAP had to resign itself to entrust the operation of the wastewater treatment plant to a "régie publique" as of April 1, 2018.

Veolia's Romanian subsidiary, Apa Nova, in charge of Bucharest's water and sanitation service, is at the heart of a large-scale corruption case. Apa Nova has held the contract to manage Bucharest's water and sanitation service for 25 years since 2000. Water tariffs increased by 125% between 2008 and 2015 while Apa Nova committed in the initial contract to lower the price every 5 years. The Romanian national anti-corruption division (DNA) has found Apa Nova executives of paying bribes worth 12 million euros in exchange for the signature by the Bucharest City Council of amendments to the concession contract that increased the price and boosted the company's profits. The DNA lay charges against the company Apa Nova as well as nine individuals including the two French executives who ran the subsidiary at the time of the events. Since 2016, following a complaint from a Veolia France union representative, the French national financial prosecutor's office (PNF) has been investigating the role played by Veolia in the actions of its subsidiary Apa Nova. A search took place on January 9, 2018 at Veolia headquarters in Paris. The US Department of Justice (DoJ) in liaison with the Securities Exchange Commission (SEC) has also been investigating the case since 2017. Veolia is listed on the New York Stock Exchange between 2012 and 2014, which means it could be held accountable for violating US federal laws in Romania.

Suez

In the Essonne department of the Parisian region, the new “communauté d’agglomération” of Paris-Saclay, comprised of 27 communes and 300,000 inhabitants was created on January 1, 2016. The territorial reform dissolved and merged three former “communautés d’agglomération”. The new local government immediately took over responsibility for drinking water. Suez is currently in a monopoly within the department, serving 80% of drinking water users, based on the (controversial) claim of its private ownership of three drinking water production plants. With surprising speed, the new local government immediately launched a tendering procedure for the award of a new concession contract for the distribution of drinking water for 10 cities, previously in public service delegation (DSP) with Suez. The tender procedure does not comply with the current regulations since it is impossible to know the water production tariffs currently applied by Suez for each of these ten cities, in the absence of sectoral meters. A users' association has initiated a major legal action and has already applied to the Versailles administrative court for the following reasons: the illegal presence of the consultancy firm, which recommended a concession rather than public management, when the Paris-Saclay Council voted approving the launch of the call for tenders for a future concession contract; illegality of the protocols of end of contract, with in particular the repurchase of the meter fleet, and the abandonment to Suez, the existing delegatee, of the provisions for network renewal not consumed at the expiry of the contract; and finally omission of the new obligation to justify the depreciation of investments for the 12-year duration of the new concession contract and the "reasonable" profit margin of the concessionaire.

A police report on water management in Lourdes was sent to the public prosecutor's office in Tarbes in early 2017. It revealeds that for years, Suez overcharged for the water and sanitation services while municipality looked the other way. In a report published in January 2017, the Regional Court of Auditors stated that, out of ten invoices dated 2013, three did not correspond to any service. We do not know whether or not these practices continue. 

Agbar, the Spanish subsidiary of Suez, and its subsidiaries Aquagest and Sorea are central players in the corruption cases revealed in recent years by the Spanish press in the regions of Galicia, Asturias and Catalonia. In Galicia, since 2013, the judiciary has been investigating a general pattern of bribes, false invoices, clandestine/illegal financing of political parties, called "Operation Pokemon". Aquagest is being investigated along with more than a hundred mayors, municipal councillors, territorial civil servants and representatives of political parties. A similar system of corruption with Aquagest also affects the neighbouring region of Asturias, where dozens of mayors and municipal councillors were placed in police custody in 2015. In 2014, the mayor of Torredembarra (Tarragona province, Catalonia) and his municipal councillors were also taken into custody for embezzlement, influence peddling and capital money laundering during the awarding of public and concession contracts, including the contract for water management with Sorea. Convergència Democràtica de Catalunya, the political party in power in Catalonia at the time of the award of the concession contract for water management in the metropolitan area of Barcelona, is suspected of having received money from candidates competing for the tender including Agbar. This contract awarded in 2013 to Agbar as part of a public-private company has since been declared illegal for non-compliance with competition rules. The limitation of three years for these corruption offences prevented the conviction of corrupters (primarily Agbar) and corrupted persons (Convergència Democràtica de Catalunya and various political figures). As a precautionary measure, Suez's two most senior executives, Jean-Louis Chaussade and Gérard Mestralet, nevertheless left Agbar's Board of Directors at the end of 2015, when a new investigation for corruption called "Operation Petrum" (successor to Operation Pokemon) was launched.

Aqualia

Aqualia, a subsidiary of the Spanish construction company FCC, is the third largest private water company in Europe. FCC has just sold 49% of Aqualia's capital to the Australian investment fund IFM.

Executives of Acuamed (Aguas de las Cuencas Mediterráneas), a public company under the Spanish Ministry of Agriculture, are suspected of receiving bribes from private companies in exchange for the award of concession contracts for the construction of hydraulic works (seawater desalination plants, inter-basin water transfers, etc.) and the falsification of completion certificates. Among the companies involved are both Aqualia and FCC. On 18 January 2016, thirteen individuals, including six senior executives from private companies and Acuamed's General Manager and Director of Engineering and Construction, were indicted. 20 searches were carried out at the homes of the persons concerned and at Acuamed's offices in Madrid, Valencia and Murcia. The desalination plant in Bajo Almanzora (Almería) is one of the hydraulic works that led to the investigation of Acuamed by the financial prosecutor's office ("Operation Frontino"). The cost of building the plant by a consortium led by FCC and Aqualia was three times higher than expected. The plant has never operated properly due to poor design and damage caused by flooding in 2012.

The concession contract for the Oviedo water service, signed in 1996, requires Aqualia to maintain the entire distribution network, including standpipes and fire hydrants. In March 2017, the Plataforma por la Defensa del Agua Pública d'Oviedo filed a complaint against Aqualia for embezzlement and fraud. La Plataforma accuses Aqualia of not respecting the terms of the contract and of charging for the maintenance of the standpipes and fire hydrants through additional contracts with the complicity of the municipal services.

Aguas de Valencia

Aguas de Valencia, also known as Global Omnium, is present almost exclusively in the Valencia region, where it holds the majority of public contracts and concession contracts in the field of integrated water management, either directly or through public-private companies.

In 2008, Aguas de Valencia obtained a 25-year concession contract for the production and distribution of drinking water for the city of Gandia thanks to the payment of an entrance fee of 55 million euros. In 2012, the new city council launched a call for tenders for a 50-year concession contract covering the production and distribution of drinking water and sanitation, with a clause obliging the concession holder to compensate Aguas de Valencia for an amount of 83 million euros. This call for tenders was cancelled by the Administrative Court in 2013 because Aguas de Valencia was of course the only one able to respond.

In 2015, a survey of bribes paid to the president of the province of Valencia and to several provincial councillors of the Popular Party revealed a general pattern of bribes, rigged markets and overbilling of services provided by public-private companies at the provincial level, but also with ramifications in the metropolitan area of Valencia and the region. The sister of one of the provincial councillors who received bribes was a member of the board of directors of Aguas de Valencia and represented the company on the board of directors of Egevasa (a public-private company that carries the sanitation in 194 municipalities in the province) and Aguas de Calpe (a public-private company that produces and distributes drinking water in the city of Calpe). Egevasa and Aguas de Calpe are two of the public-private companies suspected of paying bribes in exchange for work overbilling.

Tackling corruption and transposition of the Directive on the award of concession contracts

There are many more corruption cases than those described above. But obtaining information is often quite challenging because the details are hidden by the secrecy of investigation. In addition, most national or local press organs fear losing their advertising contracts with the private company or municipality by publishing regarding corruption scandals.

It is extremely rare for an investigation in Europe to result in the conviction of a private company for corruption in the water sector for several reasons:
1. Finding irrefutable evidence of corruption is extremely difficult because very often, money moves through the accounts of intermediaries and shell companies;
2. The police and judges are sorely lacking in the means to carry out their investigations before the statute of limitations for the offence expires;
3. Police and judges are under strong pressure from political authorities at both local and national levels to reach an amicable settlement rather than convictions.

However, the situation is changing.

France has improved its anti-corruption mechanisms, which, together with Spain, was among the least effective in Europe. In 2013, France created the High Authority for the Transparency of Public Life, the Central Office for the Fight against Corruption and Financial and Fiscal Offences (OCLCIFF, police body), and the National Financial Prosecutor's Office (PNF, judicial body). Finally, in 2017, the brand new French anti-corruption agency (AFA) was created through the Sapin 2 law.

The PNF leads OCLCIFF investigations and prosecutes stock exchange offences, tax fraud and corruption offences when they appear too complex to be dealt with on a non-national scale. The AFA, attached to the Ministries of Justice and Budget, has made the prevention of corruption and the control of procedures implemented by private companies and public administrations part of its mission.

The Spanish Criminal Code establishes a three-year statute of limitations for corruption offences. In France since February 16, 2017, the statute of limitations is 6 years for these same offences. Moreover, the limitation period starts at the time of discovery of the offence and not at the date when the offence started, with a time limit of 12 years. French criminal law is therefore stricter in this area than Spanish criminal law.

The transposition of the Directive on the award of concession contracts places a Damocles sword above the heads of European water companies suspected of being involved in corruption cases. They are well aware of this and are eager to adopt a charter and other ethical guide in which they affirm their commitment to prevent corruption and conflicts of interest. Publicly, corporate spokespeople like Antoine Frérot, CEO of Veolia, claim that they want to clean up by chasing "black sheep" among their executives (as in the Olkypay case) – making corruption appear to be the result of the actions of a few corrupted individuals rather than a broader pattern within privatized services.

What does the Directive on the award of concession contracts and its transposition into French law say about corruption and conflicts of interest?

The European Directive 2014/23/EU on the award of concession contracts makes an economic operator convicted somewhere for corruption in one part of Europe ineligible as a candidate for concession contracts elsewhere in Europe (see Annex 1). Order 2016-65 of 29 January 2016 on concession contracts (see Annex 2) introduces this provision into French law by specifying it.

Any legal person (the private company or one of its senior executives) who, less than five years ago, was convicted on grounds of corruption, misappropriation or illegal taking of interests in connection with public contracts or concession contracts is excluded from the procedure for the award of a concession contract. The exclusion shall apply for three years from the time the offence is established.

If a local authority decides to override this clause and award a concession to a private company convicted of corruption, a users' association can have the concession contract annulled on the grounds of corruption of the company holding the concession, throughout Europe and not only in France.

Annex 1 : Directive 2014/23/EU on the award of concession contracts 

Introduction

(61) In order to combat fraud, favouritism and corruption and prevent conflicts of interest, Member States should take appropriate measures to ensure the transparency of the award procedure and the equal treatment of all candidates and tenderers. Such measures should in particular aim at eliminating conflicts of interest and other serious irregularities.

(69) Concessions should not be awarded to economic operators that [...] have been found guilty of corruption

Article 35: Combating corruption and preventing conflicts of interest

Member States shall require contracting authorities and contracting entities to take appropriate measures to combat fraud, favouritism and corruption and to effectively prevent, identify and remedy conflicts of interest arising in the conduct of concession award procedures, so as to avoid any distortion of competition and to ensure the transparency of the award procedure and the equal treatment of all candidates and tenderers.

The concept of conflicts of interest shall at least cover any situation where staff members of the contracting authority or entity who are involved in the conduct of the concession award procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the concession award procedure.

Article 38: Selection and qualitative assessment of candidates

4. Contracting authorities and contracting entities shall exclude an economic operator from participation in a concession award procedure where they have established that that economic operator has been the subject of a conviction by final judgment for one of the following reasons:
     b) corruption

7. Contracting authorities or contracting entities may exclude or may be required by Member State to exclude from participation in a concession award any economic operator if one of the following conditions is fulfilled:
     d) where a conflict of interest cannot be effectively remedied
     e) where the contracting authority has sufficiently plausible indications to conclude that the economic operator has entered into agreements with other economic operators aimed at distorting competition;

Annexe 2 : Ordonnance n° 2016-65 du 29 janvier 2016 relative aux contrats de concession

Article 39 : Interdictions de soumissionner obligatoires et générales

Sont exclues de la procédure de passation des contrats de concession :

1° Les personnes [morales, publiques ou privées] qui ont fait l'objet d'une condamnation définitive pour l'une des infractions prévues aux articles 432-10 [concussion], 432-11, 433-1, 433-2, 435-3 [corruption], 432-12 à 432-16 [prise illégale d’intérêts, détournement de biens, atteintes à la liberté d’accès et à l’égalité des candidats dans les marchés publics] du code pénal, […] ou pour recel de telles infractions, ainsi que pour les infractions équivalentes prévues par la législation d'un autre Etat membre de l'Union européenne.

4° Les personnes qui :

        c) Ont été condamnées au titre du 5° de l'article 131-39 du code pénal ou qui sont des personnes physiques condamnées à une peine d'exclusion des marchés publics.

Sauf lorsque la peine d'exclusion des marchés publics a été prononcée pour une durée différente fixée par une décision de justice définitive, l'exclusion prévue au présent 4° s'applique pour une durée de trois ans à compter de la date de la décision ou du jugement ayant constaté la commission de l'infraction.

Article 42 : Interdictions de soumissionner facultatives

I. Les autorités concédantes peuvent exclure de la procédure de passation du contrat de concession :

2° Les personnes qui ont entrepris d'influer indûment le processus décisionnel de l'autorité concédante ou d'obtenir des informations confidentielles susceptibles de leur donner un avantage indu lors de la procédure de passation du contrat de concession, ou ont fourni des informations trompeuses susceptibles d'avoir une influence déterminante sur les décisions d'exclusion, de sélection ou d'attribution ;

3° Les personnes à l'égard desquelles l'autorité concédante dispose d'éléments suffisamment probants ou constituant un faisceau d'indices graves, sérieux et concordants pour en déduire qu'elles ont conclu une entente avec d'autres opérateurs économiques en vue de fausser la concurrence ;

4° Les personnes qui, par leur candidature, créent une situation de conflit d'intérêts, lorsqu'il ne peut y être remédié par d'autres moyens. Constitue une situation de conflit d'intérêts toute situation dans laquelle une personne qui participe au déroulement de la procédure de passation du contrat de concession ou est susceptible d'en influencer l'issue a, directement ou indirectement, un intérêt financier, économique ou tout autre intérêt personnel qui pourrait compromettre son impartialité ou son indépendance dans le cadre de la procédure de passation du contrat de concession.

Note: The Spanish transposition of the Directive on the award of concession contracts was adopted two years late and Spain was ordered by the Court of Justice of the European Union to pay a fine of more than EUR 100 000 per day of delay.

Newspaper articles

Eaux usées d’Île-de-France : Un scandale exemplaire
Veolia visé par un scandale de corruption dans sa filiale roumaine
Affaire OlkyPay: le responsable eau de Veolia était au cœur de la corruption

Arrangements entre élus et gestionnaires : le scandale du prix de l'eau
El ciclo político del agua: caudales turbulentos
El alto cargo de Mas detenido dirigió una obra con un sobrecoste del 81%

La plataforma del Agua lleva a Aqualia a la Fiscalía por malversación y fraude
El juez investiga sobornos a altos cargos de Acuamed
Acuamed construyó en Almería desaladoras por el triple de lo previsto

Anulan el concurso del agua de Gandia por incumplir la libre concurrencia
La hermana del 'comisionista' de Rus, consejera en Aguas de Valencia
Investigación por corrupción sin precedentes en Sagunt