Spurred By Rockland County Times Report, New York PSC Continues Investigation of United Water Accounting Errors

BY CHERYL SLAVIN

Photo of Michael Pointing from News 12 report
Photo of Michael Pointing from News 12 report

The New York State Public Service Commission has opened an investigation into United Water’s accounting practices of the past 10 years, including the reasons for the recent termination of UWNY General Manager Michael Pointing and two other high level employees.

According to official PSC documents their investigation was initially prompted by the Rockland County Times’ September 17 report of the firings and the paper’s exclusive scoop that there was an internal United Water investigation into its own accounting practices under the regime of Michael Pointing. The PSC is seeking to determine whether there has been any misappropriation of funds as well as misstatements of revenue specifically for the period between 2010 and 2014, and whether that has led to any negative impact on consumer rates.

At the PSC’s November 13 meeting, Accounting Chief Joe Lochner presented an initial report of the on-going investigation based on the answers so far received from written interrogatories sent to United Water. The company denies that Pointing, Director of Finance Michael Blake and Manager of Utility Accounting Michael Roling were fired for “misappropriation of funds.” Rather, their employment was terminated after an internal investigation conducted by the company turned up an accounting error that over the four years from 2010 to 2014 produced a $7.1 million “misstatement” of revenue.

Blake and Roling were charged with “failing to exercise proper care to insure that revenue was recognized in a pattern consistent with actual sales as required under Generally Accepted Accounting Principles.” Pointing lost his job for relying on the mistakes of others and for “failing to do more,” as the head of the New York Division, to ensure accuracy.

United Water denies that this admitted mistake caused any harm to ratepayers. Lochner explained at the meeting that the “company was improperly booking a higher level of revenue reconciliation resulting from the operation of their tariffs than what was approved for recovery by the parties under these tariffs.” He further stated that the error at this point appears to have mostly inflated reported earnings, with no “clear, convincing evidence” of negative effect to consumers.

However, United Water also admitted that the discrepancy led to an aggregate increase in bonus pay of $2,139 to the three employees but that the funds for the bonuses came out of shareholders’ pockets, and not the ratepayers.’ The United Water internal investigation, led by its Ethics Committee, concluded that the “impetus for the misstatements appeared to be so that the New York Division would meet its budget targets, not so that the employees could receive increased bonuses.”

UW has also informed the PSC that, to ensure there has been no harm to customers, it has engaged the firm of Pricewaterhouse Coopers to conduct an independent audit of the company’s deferred balance/surcharge applications and accounting processes going back to 2003—the year that coincides with Pointing’s hire. Again, the cost for this review will be absorbed by the shareholders. Lochner stated that the staff investigation also remains open, and that it has requested UW to submit the PwC report when it is completed in the first quarter of next year.

Prior to the PSC investigation publicly confirming the scope of the accounting errors, Michael Pointing and his attorney Dennis Lynch had demanded the Rockland County Times retract the September 17 article and claimed it was defamatory. Pointing and Lynch implied a threat of a lawsuit against the newspaper if the story was not retracted.

Lynch is also the special counsel to the Town of Stony Point, a town ardently opposed to the ill-fated United Water desalination project, which Pointing had been pushing for while at the helm of the company.

Rockland County Times editor Dylan Skriloff said, “Dennis Lynch’s letter to our newspaper specifically stated that there was no internal United Water investigation into misstatement of revenue by Pointing’s regime, a claim that the water company itself has publicly contradicted. I am amazed the letter was ever written.”

Skriloff, who also was a 2013 Stony Point town supervisor candidate, stated, “I am mystified that the Town of Stony Point’s special counsel would agitate against the release of information that led to a state investigation clearly in the public’s interest.”