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Utility sues chemical makers

Maryland water supplier alleges several firms conspired to fix prices for the water treatment chemical aluminum sulfate

by Marc S. Reisch
October 26, 2017 | A version of this story appeared in Volume 95, Issue 43

Credit: Shutterstock
Aluminum sulfate is used to clarify water.
A picture showing a large water treatment tank.
Credit: Shutterstock
Aluminum sulfate is used to clarify water.

A Maryland water utility is suing an alleged cartel of chemical makers for supposedly conspiring to fix prices of the water treatment chemical aluminum sulfate, costing it millions of dollars.

Aluminum sulfate, also known as alum, is a flocculant, meaning it is added to drinking water and wastewater to make minute particles stick together so they can be filtered out.

Washington Suburban Sanitary Commission (WSSC), which serves 475,000 Maryland customers just outside of Washington, D.C., filed suit on Oct. 19 in U.S. District Court for the District of Maryland, charging that seven alum makers—including General Chemical, Chemtrade Chemicals, Geo Specialty Chemicals, and Kemira—rigged bids and allocated customers among themselves between 1997 and 2011.

WSSC says the scheme raised prices it and other U.S. utilities paid for alum through 2016. At least 68 other civil suits based on alum price-rigging allegations have been filed in federal court to recoup costs, WSSC says. Others suing alum makers include the Illinois-American Water Co., which filed its suit in April. In June, the cities of Baltimore and Richmond, Va., which supply water to their residents, also filed suits.

WSSC is asking the firms named in its suit for $5 million in compensatory damages and additional damage to be determined in a trial.

The WSSC and other suits follow the U.S. Department of Justice revelation in late 2015 of the price-fixing scheme. At that time, DOJ announced that Frank A. Reichl, a General Chemical sales executive, had pleaded guilty for his role in the scheme. As part of a deal with the government, he agreed to cooperate with prosecutors investigating the conspiracy.

In early 2016, federal prosecutors indicted another General Chemical sales executive, Vincent Opalewski, and a high-ranking Geo Specialty Chemicals executive, Brian C. Steppig, for their alleged roles in the scheme. In June 2016, Geo pleaded guilty and was ordered to pay a $5 million fine for fixing prices of alum.

By violating the competitive process, “Geo and others defrauded municipalities as well as pulp and paper companies out of millions of dollars,” said Timothy Gallagher, the FBI agent in charge of the Geo investigation at the time.



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