Veolia

Introduction

Considering itself globally as the 'benchmark in environmental solutions' Veolia, formerly known as Vivendi, provides services in four key areas. Water cycle management, waste recovery and recycling, energy efficiency and transportation of people and goods. Globally, in all sectors, they employ nearly 320000 people. Out of 32.6billion Euros of consolidated revenue, Water was the largest contributor with 34% of that revenue, Veolia Environmental Services (Waste) brought forth 28%, energy was 21% and transportation 17% . In water they are the second biggest supplier of water and wastewater services in the world. Clearly they are a vast global concern, providing essential services in countries across the globe. They were helped in this by the unique system in France, which saw municipalities often outsource essential public services out to the private sector. Consequently they were in prime position to take advantage of the neo-liberal revolution that advocated and then practiced outsourcing from the public to private sector and partnership between the two. As an implicit and explicit consensus took hold: private was good and dynamic and the public was bad and stagnant.

In their annual report for 2007 Veolia are pretty pleased with the financuial results borne from their expansionist strategy. Jérôme Contamine, Senior Executive Vice President said, “Our 2007 performance confirms our expansion strategy, which is based on the ability of Veolia Environnement’s teams to generate steady and sustainable organic growth in buoyant markets. This was complemented in 2007 by a policy of making selective acquisitions, which strengthen our leadership position.”. These aquisitions include buying out Thames Waters stake in the joint venture Scottish Water Solutions and their PFI contracts for Wastewater Treatment Plants in Scotland.

In water Veolia advances the view that they are best placed to manage the diverse and increasing demands for water. They recognise that agriculture, industry and domestic needs - population growth and rapid urbanisation are both burgeoning - all have competing needs for water. In their annual report for 2007 Its implicitly clear they proclaim themselves as best placed to manage these competing interests, through their technolgical expertise, ability and resources . They dont mention costing as a mechanism to manage these interests. This is however the dominant policy prescription articulated by all the main actors in the water sector. The arguments goes that by placing in price adequate tariffs usage will be regulated. Moreover, by extension, water is categorised as a commodity like any other and one that they are fighting to win the right to supply or more accurately to sell.

Veolia has been plagued by controversy in recent times however. Prosecutions and convictions of employees on corruption charges have happened and accusations of environmental degradation and price-gouging persist . Veolia Water sector is clear that one of their top priorities is to pursue growth opportunities in Europe, Asia and the Middle East . Europe is where the vast majority of their business takes place: 44% in France itself and 36% elsewhere in Europe. Given that the bulk of thier business is carried out in Europe its little surprise that Veolia lobbies so hard in and around the European Union.

Water: Key figures

• €10,927.4 million in revenue
• 60 operating countries
• 82,867 employees
• 78 million people provided with water service
• 53 million people provided with wastewater service
• More than 4,400 contracts managed around the world .

Controversy never far away

As Vivendi multi-billion debts were accummulated. Vivendi diversified and expanded into various sectors; a straegy that proved its undoing. An investigation in 2005 reported that 'the once-massive Vivendi Universal empire, of which Vivendi (now Veolia) Environnement was a part, was a maelstrom of corporate corruption and chaos, bribery convictions, raids on corporate offices by evidence-seeking securities investigators, class action suits filed by shareholders on both sides of the Atlantic, collapses in both its stock price and its credit rating, massive debt necessitating a fire-sale of assets, a discredited and ultimately ousted corporate chieftain, dizzying financial uncertainty, and an identity crisis' . The perils of treating water like any other commodity is shown in the case of Vivendi. Providing an essential element for life is different from making and showing movies: yet water was part of the portfolio of a company that treated both equally. A means to enhance their profit. To increase that profit they expanded their business in the entertainment industry. This was fianaced by money meant to upgrade vital infrastructure in France. This was described in the report by Public Citizen: 'As part of their contracts, Vivendi set aside a portion of revenues to be saved for maintenance and repair of the water system. A recent book by former Vivendi employee, Jean-Luc Touly, and investigative journalist, Roger Lenglet, reveals that by 1996 Vivendi’s “capital improvement” account added up to 27 billion Francs which were invested in a reinsurance company, General Re Financial Products. Lenglet and Touly claim that these funds were then used to finance Vivendi’s illfated end of the century buying spree. The French consumers’ 27 billion Francs, enough money to replace the entire water network of France, have gone down the drain, leaving Vivendi with a multi-billion dollar debt and the citizens of France with aging pipes in desperate need of rehabilitation . . Since then Veolia has spanned the globe for management contracts that enable them to profit without making any investment. Rather than them making the investment, the public does tghrough higher tariffs, grants, subsidies, tax breaks etc.

Or put another way,

Veolia is seeking 'management contracts with clear cash flows and little in the way of capital commitment. These are contracts where the company can lease assets and collect revenue without being required to make any major capital investments in maintaining, expanding or rehabilitating the water system infrastructure. In other words, the public must pay for pipes, treatment plants and other infrastructure, and the company gets to make the money. The French term for the model is affermage, but several English phrases serve more than adequately to describe the arrangement; for instance, “corporate welfare,” “subsidy” or “consumer rip-off.”' . This is the type of deal that they have entered into in Scotland.

Corruption

In their pursuit of expansion of 'affermage' contracts Veolia, through Vivendi or Generale Des Eaux, has often stepped outside legal boundaries. Manifesting itself most prominently through the bribing of public officials in exchange for public contracts it happened so regularly that it seems like a practice commonly done. Their were convictions of officials in the following places.

• Strasbourg, France, 1991
• St. Denis, Isle de La Reunion, France, 1996
• Angouleme, France, 1996
• New Orleans, Louisiana, USA, 2001
• Milan, Italy, 2001
• Bridgeport, Connecticut, USA, 2002

In recent times this litany of cases has increased. In Rockland, USA, a subsidiary of Veolia was recently made to pay the town $746000, $232500 fines and the rest legal fees for colluding with Rockland's former sewer superintendent in order to win a 1998 contract . Moreover, there is a lingering concern that in many of the places throughout the world where Veolia hold contracts that the regulatory and judicial environment is not as strong as where they have been prosecuted. Thus, making it easier to indulge in illegal activity if so inclined.

A Director of Veolia, Daniele Bouton, was under Judicial Investigation and placed under trial for apparent involvement in a multi- billion Euro money laundering scheme between France and Israel. Formerly Chief Executive of the bank Societie Generale he was forced to stand down after a banking scandal early in 2008 . Mr Bouton is still a Director of Veolia.

Veolia's transport section was also linked to a corruption case In Marbella, Spain. There officials were arrested on suspicion of bribery in connection with the renewal of the local transport concession granted by the Marbella local council .