In the fall of 2019, the New Orleans Sewerage & Water Board uncovered what officials said was a major payroll fraud scheme inside the Carrollton Water Treatment Plant filter gallery — a vital facility that purifies the city’s drinking water.

Officials at the highest level of the agency were informed that employees appeared to be  working in concert with their managers to improperly, and perhaps illegally, gift themselves hundreds of thousands of dollars by abusing overtime and “chemical pay,” a special pay rate for the handling of hazardous chemicals such as chlorine. 

At least initially, there appeared to be broad agreement that there was clear misconduct and the agency needed to take swift action to stop it. 

“This was pretty blatant,” one agency investigator said at a personnel disciplinary hearing in the fall of 2020.

Following an extensive internal investigation in 2019, the Sewerage & Water Board’s chief of security recommended immediately firing three employees over the payroll fraud allegations, and potentially referring the evidence to the Orleans Parish District Attorney’s Office for criminal prosecution. (Evidence indicated that more than three employees may have been involved). 

Nearly four years later, no criminal charges have been filed, and only one of the three employees has faced serious discipline. Shortly after the investigation concluded, filter gallery employee Gregg Herbert was fired for payroll fraud, theft and falsification of records. But last month the Sewerage and Water Board agreed to reverse the termination, allow Herbert to retire with full benefits and give him $39,000 in back pay. It also agreed not to seek criminal prosecution. 

Of the two others, one retired earlier this year without facing discipline, New Orleans personnel records show. And the third, a manager named Steven Ware, is still working and has since been promoted twice. None of the three accused employees responded to multiple requests for comment. 

Sewerage & Water Board employees have complained to management about a host of other issues in the division in recent years, including allegations of favoritism, retaliation, unsafe working conditions and unchecked harassment. 

In 2022, a filter gallery employee filed a public whistleblower complaint that accused managers of using taxpayer dollars to build a “secret room” inside the Carrollton plant where a select number of employees would bring people to sleep with both on and off their shift.

Verite interviewed two current employees and one former worker from the Carrollton Plant, who spoke on the condition of anonymity for fear of retaliation. In their interviews with Verite, they confirmed the existence of what one employee described as a “secret sex room.” One employee provided a video of it, showing couches, a refrigerator, a microwave, a TV and a shelf full of framed photos of nude women.

YouTube video

The anonymous workers said that more baffling than the allegations is the lack of a strong response from the Sewerage & Water Board.

“Ain’t nothing being done about it,” one current employee said. “And if you do report anything, they tell you that you need to worry about yourself, don’t worry about nobody else.”

All the employees who spoke to Verite said the problems in their office got worse as Ware was promoted to higher positions, and said he was one of the central people driving the troubling workplace culture. 

Ware, who supervised Herbert in 2019, now works as a water purification supervisor and oversees 20 people. 

“It’s hard ever since Steven Ware took over,” one current employee told Verite.

The employees also said there was a broad perception in the office that Ware was somehow being protected from accountability by higher-ups.

“I quit after I realized nothing was going to happen,” the former employee said. “They protect Steven Ware as if he were a newborn baby. Why? I don’t know. I have no idea why they protect him so much.”

In an interview last week, Sewerage & Water Board Executive Director Ghassan Korban said  he was surprised and concerned about some of Verite’s findings.

“That gives me heartburn, to be honest with you,” Korban said. “I’m at a bit of a loss in terms of what you’re sharing. It bothers me to no end to hear. … It doesn’t make any sense.”

Korban, who took over the agency in 2018, was broadly familiar with the payroll fraud claims that emerged in 2019, and defended certain aspects of the agency’s response to Verite. He said that some policies have been updated to try to protect against future abuse. 

But he said he was unaware that Ware had been promoted, or that allegations against him have continued to accumulate over the past few years. 

“I’m not going to defend that decision (to promote Ware) by any means; I’m very disappointed about it,” Korban said. 

Korban said he is committed to investigating the allegations further and fixing the problems. He said that the agency would finally force Ware to serve a three-day suspension he was originally given in 2019 over the payroll fraud allegations. He said that would happen sometime in the next 60 days. 

Korban said that he had to learn more before making any firm judgements about whether the agency acted properly. But he said the decisions ultimately revolved around balancing the need to keep employees accountable while making sure the agency had enough qualified workers to provide clean drinking water. 

“That’s just the reality,” Korban said. “It’s hard to get people with the pay that we have. … It’s a root cause for multiple issues.”

Mayor LaToya Cantrell, who is the chair of the water utility’s governing board, did not respond to a request for comment. 

‘That’s what we’ve always done’

The issues within the Carrollton Plant’s filter gallery first became public almost four years ago when WDSU reported on high levels of overtime being paid to Sewerage & Water Board employees. Herbert, a 37-year employee at the agency, was one of the employees highlighted in the story. Herbert had a base salary of $49,000, but took home roughly $136,000 with overtime, according to WDSU. 

Two days after that TV report, according to an internal Sewerage & Water Board memo obtained by Verite, an employee made an anonymous complaint that Herbert was getting paid for hours he never worked. The agency launched an investigation.

The two internal investigators assigned to the case, both former veteran officers with the New Orleans Police Department, analyzed Herbert’s timesheets, staked out his house, used surveillance cameras to track his movements and interviewed multiple employees.

The result was a 158-page report, completed in September 2019. The investigators described their findings in no uncertain terms. 

“The Investigation clearly disclosed the abuse of overtime and chemical pay in the Filter Gallery,” they wrote. 

According to the report, some of the hours recorded on Herbert’s timesheets were simply impossible, such as working 28 hours in a single day. The investigators also caught Herbert at his home when he was scheduled and being paid to work. 

But the investigators did not conclude that Herbert was the only person at fault. They found that Herbert’s timesheets were filled out and signed by two of his managers — Ware and Charles LeBlanc — not by Herbert himself. 

“There has been testimony that there has been an ongoing scheme by Mr. Herbert, Mr. Weare (Ware) and Mr. LeBlanc to defraud the Sewerage and Water Board of hundreds of thousands of dollars,” a Sewerage & Water Board attorney, Joseph Zanetti, said during Herbert’s termination appeal hearing. “This is the logical conclusion.” 

When asked about the inaccuracies found on his time sheets, Herbert told investigators to speak to his bosses.

“You’re going to have to ask the timekeepers on that because they’re the ones who figure out how to manipulate the time,” he said. He added that “they will take all the time that we work and we will stack it.”

The investigators said they found a pattern — internally referred to as “stacking” — in which Herbert would log 40 hours of regular time in the first couple days of the week, which made every hour he worked for the rest of the week eligible for overtime rates. 

When Ware was interviewed, he said that regardless of when employees actually worked, he would stack their regular time in the beginning of the week to quickly accumulate 40 hours..  

Chemical pay jobs were put on timesheets at the end of the week, regardless of when the job was actually done, so that the 10% extra pay would be combined with the overtime rate to produce the highest possible payout. 

“That way the chemical pay will be at the overtime rate,” Ware told investigators. “That’s what we’ve always done.”

Along with recommending firing the three employees, the investigators also concluded that they had unearthed oversight problems that required serious policy changes. 

At first, the agency appeared to move quickly. Within a month of the investigation, Herbert was fired. 

Herbert appealed his termination to the New Orleans Civil Service Commission, which handles personnel matters for the city. During an initial termination hearing in September 2020, the agency’s head of security testified that although Ware and LeBlanc hadn’t been fired yet, there were still ongoing investigations into other employees involved in the payroll scheme, and still recommended immediate termination for Ware and LeBlanc.

A screenshot from a transcript from a Sept. 2020 Civil Service Commission hearing, showing an exchange between a S&WB Attorney Joseph Zanetti (“Q.”) and the S&WB Chief of Security (“A.”)

After that hearing, however, the agency’s efforts to hold those men accountable appear to fizzle. LeBlanc worked for another three years before retiring in January. Ware was promoted twice. 

Last month, the Civil Service Commission approved a settlement between Herbert and the Sewerage & Water Board. The agency agreed to allow Herbert to retire and give him back pay. The agreement also stated that the agency would not seek any criminal penalty against him. 

The settlement does not explain why the Sewerage & Water Board chose to settle. Herbert’s attorney, Theodore Alpaugh, told Verite in an interview that the arguments he used on behalf of his client for the settlement were “confidential.”

“The only comment I have is that if there was actually payroll fraud, they would have referred it to the (district attorney) and they wouldn’t have settled the case,” Alpaugh said. 

Based on Alpaugh’s line of questioning at the hearing, it appears that one of Herbert’s central defenses was that he was being unfairly targeted when there were many other employees collecting the same benefits.  

“Mr. Herbert’s timesheets were not the only ones that showed stacking, correct?” Alpaugh asked one of the investigators during a September 2020 hearing. 

As part of the appeal, Alpaugh and Herbert subpoenaed and planned to question several other Sewerage & Water Board employees who were also implicated in the alleged payroll fraud scheme. However, they never got the chance. The hearing was cut short when it became clear that Ware wasn’t going to comply with the subpoena. A city hearing officer said that Ware was in contempt of his subpoena. 

The plan was to resume the hearing and call those witnesses, but that never happened because the Sewerage & Water Board chose to settle. 

“The Herbert case unveiled and revealed that there were gaps in the policies, which led to abuse, in this case, by one employee,” Korban said last week. 

Korban said S&WB settled to ensure that Herbert retired rather than winning reinstatement.

“It would have been a huge loss for us if we had, you know, been forced to take him back,” Korban said.

While he can’t legally strip Herbert’s pension, Korban said he was looking for other ways to try to claw back some of the money he allegedly didn’t earn. Korban did not have an answer, however, when asked why the agency agreed to $39,000 in back pay. 

“Unfortunately, I’m not fully privy to the details for that,” Korban said. 

He said that the agency didn’t move forward with firing Ware and LeBlanc, or investigating other employees implicated in the scheme, in part because of a staffing shortage in the filter gallery division. 

“I think (Herbert) was probably the biggest and worst culprit,” Korban said. “And I would by no means defend other people’s actions. I’m not 100% certain what they did or did not do. I think our goal was to make sure that we have the sufficient expertise [to keep the facility operating].” 

He said that it was hard to find certified workers to fill roles vital to maintaining safe and clean drinking water. He said he had to balance the “grossness of the actions” against the need to have the necessary “expertise for one of the most critical responsibilities we have in the city, which is quality drinking water.” 

“If somebody leaves an important critical position, and you have one person that can fill it, you’re stuck. It’s a terrible dilemma, and I’m not going to undermine that decision for now. But I’m not going to defend it either.”

Korban said that the agency had overhauled some payroll policies that should protect against future abuses.

“​​That was a flawed process, an unacceptable process,” he said. “There was clearly a very loose process that lends itself to fraud.” 

He said the new policies require greater oversight from supervisors when filling out timesheets. However, Verite pointed out that in this case, Herbert’s supervisors were accused of collaborating in the process. And that one of them — Ware — now had an even larger role in overseeing the department. 

“You may be onto something here and you raise a good point,” Korban said. “I’m gonna hold judgment, and I’m gonna do more investigation to understand, and I’m sure you may have a follow-up on that story when I get a better appreciation of what happened.”

‘Secret sex room’

The big question is whether the agency’s policy changes have actually stopped the misconduct. Verite requested payroll data from the Sewerage & Water Board, but that won’t be available until August. 

Verite was able to confirm that last year, Steven Ware took home $113,000, well above his base salary of roughly $70,000. Korban said that could be because a lack of qualified staff forced employees to take on excessive, but legitimate, overtime. 

“Obviously when you see the timesheets you can conclude on your own whether things kept continuing,” Korban said.

There are some indications that problems have continued. In September of last year, an employee named Nicole Jackson filed a whistleblower appeal after receiving a five-day suspension for allegedly leaving work one to two hours early from a shift. 

In the public document, Jackson accused Ware and the Carrollton Plant management of various forms of misconduct, including harassment and fraud, and said that her complaints to managers had fallen on deaf ears. For example, after years of complaining about mold and rust and other hazards in the building, she finally brought her complaints to the federal Occupational Health and Safety Administration. 

Jackson said she was being unfairly targeted for trying to expose these problems. 

Her most salacious claim was that Ware and some of his “favorite employees” had built two “secret rooms,” furnished with Sewerage & Water Board funds, that employees used to sleep on the job or bring people to have sex with.

“It was like a brothel,” one employee told Verite. 

Korban said that the room was locked and dismantled following Jackson’s complaint.

But all the employees who spoke with Verite corroborated Jackson’s central concern — that Ware has certain favored employees he helps manipulate payroll, while retaliating against others he doesn’t like or thinks will cause him problems. 

“He will try anything and everything to make you quit or make your life as miserable as hell,” one current employee said. 

One employee said there was a “buddy-buddy system” where favored employees are given wide latitude on when they show up for work, while “coming down on everyone else.”

“They could go to the doctor’s appointment, don’t get docked. They could be late, they don’t get docked,” the employee said. “[Ware] was supposed to work this weekend and he wasn’t there.”

Asked if Ware had changed his behavior since the 2019 investigation, all three anonymous employees said no.

“He never stopped,” one said.

Join Verite’s Mailing List | Get the news that matters to you

Creative Commons License

Republish our articles for free, online or in print, under a Creative Commons license.

Help inform our coverage as we build a newsroom for and by the people of New Orleans:

Please take a few minutes to share your thoughts with us by answering each question.

Before joining Verite, Michael Isaac Stein spent five years as an investigative reporter at The Lens, a nonprofit New Orleans news publication, covering local government, housing and labor issues. During...