Mississippi's capital city is suing the German company it hired to overhaul its water billing system, saying the company orchestrated "massive fraud" and failed to deliver on promises of saving the city $120 million.
A lawsuit filed Tuesday by the city of Jackson seeks more than $225 million from Siemens and several black-owned businesses that are subcontractors. That amount would cover the city's contract costs plus lost water revenue and damage to the city's credit worthiness.
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Siemens was hired in 2012, and the $90 million contract was the largest in city history. It called for installation of new water meters, a new billing system and infrastructure work.
"This case involves a massive fraud orchestrated by Siemens under the guise of an energy performance contract promising $120 million in guaranteed savings for the city," says the lawsuit filed in Hinds County Circuit Court. "Siemens committed fraud with respect to who was performing work on the project, what the system would do, and what savings the system would generate."
Jackson Mayor Chokwe Antar Lumumba said during a news conference Tuesday that the contract has led to widespread billing problems and thousands of faulty water meters, the Clarion Ledger reported.
"Their performance has been woefully inadequate in every aspect of the contract," Lumumba said of Siemens AG, a German company with U.S. corporate offices in Delaware.
Siemens issued a statement Tuesday saying its work on the Jackson water project "has been validated by an independent, third-party review" done by a separate firm hired by the city.
"Siemens has gone above and beyond its contractual obligations to help address the city's well-known challenges, which are complex," the company's statement said, according to WLBT-TV . "While Siemens has not yet reviewed the complaint, it is disappointed the city has taken this action and will respond through the appropriate legal channels."
The lawsuit says Siemens "misrepresented its commitment to hire qualified, minority-owned subcontractors" as part of a plan to "provide opportunities for historically-underutilized businesses."
Jackson is a majority-black city, but economic power is still largely held by white-owned banks and businesses.
"Instead of abiding by its promise to hire minority-owned businesses to perform 58% of the $90 million contract, Siemens used unqualified, sham subcontractors based on their political connections and influence to carry out a pass-through scheme that ultimately cost the city millions of dollars in inflated costs for an already overpriced water system," the lawsuit says.
For example, the lawsuit says a company owned by a black former state lawmaker, Tom Wallace, was supposed to sell water meters to Siemens for the Jackson project, but the politician's company bought the meters from another firm and then sold them to Siemens at a higher price, which drove up the city's expenses.
Another subcontractor named in the lawsuit, Marcus Wallace, told the Clarion Ledger on Wednesday that he was involved in more than 100 projects related to the contract, and that he had hired 130 people to work on it. Marcus Wallace's company was tasked with the installation of new water meters, and water plant and sewer line repairs. He said his company performed about 25 to 30 percent of that work, and contracted out the rest to Hemphill Construction Inc.
A spokesman for the Mississippi auditor's office said he could not comment on whether the office is investigating allegations the city makes in the lawsuit.
The lawsuit also says that more than half of the 60,000 water meters were installed incorrectly or did not meet requirements.
This story has been corrected to show comments about hiring 130 people to work on a contract are from Marcus Wallace, not Tom Wallace.