IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF IOWA
`WESTERN DIVISION
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`UNITED STATES OF AMERICA,
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`Plaintiff,
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`vs.
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`JAY EARNEST NIDAY,
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`Defendant.
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`No. 20-CR-4081-LTS
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`SENTENCING MEMORANDUM
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`Witnesses:
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`None
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`Exhibits:
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`1.
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`IDNR Certified Wastewater Operator Requirements
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`2. Excerpt from March 2013 Draft Master Plan Concerning Disinfection Problems
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`2A. March 8, 2013 Email Delivering Draft Master Plan to Defendant
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`3. March 16, 2015 Agreement to Not Finalize Draft Master Plan
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`Issues:1
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`1. Whether an adjustment for aggravated role is appropriate, pursuant to USSG
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`§3B1.1(a)?
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`1 Defendant recently moved for a downward variance. See Docs. 20-21. The
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`government will review and respond to the motion in the normal course.
`1
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`2. Whether an adjustment for abuse of position of trust, or use of special skill,
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`is appropriate, pursuant to USSG §3B1.3?
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`3. Whether defendant should repay court-appointed counsel fees?
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`TABLE OF CONTENTS
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`I.
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`II.
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`BACKGROUND FACTS ................................................................................... 2
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`AN AGGRAVATING ROLE ADJUSTMENT IS APPROPRIATE ........... 10
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`III. DEFENDANT ABUSED A POSITION OF TRUST AND USED A
`SPECIAL SKILL ............................................................................................. 13
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`IV. ATTORNEY FEES .......................................................................................... 14
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`V.
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`I.
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`CONCLUSION ................................................................................................. 15
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`BACKGROUND FACTS
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`A.
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`Introduction
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`At all relevant times, defendant Jay Niday was the Superintendent of the City
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`of Sioux City’s (“City”) Wastewater Treatment Plant (“WWTP”). PSR ¶ 41. The
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`WWTP is a large regional sewage treatment facility that treats wastewater before
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`discharging its final product (“effluent”) into the nearby Missouri River under the
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`terms of a Clean Water Act permit issued by the Iowa Department of Natural
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`Resources (IDNR). PSR ¶¶ 17-19, 41. The WWTP treats high-strength wastewater
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`from at least 20 significant industrial users throughout “Siouxland,” a three-state
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`geographic region whose industrial base consists largely of agricultural and food-based
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`processors. PSR ¶¶ 14-18.
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`2
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`In light of the heavy recreational use of the Missouri River in the area, proper
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`disinfection is a critical part of the WWTP’s treatment process. PSR ¶ 20.
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`Disinfection of the WWTP’s wastewater helps to ensure a healthy aquatic
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`environment. Id. If insufficiently disinfected, the WWTP’s wastewater may expose
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`recreational users of the Missouri River to various pathogens, including bacteria,
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`viruses, and protozoa. Id.
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`As a condition for permission to discharge effluent into the Missouri River, the
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`IDNR requires the City to disinfect the WWTP’s effluent from March 15 through
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`November 15 of each calendar year. PSR ¶ 21. During this “disinfection season,” the
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`Missouri River is warmer, and the level of the public’s recreational use of the Missouri
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`River is higher. Id.2 The WWTP was required to disinfect its effluent with liquid
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`chlorine3 and then take certain tests during the disinfection season in order to ensure
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`the Missouri River is safe for recreational use and wildlife. Id.
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`As described in more detail below, no later than about 2012, defendant and
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`other Sioux City officials and employees discovered that the WWTP did not work
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`properly and could not consistently disinfect the millions of gallons of wastewater that
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`2 IDNR classifies the Missouri River as a “Class A1” surface water because of
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`heavy local recreational use. PSR ¶ 18. The IDNR also has classified the Missouri
`River as an “impaired water” because of pollution. Id.
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`3 The WWTP uses a sodium hypochlorite solution (“liquid chlorine”) to disinfect
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`its wastewater stream. PSR ¶ 25. Because liquid chlorine is toxic to fish and other
`aquatic life, proper disinfection practices require the subsequent addition of sodium
`bisulfite to the wastewater stream to reduce the total residual chlorine (“TRC”) in the
`WWTP’s effluent. Id. Sodium bisulfite neutralizes sodium hypochlorite after the
`sodium hypochlorite destroys pathogens. Id. The WWTP’s permit thus included
`limites on TRC, in order to protect the environment. Id.
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`3
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`the WWTP was discharging into the Missouri River each day. Rather than alert the
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`Iowa Department of Natural Resources (IDNR) to this serious problem, however,
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`defendant betrayed the trust of the public and conspired with others, most notably his
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`subordinate shift supervisor Patrick Schwarte, to cheat on the WWTP’s required
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`environmental testing. Defendant and his coconspirators employed a fraudulent
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`testing procedure that ensured that the City’s WWTP would always pass its effluent
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`tests for fecal coliform, E. coli, and total residual chlorine (TRC).4
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`The criminal conspiracy continued until a whistleblower conducted the
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`whistleblower’s own testing of the WWTP’s effluent, discovered “that the WWTP was
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`in significant violation of its effluent limits,” and reported the whistleblower’s findings
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`to the IDNR. PSR ¶¶ 76-77.5 In June 2015, the City terminated defendant’s
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`employment. Id.
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`B.
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`The WWTP Does Not Work
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`In 2011, defendant had a very serious problem—the WWTP did not work as
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`designed and could not consistently disinfect wastewater. At the same time high-
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`ranking city officials were touting the effectiveness of the WWTP’s new “MLE process”
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`4 E. coli is a species of fecal coliform bacteria that is specific to fecal material
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`from humans and other warm-blooded animals; its presence tends to indicate fecal
`contamination of the water. Monitoring is typically for fecal coliform or E. coli, as
`opposed to various individual pathogens of human disease, because there are many
`different pathogens; pathogens are more difficult to measure; the presence of one
`pathogen does not necessarily predict the presence of another pathogen; and a specific
`pathogen may not be present at the time of testing. PSR ¶ 22.
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`5 In about October 2014, the whistleblower called an IDNR official and reported
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`the whistleblower’s suspicions to that official. PSR ¶ 76. In November 2014, near the
`end of that year’s disinfection season, the IDNR official asked the defendant if the City
`was disinfecting with liquid chlorine every day, and the defendant lied and said the
`City was doing so. Id.
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`4
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`to the IDNR in an attempt to convince the IDNR to re-rate the WWTP to increase its
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`treatment capacity,6 defendant and one such official had “discovered serious, ongoing
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`disinfection problems at the WWTP.” PSR ¶ 47.
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`Beginning no later than 2011, and continuing until at least June 2015,
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`defendant and others knowingly withheld from the IDNR serious problems with the
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`MLE process, specifically impacts on disinfection at the WWTP. PSR ¶ 46. In
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`contrast to its advertisements to the IDNR that the MLE process was a success, and
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`requests to the IDNR that the WWTP’s rated capacity should be increased, significant
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`problems with disinfection became apparent shortly after the MLE process came
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`online. Id. Defendant and others concealed this fundamental problem with the MLE
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`process from the IDNR and an engineering firm that the City had hired to assist with
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`the re-rating process, because exposure of the WWTP’s disinfection problems would
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`halt the City’s efforts to re-rate the WWTP absent significant capital investment in the
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`WWTP. Id.7
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`No later than May 1, 2012, however, defendant notified the engineering firm
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`that the City had hired to oversee construction at the WWTP, CDM Smith, Inc.
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`(“CDM”) about the City’s disinfection problems.” PSR ¶ 49. Defendant reported to
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`6 The City has long sought to recruit and retain industries with high-strength
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`wastewater. PSR ¶ 17. The City uses the purported capacity of the WWTP to attract
`such industries in an ever-present economic development competition with other
`municipalities in Iowa and elsewhere. Id. Cheating on required environmental tests
`gave the City an unfair advantage in this competition among municipalities.
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`7 Doing so would also call into question the federal loan disbursements that the
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`City was receiving throughout this timeframe. PSR ¶ 49. The City has received no
`less than $16,548,890.91 in federally subsidized loan funds since January 3, 2011. Id.
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`5
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`CDM that WWTP operators had “the sodium hypo dosing pumps maxed out and they
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`are still not meeting E. coli kill levels for their effluent permit.” Id. “CDM indicated
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`that the City had estimated that ‘at the amount of [liquid chlorine] the[y] are feeding
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`currently it will cost $3m a year in chemical.’” PSR ¶ 50.8 “By the end of June 2012, a
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`CDM engineer examining the data that the City provided observed that ‘[t]he effluent
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`nitrite being produced by this plant is the highest I have ever seen.’” PSR ¶ 52.
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`On August 30, 2012, a CDM engineer informed defendant that “[t]he numbers
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`[for chlorine] . . . are very high and it looks like you still have very high nitrite in the
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`effluent.” Based on the data that the City provided to CDM, a CDM engineer would
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`later conclude that the WWTP’s “chlorine doses were insane to push through the
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`breakpoint” to allow for disinfection. PSR ¶ 60.
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`By September 2012, a CDM engineer provided defendant with information on
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`toxicity test failures and how to detect nitrification inhibition, which appeared to be
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`causing the problems with the MLE process at the WWTP. PSR ¶ 61. However,
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`locating and eliminating the source of the toxic agent would not be an easy task,
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`especially if there were multiple sources. Id.
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`CDM surmised that “waste from heavy industrial users was inhibiting the MLE
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`process and, in turn, disinfection.” PSR ¶ 51. One engineer believed there was “a
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`clear indication of toxicity, likely from something being discharged by one of their
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`industrial users.” PSR ¶ 52. Although CDM wrote a memorandum to defendant and
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`another City official requesting that the City conduct additional testing and send it to
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`8 According to a 2008 facility plan, the total operating budget at that time was
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`about $3.5 million, including labor, energy, and expendable supplies (chemicals,
`maintenance parts, materials, etc.) and replacement reserve. PSR ¶ 50.
`6
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`CDM, the City never provided all of the data that CDM requested. PSR ¶ 51. Nor did
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`the City contract with CDM to construct a fix to the problem—either an entirely new
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`disinfection system or a temporary ammonia feed system. PSR ¶ 53. Those options
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`“would require significant expense and IDNR approval, as well as expose the City’s lie
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`to IDNR that the MLE process was working well and thus the WWTP should be re-
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`rated to accept more load and flow from the WWTP’s significant industrial users.” Id.
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`C.
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`The Criminal Conspiracy: Rigging the Environmental Tests
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`Defendant did not report any exceedances of the WWTP’s disinfection permit
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`limits after 2012. PSR ¶ 54. Rather, defendant organized a criminal solution to the
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`problem—a fraudulent testing procedure that ensured that the City would always pass
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`its effluent tests for fecal coliform, E. coli, and TRC. PSR ¶ 59.
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`No later than July 2012, the defendant and Patrick Schwarte, and at least five
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`first-shift operators acting at the direction of the defendant and Schwarte, tampered
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`with the monitoring methods at the WWTP in order to ensure the WWTP would pass
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`all of its tests. PSR ¶ 54. Specifically, early in the morning on testing days for fecal
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`coliform or, after March 2015, testing for E. coli, as required by its permit, defendant
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`and Schwarte instructed first-shift operators at the WWTP to increase the rate of
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`liquid chlorine supplied to the wastewater in the online chlorine contact chamber.
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`PSR ¶ 55. After an hour or two passed, and an artificially high level of chlorine was
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`fully mixed into the online chlorine contact basin, the defendant and Schwarte ordered
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`the WWTP’s first-shift operators to use hand-held colorimeters to gauge the levels of
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`chlorine. Id. Only when the colorimeter “maxed out” at 2.2 mg/L would the defendant
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`take a sample for fecal coliform or E. coli.; if the colorimeter read 2.2 mg/L, the
`7
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`defendant and Schwarte were certain the sample would pass a laboratory analysis on
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`account of the large amount of liquid chlorine in the chlorine contact chamber at that
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`time. Id. This fraudulent procedure allowed for the chlorine in the WWTP contact
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`chamber to reach sufficient concentrations to avoid showing elevated levels of fecal
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`coliform or E. coli, which would violate the WWTP’s permit. Id.
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`The increase in the amount of liquid chlorine supplied to the online chlorine
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`contact basin was substantial but temporary. PSR ¶ 56. Immediately after taking the
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`fraudulent fecal coliform or E. coli test, the defendant and Schwarte would instruct the
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`WWTP’s operators to lower the rate of liquid chlorine fed to the chlorine contact
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`chamber back to minimal levels. Id. The liquid chlorine rate was increased from about
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`2.5 gallons per hour, to somewhere between 70 to 120 gallons per hour, for up to two
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`hours. Id.
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`On non-testing days, the defendant and Schwarte and others working for the
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`City maintained the chlorine feed rate at minimal levels, well below the designed feed
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`rate of the WWTP and at a rate clearly insufficient to ensure the WWTP consistently
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`and adequately disinfected its wastewater, as the City’s permit required. PSR ¶ 57.
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`The engineering firm that designed the liquid chlorine feed system at the WWTP
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`estimated that approximately 16.7 gallons of chlorine would need to be fed per hour,
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`but the City was supplying chlorine to the chlorine contact chambers at a much lower
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`rate. Id.
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`D.
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`The Draft Master Plan
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`In March 2013, CDM prepared a draft of the Master Plan (“2013 Draft Master
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`Plan”) contemplated under its $1 million “Phase 3” contract with the City. PSR ¶ 64;
`8
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`Exhibit 2. A CDM representative sent the 2013 Draft Master Plan directly to
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`defendant and another City official in an email. Exhibit 2A.
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`Section 5 of the Master Plan discussed the disinfection problems at the WWTP
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`at length. PSR ¶ 63; Exhibit 2. CDM examined what sampling defendant had
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`provided to the engineering firm and concluded the MLE process could not provide
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`adequate disinfection of the WWTP’s influent given the apparently high toxicity in its
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`significant industrial users’ influent. PSR ¶ 64.
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`In other words, the 2013 Draft Master Plant made crystal clear, in writing no
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`less, that the WWTP did not work. Specifically, the 2013 Draft Master Plan observed:
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`Due to the inconsistent ammonia concentration, a stable chloramine dose
`cannot be formed. In addition, the data shows a high concentration of
`nitrites, which should be less than the nitrates. Nitrites have a high
`chlorine demand that takes five parts of chlorine to oxidize one part of
`nitrite. The present of nitrites over nitrates was also an indication that
`there was toxicity or upset conditions in the MLE process hindering the
`bacteria from completing the full two step nitrification process. Organic
`nitrogen was also present upstream of the contact basins, which can also
`exert a chlorine demand.
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`PSR ¶ 64; Exhibit 2, p.3.
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`Defendant did not conduct the recommended additional sampling or follow the
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`recommendations in the 2013 Draft Master Plan. PSR ¶ 66. Instead, defendant
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`instructed CDM to not finalize the 2013 Draft Master Plan into a Final Master Plan,
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`as CDM and the City had originally contemplated under their contract. PSR ¶ 66;
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`Exhibit 3. Defendant told CDM that the City no longer needed a Final Master Plan.
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`Id.9
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`9 The City relieved CDM of its contractual obligation to prepare a Final Master
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`Plan and never requested bids for construction of an ammonia injection system. PSR
`9
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`II.
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`AN AGGRAVATING ROLE ADJUSTMENT IS APPROPRIATE
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`In Paragraph 86 of the PSR, the USPO correctly scores a four-level increase
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`for aggravating role in the offense, pursuant to USSG §3B1.1(a). Section 3B1.1(a)
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`provides, “[i]f the defendant was an organizer or leader of a criminal activity that
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`involved five or more participants or was otherwise extensive, increase by 4 levels.”
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`Defendant was the organizer and leader of the criminal activity, which involved
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`five or more participants and, in any event, was otherwise extensive.
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`As indicated in Section I above, defendant was the WWTP’s
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`Superintendent—that is, he was in charge of the entire sewage treatment plant
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`and the top City official working there. PSR ¶¶ 13-17, 41. Defendant supervised
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`Schwarte and the lower-level operators in the operation of the WWTP and directed
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`them to engage in the criminal activity at issue—namely, the rigging of the
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`WWTP’s environmental tests from no later than 2012 through at least June 2015.
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`See, e.g., PSR ¶¶ 54-59. As the undisputed portions of the PSR make clear, “No
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`later than July 2012, the defendant and Patrick Schwarte, and at least five first-
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`shift operators acting at the direction of the defendant and Schwarte, tampered with
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`the monitoring methods at the WWTP in order to ensure the WWTP would pass all
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`of its tests.” PSR ¶ 54.
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`Schwarte has already pled guilty to his part in this conspiracy, and so he
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`clearly qualifies as a “participant” in this offense. These five other persons qualify
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`as “participants” in the criminal activity for purposes of USSG §3B1.1, as well,
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`¶ 66. Nor did the City ever provide a copy of the 2013 Draft Master Plan to the IDNR.
`Id. However, the City continued to press the IDNR to re-rate the WWTP to increase
`its purported capacity. Id.
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`10
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`because those persons could be held criminally responsible for their acts; helping to
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`rig the environmental test results at the WWTP, of course, forms the basis for a
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`number of federal crimes. 33 U.S.C. § 1319(c)(4); 18 U.S.C. § 2; 18 U.S.C. § 371.
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`As the USPO recognizes, the mere fact that the grand jury has not charged
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`the other five persons is irrelevant to the analysis for aggravating role. See USSG
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`§3B1.1, comment (n.1). This is not a case in which one of the other five persons, for
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`example, was an undercover law enforcement officer. See id. Further, a supervisor-
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`employee relationship, in which the supervisor instructs the employee to commit
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`acts that form the basis for a crime, may be sufficient to support a role
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`enhancement under USSG §3B1.1. See, e.g., United States v. Due, 141 F.3d 1171,
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`1998 WL 105863, at *1 (8th Cir. 1998) (unpublished per curiam) (affirming role
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`enhancement where part owner and vice president supervised line-level employees
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`in illegal burying of waste); United States v. Braun, 60 F.3d 451, 453 (8th Cir. 1995)
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`(affirming supervisor’s role enhancement and rejecting arguments that none of his
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`employees were charged by the grand jury, none of the employees benefitted from
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`the illegal conduct, and none of the employees took part in the supervisor’s later
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`diversion of funds or investments in the commodities market).
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`In any event, this criminal activity was clearly “otherwise extensive” and
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`thus defendant qualifies for the four-level aggravating role enhancement under
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`§3B1.1. Under the second prong of §3B1.1(a), which may independently provide
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`grounds for an aggravating role enhancement, “[i]n assessing whether an
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`organization is ‘otherwise extensive,’ all persons involved during the course of the
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`entire offense are to be considered. Id., comment (n.3). Specifically, a scheme that
`11
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`“used the unknowing services of many outsiders could be considered extensive.” Id.
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`That is certainly the case here, because a large regional waste treatment facility
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`such as the WWTP could not possibly pollute the Missouri River for so many years,
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`without detection no less, absent the unknowing services of many persons. As the
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`Eighth Circuit Court of Appeals observed in United States v. West, 942 F.2d 528,
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`531 (8th Cir. 1991):
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`[W]e are entirely satisfied that the record supports the finding that
`the criminal activity was “otherwise extensive.” The “otherwise
`extensive” language refers “to the number of persons involved in the
`operation,” United States v. Boula, 932 F.2d 651, 654 (7th Cir.1991), and
`includes “all persons involved during the course of the entire offense,”
`U.S.S.G. §3B1.1, comment. (n. 2), including “outsiders” who did not have
`knowledge of the facts. Id. In this case, West does not dispute either that
`he was a supervisor or that at least eight employees participated in the
`adulteration, though some may have participated without knowledge of
`the facts making their activities part of a crime. The district court did not
`err in considering these employees in determining that the criminal
`activities in this case were “otherwise extensive.”
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`The same principle as in West applies in the case at bar, because defendant
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`was the supervisor in charge of the entire WWTP and at least five employees
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`participated in activities that made the crime possible. Therefore, the Court should
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`overrule defendant’s objection to the four-level increase for aggravating role in the
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`offense under USSG §3B1.1(a).
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`12
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`III. DEFENDANT ABUSED A POSTION OF TRUST AND USED A
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`SPECIAL SKILL10
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`In Paragraph 87 of the PSR, the USPO correctly scores a two-level increase,
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`pursuant to USSG §3B1.3, because defendant “abused a position of public . . . trust”
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`and “used a special skill in a manner that significantly facilitated the commission or
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`concealment of the offense.” USSG §3B1.3. Defendant’s position as the WWTP’s
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`Superintendent was “a position of public . . . trust characterized by professional or
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`managerial discretion” for which substantial education, training, and licensing was
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`required. USSG §3B1.3, comment., nn. 1, 3.
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`As indicated in Part I above, defendant was a certified State of Iowa Grade
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`IV wastewater treatment plant supervisor. PSR ¶ 41. Grade IV certification is the
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`highest grade of certification that the State of Iowa offers, requires four years of
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`post-high school education, two years in direct responsible charge at the Grade III
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`level, and continuing education requirements. See 567 Iowa Admin. Code ch. 81;
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`Exhibit 1. A Grade IV certification is required to operate the State’s largest and
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`most complex wastewater treatment plants, such as the WWTP. See id.
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`Defendant possessed extensive training and experience in wastewater
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`treatment. Id. Defendant was in charge of the entire WWTP, which was a large
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`regional sewage treatment plant that purported to treat waste for the entire
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`Siouxland region. PSR ¶¶ 14-16.
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`10 The parties agree that, with respect to Count 2, pursuant to USSG §3B1.3, if
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`the Court determines an adjustment would apply under USSG §3B1.3, but would be
`based solely on the use of a special skill and not an abuse of a position of public trust,
`any such adjustment may not be employed in addition to any adjustment under USSG
`§3B1.1. See USSG §3B1.3.
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`13
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`United States v. Kuhn, 345 F.3d 431, 437 (6th Cir. 2003) is apposite. In
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`Kuhn, the Sixth Circuit Court of Appeals affirmed the §3B1.3 enhancement for the
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`superintendent of a WWTP. The Sixth Circuit wrote:
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`It is clear that the [§ 3B1.3] enhancement was properly applied.
`Kuhn was a government employee, charged with the safe and efficient
`operation of a wastewater treatment operation. He was convicted of
`knowingly causing sewage sludge to be discharged into a navigable
`waterway and falsifying reports. The statutes that were violated were in
`place to protect the general public from this sort of activity. It is difficult
`to see how members of the general public were not in a beneficial
`relationship with Kuhn, as significant numbers of the public depended
`upon Kuhn to prevent or ameliorate water pollution in the area.
`Moreover, his high-level position with respect to his public function of
`wastewater treatment, contributed in some significant way to facilitating
`the commission of his offense.
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`Kuhn, 345 F.3d at 437 (citation and internal quotation marks omitted).
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`III. ATTORNEY FEES
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`In relevant part, 18 U.S.C. § 3006A(c) provides that, “[i]f at any time after the
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`appointment of counsel [the district court] finds that the person [for whom counsel
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`is appointed] is financially able to obtain counsel . . . , it may . . . authorize payment
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`as provided in subsection (f), as the interests of justice may dictate.” Subsection (f),
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`in turn, authorizes the district court to direct that the repaid funds be paid to,
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`among other entities, the district court.
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`Before defendant was indicted Chief United States Magistrate Judge Kelly
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`K.E. Mahoney found that defendant had the ability to pay for his defense and
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`ordered defendant to make $250 monthly payments. PSR ¶ 121. Defendant made
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`these payments for ten months, for a total of $2,500, until the Court suspended such
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`payments until such time as defendant was formally charged. Id. Those payments
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`Case 5:20-cr-04081-LTS-KEM Document 22 Filed 03/25/21 Page 14 of 15
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`have remained stayed, however, during the pendency of this case. Id.
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`Defendant does not dispute he has the ability to pay a financial penalty, see
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`PSR ¶ 122, so it necessarily follows that he is financially able to contribute to the
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`cost of his defense. Although it does not appear that defendant is presently
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`employed, he has a positive net worth, including significant stock holdings and
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`other assets that could be liquidated to defray at least some of the money that
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`taxpayers will otherwise pay toward his defense. PSR ¶ 119. The government
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`takes no position with respect to the particular amount that defendant should be
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`required to repay.
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`V. CONCLUSION
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`The Court should find the USPO has correctly determined that defendant’s
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`Guidelines range is 30 to 37 months’ imprisonment, based upon a total offense level
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`of 19 and a criminal history category I. The Court should sentence defendant
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`within such range, impose a fine, and order defendant to defray the costs of his
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`court-appointed counsel.
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`Respectfully submitted,
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`SEAN R. BERRY
`Acting U.S. Attorney
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`By, /s/ Timothy L. Vavricek
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`TIMOTHY L. VAVRICEK
`Assistant United States Attorney
`111 Seventh Avenue, SE, Box 1
`Cedar Rapids, IA 52401
`319-363-6333/319-363-1990 (Fax)
`tim.vavricek@usdoj.gov
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`15
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` CERTIFICATE OF SERVICE
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` I
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` hereby certify that on March 25, 2021, I
`electronically filed the foregoing and its
`attachments with the Clerk of Court using
`the ECF system which will send notification
`of such filing to the parties or attorneys of
`record.
`
`
`UNITED STATES ATTORNEY
`
`BY: /s/TV
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`Copy to:
`Mr. J.P. Greer
`USPO
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`Case 5:20-cr-04081-LTS-KEM Document 22 Filed 03/25/21 Page 15 of 15
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