Liquidity: Privatization and the Rise of Big Water - The Ripple Effect: The Fate of Freshwater in the Twenty-First Century - page 232

was forced out of the company, Vivendi's shares were downgraded to junk status, and
rumors swirled that the firm might file for bankruptcy.
New management was installed and turned the company around. In a bid to raise
cash, the company spun off Vivendi Environment, the original water company, which
was renamed Veolia in 2003. In 2006, the company's revenues shot up 12 percent.
Veolia's new chairman, Henri Proglio, was the antithesis of Messier—he claimed to have
never owned a tuxedo and said that corporations must act as a positive force on the en-
vironment.
Veolia's prime competitor is another Paris-based multinational, Suez Lyonnaise des
Eaux, which grew out of the group that built the Suez Canal in the 1860s. In 2007, it
was ranked ninetieth on the Forbeslist of the world's largest public companies. In 2007,
Suez had water and energy projects in thirty-one countries and annual revenues of $60
billion. Suez gained notoriety when, in 1994, the former mayor of Grenoble was sen-
tenced to a four-year prison term for accepting a $3 million bribe for privatizing the
city's water system; three local Suez officials were also sentenced in the case. Suez's then
CEO, Jérôme Monod—a close associate of Jacques Chirac, the mayor of Paris and later
president of France—was reported to have personally finalized the deal in Grenoble.
Monod was never charged and later served as Chirac's senior adviser. A second court
ruling showed that Grenoble's Suez subsidiary grossly overcharged customers and used
fraudulent accounting, even allowing for a rise in rates to compensate the company
when people conserved water. As a result of the scandal, control of the water system was
turned over to a public utility, and Grenoble's water rates became some of the lowest in
France.
Suez's high-handedness in Grenoble, wrote the International Consortium of Invest-
igative Journalists , “revealed how the privatization of water offered the perfect oppor-
tunity for personal gain and corporate graft.”
In the United States, Suez owns United Water , a subsidiary that has operations
stretching from El Segundo, California—where it runs the West Basin Recycling Dis-
trict, the largest water-recycling operation in North America—to a small treatment
plant in the town of St. Johnsbury, Vermont. Most of their contracts have been renewed
uneventfully. But a few have not.
In January 1999, United Water began to manage the Atlanta, Georgia, water system.
The company had won the city's twenty-year contract with a surprisingly low bid of
$21.4 million a year, which was about half the cost of the existing public system. The
$428 million deal was the largest water-privatization contract in US history. In explain-
ing the shift from a public to private system, Mayor Bill Campbell told the Atlanta
Journal-Constitution,“It's virtually impossible to finance the improvements without go-
ing to … privatization.” For Suez, the corporate strategy was to use Atlanta as a “loss