By Benjamin J. Gohs, Editor
Eight years after allegations of racketeering against Walloon Lake Water System led to plea deals, dropped charges, settlements, a counter-suit, and plans for Melrose Township to purchase the water system for $1.379 million, there are new complaints and still no deal.
Melrose Township Clerk Robin Hissong-Berry told the Boyne City Gazette that the township’s attorney is trying to find out from WLWS owner Dennis Hass’ attorney what, if anything, is going to happen next.
“We hired an outside appraiser because our attorney was negotiating with his (Hass’) attorney to buy it (WLWS) but he wouldn’t give the appraiser access,” Hissong-Berry said. “So, we paid for an appraisal only to get a report that said he was unable to see the necessary records.”
She added, “In the past when we tried to deal with him (Hass) we said, ‘How many customers are there?’ and he said that was confidential. You’re trying to sell us your business but you won’t say how many customers you have?”
According to Hass, there is currently no negotiation.
Hass spoke with the Boyne City Gazette regarding the water system and said the last he knew about the appraisal was that the two parties had not come to terms on what they were doing and what the appraiser’s qualifications were.
“I don’t know what they need to appraise,” he said. “They’ve got everything information-wise from previous negotiations and what the state’s given them.”
Hass wouldn’t discuss the price he’s asking but said the number of $1.379 million that the board had disclosed several years ago isn’t even close.
“We’ve got a lot to talk about as far as price,” Hass said. “The price has changed substantially. We’ve done a lot of work on the system since then.”
Prior to the latest negotiations to purchase the water system, Melrose Township was granted a permit to drill test wells to determine if it could create its own municipal water source.
According to Hissong-Berry, shortly after receiving the permit, Hass appeared unbidden at a township board of trustees meeting and told the board he was willing to sell his water system.
Hissong-Berry said the township put aside the idea of creating its own water system and entered negotiations with Hass to buy WLWS.
In November of 2017, the township board approved a motion directing its attorney to investigate conditions of the water system.
In July of 2018, Melrose Township approved a $4,900 charge for a formal appraisal of the water system.
“We’re interested in buying it but we can’t buy something if we can’t have an appraisal for its value,” Hissong-Berry said. “He’s the one who approached us out of the blue.”
Hoping for a deal
As the negotiations linger, more and more water system customers are finding the situation difficult.
“We’ve had numerous customers tell us to buy it (WLWS) at any price,” said Hissong-Berry.
Greg Bentley, part owner of a housing development which falls within the WLWS coverage area, has shared his concerns with some state officials.
In a Sept. 20 letter to Michigan 105th District Rep. Triston Cole (R-Mancelona), Bentley urged the legislator to address what he sees as an overreach of state government which led to the monopoly on water systems in the Village of Walloon Lake.
“The property owners in the Village of Walloon Lake have effectively been held hostage to abuses by the Walloon Lake Water System,” Bentley stated. “This unregulated private water company has been granted a monopoly by restricting the issuance of water well permits by the Health Department of Northwest Michigan.”
The prohibition is found in the health department’s District Sanitary Code.
“Property owners, to include myself, have been verbally denied well permits by the Charlevoix County Health Department by referencing Public Act 399, stating that act prohibits the issuance of well permits if a public water source is available,” Bentley said. “Myself and others have scrutinized Public Act 399 and have not found any such reference. The only published prohibition for the issuance of a well permit is found in the District Sanitation Code 6-6-6, drafted by the health department employees in Charlevoix County.”
According to Bentley, the Walloon Lake Water System is now putting pressure on him to make equipment upgrades which he simply cannot afford.
“The Walloon Lake Water System has recently issued a revised water tariff that is requiring the 12-unit apartment building that I own in Walloon Lake to install 13 new water meters,” he stated. “This modification would require the re-plumbing of the entire structure. The cost to complete this work is in excess of a $90,000 dollars.”
Bentley added, “The water tariff has demanded that, if we do not install the 13 meters, we will face shut-off and our residents (many of whom are elderly) will be forced to vacate. We cannot afford to re-plumb the building.”
According to Hass, the issue with Bentley has been resolved.
However, when reached for an update on the matter, Bentley said nothing has changed since he contacted his legislators regarding the matter.
No Public Oversight
Though there are a number of privately-owned water wells throughout the village, property owners are prohibited from installing new wells if there already exists a nearby municipal water source. This puts customers at the mercy of a privately-operated utility.
Hissong-Berry said the township was recently notified that it, also, must have its water meter replaced.
“That new meter will cost us over $1,200,” she said. “We’ve had our meter tested and it’s working fine but, there’s nothing we can do. We have no authority over the water system.”
She added, “This has been ongoing for so long. What’s best for the community is that it’s no longer privately owned.”
Public utilities must go before the Public Service Commission before raising rates but private systems like Walloon Lake Water System have no such oversight.
“It needs to be regulated by a public board where everything is transparent so you know what fees are and what they’re based on,” Hissong-Berry said. “Right now, it’s whatever he decides.”
Hissong-Berry and Bentley both mentioned PFAS concerns, pointing to the Petoskey News-Review article which states Walloon Lake Water System has a water source with abnormally high levels—yet not high enough to warrant action by state or federal regulatory agencies.
WLWS scandal history
In summer of 2012, fewer than three months after having charges dropped against him for allegedly overcharging and placing false liens on some of his customers, Walloon Lake Water System owner Dennis Lee Hass and wife Kathleen L. Hass were charged with three counts of racketeering and two counts of false lien.
The original charges had been dropped to allow for an appraisal of the water system, which was then thought to serve nearly 240 customers.
“Defendant’s did commit the following offense for financial gain, to wit: did maliciously threaten to injure the person or property of (victim 1) with intent to thereby extort money or any pecuniary advantage whatever or to compel the person so threatened to do or refrain from doing an act against his will,” the police complaint stated. “And, on or about Jan. 1, 2000 through June 6, 2012, in Walloon Lake and Melrose Township … defendants did commit the following offense for financial gain, to wit: did maliciously threaten to injure the person or property of (victim 2) to thereby extort money … or compel the person so threatened to do or refrain from doing an act against his will.”
At least 10 people were named as alleged victims back in 2012.
Some of the alleged illegal acts included a claim that some customers were forced to pay water bills which had been accrued by people who had owned property previous to the new owners.
Another allegation included a property owner who requested the water to be shut off as he was leaving the state, but he allegedly continued to be billed at the regular water usage rate for 6,500 gallons of water.
Other allegations included customers being forced to purchase new meters unnecessarily and at a significant price mark-up, and that the water utility often did not follow the legal requirements of the tariff which oversees the agreements between customer and provider.
Some customers were forced to pay for their water usage one year in advance.
Melrose Township thought it had a deal to purchase the water system back in June of 2014 for $1.379 million but that deal fell through.
Later, the Hasses filed suit against 10 individuals—including a number of their customers, Melrose Township, its attorney, a former Charlevoix County Chief-Assistant Prosecuting, and several Charlevoix County Sheriff Deputies—claiming that the defendants had worked to force the sale against the will of the Hasses.
“Defendants … engaged in concerted action through letters, communications, demands, offers and prosecutions to force plaintiffs to sell their property to the (Melrose) Township. The fairness or not of any offer or purchase is irrelevant. Plaintiffs did not want to sell,” The Hasses stated in their court filing. “These concerted and extra-legal (illegal) attempts by defendants, and each of them, constituted concerted action and conspiracy to violate plaintiffs’ Fifth and Fourteenth Amendment rights.”
Telgenhof called the suit a violation of the agreement and filed his own suit against the Hasses and Walloon Lake Water System.
“On Dec. 18, 2015, (Charlevoix County 33rd Circuit) Judge Roy C. Hayes issued a scathing opinion agreeing with Telgenhof’s position and ordering both Hass and WLWS to each pay $25,000 in civil fines,” it stated in Telgenhof’s March 7 release. “Hayes called Hass’s actions an ‘obvious’ and ‘blatant violation of the parties’ agreement’ as well as ‘egregious’ and ‘deplorable.’”
In March 2016, Walloon Lake Water System owners Dennis and Kathleen Hass dismissed their lawsuit against four customers and the Melrose Township attorney.
In 2016, Hass and Walloon Lake Water System paid $30,000 in fines to resolve a lawsuit brought on behalf of the State of Michigan by Charlevoix County Prosecuting Attorney Allen Telgenhof.
At that time, Telgenhof said, “I hope that a $30,000 penalty is enough to convince the defendants not to violate our agreement in the future.”
The suit initially asked the Circuit Court to order Hass and WLWS to pay a total of $25,000 in penalties for actions in filing a federal lawsuit against five customers in violation of an agreement they had signed on Sept. 10, 2013.
Despite multiple attempts, Melrose Township Supervisor Vern Goodwin could not be reached by press time.