A nine-month investigation by state and local police into possible fraud at the Edgartown wastewater treatment plant concluded this week with a criminal complaint against an Island septic hauler, alongside allegations of widespread mismanagement at the sewer plant and possible ethics violations by town employees and elected officials.

Edgartown district court clerk-magistrate Liza Williamson found probable cause on Monday to issue a criminal complaint against Jason R. Araujo, an Edgartown resident and owner of Jay’s Septic. Mr. Araujo is scheduled to be arraigned on Feb. 6 for making false statements in the procurement of supplies and services, a felony. The clerk-magistrate found that on at least 36 occasions Mr. Araujo improperly logged the amount of sewage he hauled to the facility over a period of five months in 2010. The estimated value of the loss to the town is $26,000, but Ms. Williamson agreed with police investigators who said the actual overall loss at the plant from violators can never be known “due to the gross mismanagement of the facility . . . [and] the fact that facility management did not maintain sufficient records to make prosecution viable.”

Sparked by an internal audit at the plant early this year after a former employee blew the whistle on alleged improprieties at the plant, the fraud investigation was led by the state police, acting for the Cape and Islands district attorney, and Edgartown police. Lengthy police reports that accompany the findings of fact from the district court allege a steady pattern of lax management practices by sewer plant manager Joseph Alosso that included preferential treatment for some septic haulers and shoddy record keeping.

The Edgartown sewer plant includes a facility for receiving and treating waste pumped from individual septic systems; the facility is used by septic haulers all over the Island. Haulers charge an amount of money to homeowners and businesses to pump their septic systems and in turn pay for the use of the town facility to dispose of the material. The plant has two facilities to receive septic discharge, one metered, the other unmetered.

In their investigation, police found that the septic haulers had ample opportunity to bilk the town by not recording the actual amount they dumped at the plant. Among other things police said that Mr. Alosso kept an “honor system” at the treatment plant for haulers to record the amounts of waste they had dumped, with virtually no system of supervision or checks. Electronic metering forms that were meant to be sent to a bookkeeper for audit purposes and verification of manual logs were instead thrown out.

And in interviews with police, Mr. Alosso also admitted that he had permitted certain town employees and elected officials, including himself, wastewater commissioners and an unnamed selectman, to dispose of their septic waste for free, a practice police said may violate the state ethics law.

Town counsel Ronald H. Rappaport presented the court complaint and findings from police investigators to the Edgartown selectmen at their weekly meeting Monday, underscoring the seriousness of the charges and claims. “These are just allegations, but it does raise serious issues about the way the wastewater treatment plant has been operating,” Mr. Rappaport said. “There are a number of activities that obviously give us pause in terms of how the plant operated,” he added. Mr. Rappaport recommended that the case be turned over to the state ethics commission and the board immediately agreed. Also on Mr. Rappaport’s recommendation, selectmen agreed to appoint John Paul Sullivan, a retired superior court judge who is a senior professional at Mintz Levin in Boston, as special counsel to review the case independently. “I think time is of the essence. We’d like to see this resolved, it’s not something I’d like to see hanging over the head of the town,” said selectman Margaret Serpa.

Mr. Alosso and wastewater commissioners Jim Carter and Cliff Karako attended the meeting but did not speak. Reached on Wednesday by telephone, Mr. Alosso said the problems at the plant cited in the police reports have since been corrected. “When the town learned of the deficiency with the accuracy of the hauler records, they immediately purchased the equipment to rectify the situation,” he said.

Mr. Alosso also downplayed the claims by police investigators of possible ethics violations. “Those are only allegations. People make allegations all the time, and it’s not up to me to say whether the allegations are true or not,” he said. “The town has referred that to the state ethics board to review, and until the state ethics commission does its investigation in determining whether those were true or not, there is a process to follow. It wasn’t a process we began, but it’s a process we find ourselves in. We are quite content to let the process take place and see what the outcome is.”

Mr. Carter and Mr. Karako, the chairman of the town wastewater commission, did not return telephone calls from the Gazette seeking comment.

T. George Davis, a Vineyard Haven attorney representing Mr. Araujo, declined to comment on the case.

The police reports repeatedly describe mismanagement as the root cause of the problems at the plant that led to the alleged criminal activity.

“There was never even any attempt to do something as simple as a spot check of the manual logs and electronic logs,” state police wrote in their report. “This failure to monitor created a climate in which some of the haulers themselves took full advantage of the ‘honor system,’ causing a financial loss to the town of Edgartown,” the report continued. Police also concluded that poor record keeping at the plant made eventual prosecution of violators a nearly impossible task. “There was no employee supervision, no accurate daily log as to who entered into the facility with dates/times, no video surveillance system . . . Although some haulers admitted to ‘on occasion’ defrauding the ‘honor system’ any further attempt to pursue criminal prosecution without accurate information to back the charges would be inappropriate,” they wrote. “In looking to criminally prosecute it would be necessary for law enforcement to be able to prove the date that the town . . . sustained the loss and the amount . . . Management never maintained such records as needed.”

In his interview with police, Mr. Araujo openly admitted his mistakes. “I want to take responsibility for what I did . . . I just got to take my lumps, whatever they may be. I think that’s fair, I owe them money, I don’t see what else I can do but just take responsibility for the things that I did,” he said.

He later also tried to exonerate Mr. Alosso. In a lengthy e-mail sent to the wasterwater commission in May, Mr. Araujo wrote in part: “I think Joe is being thrown under the bus.” He also wrote: “If it wasn’t for Joe I could have lost my business and my home. Our contract says we have to be paid up within 30 days. There have been numerous times when I was unable to do that. If Joe shut me off I would have lost everything . . . he has helped all of us and from what I understand he has gotten heat about being too understanding.”

The police investigation is now closed. Police who worked on the investigation were Massachusetts state police Sgts. James Plath and Jeffrey Stone, and Edgartown Det. Sgt. Christopher Dolby. They concluded their report by writing: “It is the recommendation of the investigators that the wastewater commission and or town of Edgartown take positive and aggressive steps to correct a number of the issues outlined in this report.”

The district court complaint and complete report from the police investigation is posted on the Gazette Web site at http://www.mvgazette.com/documents/jays_septic_findings.pdf.

Gazette reporter Remy Tumin contributed to this story.