Sounds like gas bubble disease. There is too much gas (N2/O2) dissolved in the water. Signs of gas bubble disease would be bubbles in the eyes/fins/skin of the fish. Gas bubble disease can also cause "pop-eye", which is exactly what it sounds like - one or both eyes pop out of the eye socket.
The fish are trying to compensate for the gas by seeking the deepest water possible.
The waterfall is the cause of the problem. Reducing the flow should help the situation.
Gas bubble disease is common below some reservoirs where the design of the reservoir outflow causes too much gas to be dissolved. I do a lot of work at Red Rock Lake in Iowa, gas bubble disease causes frequent fish kills there.
Last edited by csteffen; 06/18/09 11:50 AM.