Trash hauler to repay rate hike
Reimbursement deal part of S.F. corruption probe
San Franciscans will recoup nearly $100 million in overpaid trashcollection fees after a probe by the City Attorney’s Office detailed how the waste management company Recology improperly hiked its prices over the last four years, City Attorney Dennis Herrera said Thursday.
The settlement between the city and Recology represents the latest twist in the sprawling City Hall corruption saga centered around former Public Works Director Mohammed Nuru, other city officials, contractors and nonprofit groups.
Nuru played a key role in the ratesetting process for Recology. The results of Herrera’s investigation and a separate federal probe allege that Nuru accepted bribes from Recology in exchange for allowing the company to inflate its rates. A former Recology executive was fired and arrested in November in light of those allegations.
Officials said that in addition to the alleged bribes, Recology failed to account for revenue it would receive from ratepayers during its application for a rate increase in 2017. These underreported funds, officials said, amounted to a rate increase of 14% instead of the 7%
Recology should have received.
In a statement, Recology officials characterized the overcharging as an inadvertent mistake, and said they immediately reported it to the City Attorney’s Office. City officials said Recology counsel made the disclosure in December 2020, nearly a year after they were subpoenaed by the City Attorney’s Office.
As part of the settlement, Recology will pay $94.5 million to reimburse ratepayers for overcharges and interest fees and will lower its residential and commercial waste rates beginning April 1. The reimbursements total more than $100 million for San Francisco Recology customers, with the average household expected to receive about $190, officials said.
The company serves about 160,000 customers in San Francisco.
“With this legal action, we are making San Francisco ratepayers whole and sending a clear message that cozying up to regulators won’t be tolerated,” Herrera said in a statement. “Mohammed Nuru may have had his challenges keeping the streets clean, but he clearly excelled at cronyism, slush funds, and indifferent oversight.”
Recology Chief Executive Officer Sal Coniglio said in a statement that the company is “grateful to the City Attorney for helping us reach a resolution that benefits our San Francisco customers. We are reviewing our internal processes and working with the City to ensure an issue like this never reoccurs.”
The amount each ratepayer will be refunded will depend on how long they’ve been a Recology customer and the type of service purchased. Both current and former cus
tomers are eligible for reimbursement, and current customers are required to receive their refund by Sept. 1, Herrera said.
Recology will also be required to provide monthly reports on the status of its refunds and to pay a $7 million penalty to the city.
San Francisco is unable to bar Recology from doing business with the city Herrera said, due to a 1932 ordinance that grants it exclusive rights as the city’s trash collector.
“We think that getting $100 million back for San Francisco ratepayers and commercial residents ... is a real success,” Herrera said at a news conference Thursday. “And what happens with future trash service in San Francisco is something I’m sure policymakers will look into and debate.”
District Three Supervisor Aaron Peskin said his office is already looking into ways the city can break Recology’s monopoly. On Tuesday, Peskin will ask the city to form a task force to study other options for trash collection, including municipal services or putting out a competitive bid.
The goal, he said, is to present the decision to voters as an upcoming ballot measure.
“This task force will ultimately steer San Francisco’s antiquated garbage collection regime into the
21st century, where it can be cleaner, more efficient and more affordable,” he said.
The announcement comes about four months after federal prosecutors charged former Recology executive Paul Giusti with bribery and concealing money laundering, alleging that he funneled more than $1 million to Nuru over the span of several years. Nuru’s former post allowed him to play a key role in approving rate increases for garbage collection, and the intent of the bribe, prosecutors said, was to keep him happy.
The city’s civil investigation revealed that Nuru regularly solicited funds from Recology for the benefit of himself and city employees, despite a San Francisco law that banned giving or receiving gifts from restricted sources.
Officials said that from 2016 to 2020, Recology and its affiliated companies regularly provided gifts of money, meals and accommodations to city employees, allegedly to influence decisions affecting Recology.
Some of the gifts, officials said, were funneled through a nonprofit and used to foot the bill for employee holiday parties hosted by Nuru.
“The ramifications of our work with the city attorney on this investigation are not abstract — there are real financial consequences for San Franciscans,” City Controller Ben Rosenfield said.
Nuru was arrested and charged last year after federal officials alleged that he had attempted to bribe an airport commissioner and that he had lied to the FBI. A federal investigation revealed how he allegedly orchestrated a paytoplay scheme that involved contractors bribing public officials to curry favor while bidding for lucrative city contracts.
Federal officials allege that Giusti quietly siphoned money from Recology to Nuru and the Department of Public Works by using nonprofits like the Lefty O’Doul’s Foundation as an intermediary. Both federal and city investigators have zeroed in on how money has flowed between contractors and city departments, and said that nonprofits have helped launder allegedly illicit payments.
Meanwhile Herrera and Rosenfield began their own investigation into Nuru and several city departments, contractors and nonprofit groups with a focus on violations of city rules.
Several members of the Board of Supervisors and Mayor London Breed lauded the settlement as an important step in the city’s efforts to regain the trust of its residents.
“This is an appalling case for our residents and businesses who have been overpaying their trash rates for years,” Breed said in a statement. “The good news is that thanks to the city attorney, they will be getting that money back now.”