San Francisco City Attorney Dennis Herrera announced on March 4 that Recology San Francisco, the city’s garbage collection and recycling contractor, will cut tariffs and reimburse taxpayers nearly $ 100 million. dollars for additional costs discovered in the context of a large public corruption investigation. linked to former San Francisco public works director Mohammed Nuru and others. The investigation is part of a comprehensive public integrity review with City of San Francisco Comptroller Ben Rosenfield.
The total savings to taxpayers from the deal is over $ 100 million and covers a four-year tariff period from July 1, 2017 to June 30, 2021.
Recology will reimburse taxpayers $ 94.5 million in overcharges and interest as part of a negotiated settlement with the city attorney’s office. Under the regulations, Recology will also reduce residential and commercial waste rates from April 1, saving taxpayers $ 6.1 million from April through June of this year. Together, that adds up to over $ 100 million in direct benefits to San Francisco taxpayers. In addition, Recology will pay the city a $ 7 million settlement under California’s Unfair Competition Law and the San Francisco Campaign and Government Code of Conduct.
Four-year injunction to be filed in San Francisco Superior Court as part of settlement will bar Recology from giving a gift to a city employee or contributing to a nonprofit at the behest of an employee from the city. These restrictions also apply to department heads, commissioners and elected officials. The injunction will also require Recology to disclose any contribution of $ 1,000 or more to any local nonprofit, comply with city law governing lobbyists, report all contact with city officials involved in pricing, and discloses material errors or errors in any pricing or pricing. -report document submitted to the city.
Recology was among 24 companies, nonprofits, and individuals Herrera subpoenaed last year in a corruption investigation related to Nuru, the former chief executive of the San Francisco Public Utilities Commission. Harlan Kelly, former building inspection department director Tom Hui and others. The city attorney’s office is teaming up with the San Francisco comptroller’s office as part of the investigation. The investigation was triggered by the FBI who arrested Nuru in January 2020.
Part of the civil investigation showed that despite a city law prohibiting gifts from restricted sources, Nuru routinely solicited funds from Recology for its benefit and that of city employees. From 2016 to 2020, Recology and its affiliates, Sunset Scavenger Co. and Golden Gate Disposal & Recycling Co., regularly offered cash, meals, and housing to city employees, allegedly to influence government decisions. city affecting Recology.
Some of the gifts were disguised as charitable contributions to nonprofit organizations, but they would be distributed at Nuru’s discretion for activities such as employee parties hosted by the former director of public works and the former administrator of the city. city. In the four years before Nuru’s arrest, Recology funneled at least $ 60,000 through a non-profit organization for the city’s Public Works and General Service Agency holiday party.
Nuru, as director of public works, was responsible for ensuring that the pricing process for waste collection was fair and accurate. It would also make recommendations on whether or not to approve rate increases.
The March 4 lawsuit filed in San Francisco Superior Court stems from rate increases for Recology that Nuru, as head of public works, recommended in 2017. As noted in the court record, Recology did not count precisely the income he was to receive. of taxpayers in its 2017 rate increase request. Omitted revenues were not considered in the 2017 rate setting process. The underreporting of these revenues resulted in a recommended rate increase of more than 14%, while real incomes only supported an increase of about 7%.
Although Recology disclosed a revenue error in 2018 to the Public Works Department, then overseen by Nuru, no action was taken by Recology or Public Works to publicly disclose or correct the error. Instead, Recology continued to collect excessive tariffs from taxpayers for another two years. After Herrera subpoenaed Recology in February 2020, the company began to cooperate with the bureau’s investigation. Recology’s attorney finally reported the rate error to the city attorney’s office in December 2020.
“With this lawsuit, we are making San Francisco taxpayers whole and sending a clear message that complicity with regulators will not be tolerated,” Herrera said. “Mohammed Nuru may have struggled to keep the streets clean, but he clearly excelled at cronyism, slush funds and indifferent surveillance. While taxpayers were taking a hit in their wallets, Mr. Nuru was soliciting money for lavish parties from the company he was supposed to regulate. It’s scandalous. It is said that a fish rots from the head. Well, the head of public works was Mr. Nuru. He dishonored all the dedicated Public Works officials who go above and beyond for the people of San Francisco. “
“The ramifications of our work with the city attorney on this investigation are not abstract – there are real financial consequences for the San Franciscans,” Ben Rosenfield, Comptroller of San Francisco. said. “It is quite normal that our residents are reimbursed for the unjustified tariffs they have been charged, but in the future we need more stringent regulations that leave no room for systemic problems. How this anachronistic garbage rate setting arrangement, which dates from almost a century ago, should be administered in the future, will be the subject of our next public integrity review. in the next few days.
“We are in a new chapter at Public Works,” says Alaric Degrafinried, Acting Director of Public Works. “New leadership is in place and we are committed to being part of the solution. We have learned from the mistakes of the past, and so many people in this department are working hard every day to regain the trust of the public. We are committed to ensuring a clean, fair and transparent pricing process. The first step is to post these new lower rates so that the public understands what has changed and what it means to them. “
“I would like to note that after starting to review Mr. Nuru’s relationship, Recology has been open and cooperating with our office on this matter,” Herrera said. “As I have said from the start of this investigation, we are not going to stop until we find the bottom line. It is broader than Recology. We are not finished yet. .
The comprehensive settlement agreement with Recology is subject to approval by the San Francisco Board of Supervisors.
As part of the settlement, Recology and its affiliates will reimburse San Francisco taxpayers for the additional costs plus 5% interest. The deal covers both residential and commercial subscribers, with the exception of a few limited commercial contracts not based on approved tariffs, with accounts active at any time between July 1, 2017 and March 30 of this year.
Refunds must be paid to customers with checking accounts by September 1. Recology will need to run a public awareness campaign until December 31 of this year to notify former customers that they are eligible for a refund. Recology is to submit a monthly report of all paid and unpaid balances to the city and provide a report by January 31, 2022, detailing their efforts to release the restitution payment to active and inactive account holders. By July 1, 2022, any portion of the restitution balance that has not been paid directly to active or inactive waste collection customers will be placed in an interest-bearing account that will be used to offset any future rate increases. of waste.
In a statement on its website, Recology called the extra costs an “error” and noted that the increase was due to an “inadvertent omission,” saying: to the city in calculating revenues at the going rates. The inadvertent omission of these amounts resulted in a higher rate increase than necessary.
In the statement, new CEO of Recology, Sal Coniglio, who took over from former CEO Mike Sangiacomo earlier this year, pledges to rectify the problem with his customers.
“We value our customers and making them free from this mistake is our top priority,” says Coniglio. “As soon as we learned of the error, we took immediate action. We are grateful to the city attorney for helping us reach a resolution that benefits our clients in San Francisco. We review our internal processes and work with the city to ensure an issue like this never happens again. “