San Francisco Trash Collector Will Pay $100M for Pay-to-Play Overcharges

Recology San Francisco scored an excessively high rate increase in 2017 after influencing city workers with money, meals and other gifts.

(Image by drewplaysdrums from Pixabay)

SAN FRANCISCO (CN) — San Francisco residents will receive $100 million in reimbursements and future savings from a trash collection company accused of overcharging residents through a sophisticated bribery scheme.

San Francisco City Attorney Dennis Herrera announced the deal in a virtual press conference Thursday, detailing how executives with trash and recycling collection provider Recology San Francisco used lavish gifts to influence the city’s former Department of Public Works director Mohammed Nuru.

Nuru recommended a 14% rate hike for Recology in 2017 after the company underreported revenues in its rate increase application at the time. The omitted revenues resulted in a recommended rate hike of 14%, but actual revenues supported an increase of just half that amount, Herrera said.

“This overcharge to ratepayers was a direct result of the cozy relationship and lax oversight of Recology at the Department of Public Works under the direction of its former director Mohammed Nuru,” Herrera said.

Recology will repay residents $94.5 million for overcharges on bills that started on July 1, 2017, including $86.6 million in actual overcharges plus 5% interest. The company will also pay a $7 million penalty to the city and reduce its rates starting April 1, resulting in about $6.5 million in savings for ratepayers through June 30.

Nuru was arrested in January 2020 on federal charges of bribery and lying to FBI agents. He could be sentenced to 25 years in prison if convicted.

Though city laws ban municipal workers from receiving gifts from sources such as city contractors, Herrera said Nuru solicited money from Recology to benefit himself and other city employees. From 2016 to 2020, Recology and its affiliate companies — Sunset Scavenger Company and Golden Gate Disposal & Recycling Company — provided gifts of money, meals, and accommodations to city employees, Herrera said. The gifts were intended to affect city decisions to benefit the company.

Some of the gifts were disguised as charitable contributions to nonprofits. The donations were doled out at Nuru’s direction for activities such as employee holiday parties hosted by Nuru and former City Administrator Naomi Kelly. Kelly has not been charged with a crime but resigned in January after her husband, the former head of the San Francisco Public Utilities Commission, was arrested on bribery charges.

According to Herrera, Recology funneled at least $60,000 over four years through a nonprofit to pay for the Department of Public Works and General Services Agency holiday party.

This past November, federal prosecutors charged a former Recology executive with bribery and money laundering. Prosecutors say Paul Fredrick Giusti, former group government & community relations manager for Recoloy San Francisco, provided Nuru with a continuous stream of money and benefits worth over $1 million to influence decisions that would favor the company. Giusti faces a maximum penalty of 30 years in prison.

In a statement Thursday, Recology CEO Sal Coniglio said the company values its customers and is committed to correcting mistakes that led to overcharges for trash and recycling pickup ratepayers.

“We are grateful to the city attorney for helping us reach a resolution that benefits our San Francisco customers,” Coniglio said. “We are reviewing our internal processes and working with the city to ensure an issue like this never reoccurs.”

San Francisco Mayor London Breed also thanked Herrera for ensuring city residents are compensated for the “appalling” overpayments.

“Not only will this make a difference for people who are struggling in this moment, but also it sends a message to everyone — from the corporations and city contractors doing business with the city to the individuals working on the city’s behalf — that we will hold everyone accountable,” Breed said. “This is an important step as part of our long road to restoring the public trust.”

The $100 million settlement will resolve a lawsuit filed against Recology and its affiliated companies in San Francisco County Superior Court on Thursday.

The city corruption scandal first made public with Nuru’s arrest in January 2020 has led to the resignations of four city department heads, including Nuru and Naomi Kelly, the city’s highest ranking unelected official. Other outgoing department heads include Kelly’s husband, former public utilities chief Harlan Kelly, and former Department of Building Inspection director Tom Hui.

Nuru’s longtime romantic partner Sandra Zuniga, the city’s former fix-it director and director of the Mayor’s Office of Neighborhood Services, also faces charges of helping Nuru launder money.

Permit expediter Walter Wong and restauranter Nick Bovis, both city contractors with ties to Nuru, have pleaded guilty to obtaining or attempting to obtain city contracts and inside information in exchange for bribes.

Last month, Florence Kong, another city contractor who pleaded guilty to bribing Nuru with $95,000 and a luxury watch, was sentenced to one year in prison.

In total, 11 people — including city employees and contractors — have been charged with crimes related to the corruption probe.

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