SAN FRANCISCO (CN) — A trash collection company will pay a $36 million fine to avoid federal prosecution for bribing a former high ranking city official as it overcharged San Francisco residents tens of millions of dollars for trash and recycling pickup services.
Recology San Francisco, Sunset Scavenger Company and Golden Gate Disposal & Recycling Company — all subsidiaries of Recology Inc. — admitted their employees funneled cash and gifts to former San Francisco Public Works director Mohammed Nuru through charities that Nuru either controlled or used to fund lavish holiday parties for his employees. The trash companies also owned up to giving jobs and paid internships to Nuru’s son and paying for Nuru and another city official to stay at a luxury hotel in New York for two nights at a cost of $865 per room.
“San Francisco citizens were victimized for years in a bribery scheme involving public contractors and a powerful, corrupt San Francisco public official,” Acting U.S. Attorney Stephanie Hinds said in a statement Thursday. “San Francisco citizens expect and deserve honest services from its government.”
Before leaving his job in early 2020 after being arrested on bribery charges, Nuru recommended a 14% rate hike for Recology's services in 2017. The rate hike, which was later approved, was based on underreported revenues in Recology's rate increase application. An investigation by City Attorney Dennis Herrera’s office later found actual revenues supported an increase of just half that amount. In March, Recology agreed to repay residents more than $86.6 million in overcharges plus interest and a $7 million penalty, totaling more than $100 million.
Federal prosecutors previously charged John Porter, former vice president of Recology, and Paul Giusti, the company's former government and community relations manager, with bribery and money laundering. Giusti pleaded guilty to one count of bribery in July and agreed to cooperate with federal prosecutors.
As part of its deferred prosecution agreement, Recology admitted its involvement in multiple bribery schemes spanning at least six years as laid out in a 21-page document filed in court Thursday.
The company acknowledged that Porter, Giusti and another unnamed Recology executive supplied Nuru with cash and other benefits from 2014 through January 2020. Recology employees funneled $900,000 to a charity that Nuru controlled and $60,000 to another nonprofit that was used to fund holiday parties for Department of Public Works employees from 2016 through 2019.
The document filed Thursday also details a phone call between Nuru and Giusti in November 2018 in which Nuru asked Recology to increase its donation to Lefty O’Doul’s Foundation for Kids, which was used to fund DPW holiday parties, from $15,000 to $20,000. At the same time, Nuru said he was working on a "situation" for Recology which prosecutors say was in reference to helping Recology deal with a city employee who had refused to pay the company's increased prices as part of a city contract for dumping materials at a crushing facility.
Recology also acknowledged Giusti arranged for the company to pay a Nuru-controlled charity $150,000 per year in $30,000 bimonthly installments “for the purpose of influencing him to act in the SF Recology Group’s favor.” In May 2015, Giusti wrote in an email that he got his “ass chewed out this morning from Mohammed” after Recology failed to send an expected $30,000 payment to Nuru's hand-picked nonprofit.
The company also acknowledged it paid $3,500 in funeral expenses for a DPW employee at the request of Nuru’s longtime girlfriend Sandra Zuniga, the former director of the Mayor’s Office of Neighborhood Services and Fix-It Team. Zuniga was charged with conspiracy to launder money in June 2020. She pleaded guilty this past March.
Under the terms of its deferred prosecution agreement, Recology will pay $29 million to the U.S. government in three installments over 26 months. The first payment of $9 million is due within 60 days. Another $7 million will go to the city of San Francisco as part of its civil settlement with the company for overcharging residents for trash services.
Recology has also agreed to fully cooperate with the U.S. Justice Department’s investigation into corruption at San Francisco City Hall.
“Today’s resolution is the result of years of hard work by the FBI and its partners to combat corruption in San Francisco,” Craig D. Fair, special agent in charge of the FBI San Francisco Field Office, said in a statement Thursday. “While engaging in bribery, SF Recology Group prioritized money over the trust of their customers. The FBI remains committed to seeking out instances of public corruption and holding those who violate federal law accountable for their actions.”
The sprawling federal corruption probe that kicked off with Nuru's arrest in January 2020 has led to the arrests of multiple city contractors and city employees and has so far resulted in four guilty pleas. Four city department heads — including Nuru and directors of the Building Department, Public Utilities Commission and City Administrator’s Office — have resigned their positions amid allegations of corruption.
Recology’s attorneys did not immediately return emails requesting comment Thursday. The company is represented by Christine Wong of Morrison Foerster and Joshua Hill Jr. of Paul, Weiss, Rifkind, Wharton & Garrison.
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