Recology, the company that voted in the city in 1932 granted the monopoly of waste transportation in San Francisco, agreed to an agreement that reimburses the city’s customers for about $ 94.5 million. This came after an investigation by the prosecutor’s office revealed that the company in 2017 signed up and received a fee that deceived San Francisco customers.
In a lawsuit filed today by city attorney Dennis Herrera, he claims that Recology did not include upfront receipts on materials submitted to the city’s trash tax council in 2017 – thereby increasing his order by requesting an increase in fees with a municipal agency dominated by ex deposed – Head of public works, Mohammed Nuru.
These rates increased 14.4 percent in 2017, another 5 percent last year, and a 1 percent increase forecast for 2021. The city attorney said today, however, that if Recology had not omitted its revenue, it would have justification for applying for an increase in rates of about 7% in that first year.
Herrera said today that these rate increases have affected about 160,000 San Francisco customers.
Although the company disclosed this error in 2018 to the Public Works department, neither Nuru nor the department took corrective action. Instead, Recology continued to charge the city taxpayers’ inflated tax for two years. (Recology said today that it notified not only Public Works, but also the Department of the Environment. The company claims that the “current senior leadership” only learned of this matter in November 2020 and promptly informed the Public Ministry).
Nuru’s inactivity is not surprising: former Recology executive Paul Giusti was in November federally accused of an alleged conspiracy scheme with Nuru to increase these rates.
Over the course of several years, Giusti, with the approval of his superiors, allegedly bribed Nuru with more than $ 1 million through payments to various non-profit organizations through which Nuru would sponsor lavish parties for Public Works officials and others city dignitaries. In return, Nuru allegedly used his position to influence the increase in garbage service fees for San Francisco residents.
These gifts were camouflaged as donations to a non-profit charity. In October 2020, Mission Local reported that Recology was the open and secret source of the vast majority of the money within Nuru-controlled nonprofit funds – and that trash rates skyrocketed during the period of these donations to its secret funds.
The dollars channeled to Nuru-controlled non-profit organizations went towards the payment of “DJ services, hats, t-shirts and other merchandise, Bay to Breakers entrance fees for DPW employees, funeral expenses and thousands of dollars to cover food costs and other suppliers for DPW events, including photo booths, a source of chocolate desserts, holiday quartets and special lighting for the annual DPW parties ”- and, when necessary, buy additional drinks for the luxurious Christmas party.
In the November indictments, the feds also outlined a scheme to employ a son of Nuru, allegedly in exchange for Nuru’s help in eliminating rising garbage rates. This son was working at Recology itself until it was considered inappropriate for the company to employ the son of its regulator.
Recology found a job for Nuru’s son quickly because of the time sensitivity to the pending rate hike, according to the November billing documents. Nuru’s son also kept his job, despite reports of sleeping in the workplace and verbally and physically harming young children.
“With this legal action, we are making San Francisco taxpayers whole and sending a clear message that approaching regulators will not be tolerated,” Herrera said. “Mohammed Nuru may have had his challenges to keep the streets clean, but he clearly excelled in clientelism, water tank and indifferent supervision. While taxpayers were affecting their portfolios, Nuru was asking for money for luxurious company parties he was supposed to be regulating. It’s outrageous. ”
But San Francisco’s strange monopoly system is also complicated by the city itself, which benefits from the tax increases it has approved – and which Recology today agreed to pay.
That’s because when Recology pocketed more money from San Francisco taxpayers, Recology paid more money to the San Francisco government.
When these fees increased in 2017, Recology directed $ 11.5 million to the Department of Environment and $ 8.5 million to Public Works itself – the department that, as noted above, has a major influence on tabulation and approval of Recology fees. What will happen to this money is not yet known.
“Public Works is the regulator of Recology – and an interested party,” supervisor Aaron Peskin told Mission Local in December. “This behavior must be reformed. The regulator has to become independent. ”
Under today’s agreement, Recology will reimburse san franciscans by about $ 94.5 million by September 1 – a figure that represents their extra charges at 5% interest. On April 1, it will reduce its rate to what was considered the appropriate amount, saving an additional $ 6.5 million for city customers between April and June. He also agreed to a $ 7 million settlement payment for the city.
Finally, today’s agreement includes a four-year injunction for Recology to award any gift to a city official or contribution to a nonprofit organization at the request of a city official.
Herrera said today that attempts to prevent Recology from doing business with the city would be complicated by its status as the holder of a voter-approved 89-year monopoly. The next steps, he said, will have to be decided by the city’s politicians and voters.
Peskin says that any move would require “blowing up the 1932 ordinance.”
When Quentin Kopp, in 2012, put to the vote a measure that would have broken that monopoly and submitted Recology to its first bidding rounds since the Hoover government, it was denounced by the city’s Democratic and Republican parties and rejected by 77 percent of voters.
If the 1932 decree were to be discarded, San Francisco could go in several directions. It could bid on waste contracts – with the possibility that the winner is a company that offers worse customer service than Recology and does not treat its workers well. Or it can potentially municipalize garbage collection.
This is already done locally in Berkeley and, on a much larger scale, in New York City. Without a profit motive, Berkeley customers pay less than their Bay Area neighbors.
Peskin said on Tuesday that he will present a decree to form a task force “which includes experts in the field and labor leaders” to “determine whether we should work to acquire Recology’s assets, including its transfer station and its fleet of emergency vehicles. specialized transportation, aiming to municipalize garbage collection in San Francisco. ”
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