Franciscans will recover nearly $ 100 million in overpaid garbage collection fees after an investigation by the city’s prosecutor detailed how waste management company Recology has unduly raised its prices over the past four years, said City Attorney Dennis Herrera on Thursday.
The agreement between the city and Recology represents the latest turnaround in the City’s corruption saga around former Director of Public Works Mohammed Nuru, other city officials, contractors and non-profit groups.
Nuru played a key role in the fee setting process for Recology. The results of Herrera’s investigation and a separate federal investigation claim that Nuru took bribes from Recology in exchange for allowing the company to inflate its fees. A former Recology executive was fired and arrested in November on these charges.
The authorities said that in addition to the alleged bribes, Recology stopped counting the revenue it would receive from taxpayers during its request for a rate hike in 2017. These underreported funds, the authorities said, totaled a 14% rate hike instead 7% Recology should have received.
In a statement, Recology officials characterized the overcharging as an inadvertent error and said they immediately reported it to the prosecutor.
As part of the agreement, Recology will pay $ 94.5 million to reimburse taxpayers for excessive charges and interest rates and will reduce residential and commercial waste rates from April 1. Refunds total more than $ 100 million for San Francisco Recology customers, with an average residence expectation to receive about $ 190, officials said.
The company serves approximately 160,000 customers in San Francisco.
“With this legal action, we are making San Francisco taxpayers whole and sending a clear message that approaching regulators will not be tolerated,” said Herrera in a statement. “Mohammed Nuru may have faced his challenges in keeping the streets clean, but he clearly excelled in clientelism, money box and indifferent supervision.”
Recology’s CEO, 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 clients. We are reviewing our internal processes and working with the city to ensure that a problem like this never occurs again. “
The amount that each taxpayer will be reimbursed will depend on how long he has been a customer of Recology and the type of service purchased. Both current and former customers are entitled to a refund, and current customers must receive a refund by September 1, Herrera said.
Recology is also expected to provide monthly reports on the status of its refunds and pay a $ 7 million fine to the city.
San Francisco cannot prevent Recology from doing business with the city, said Herrera, due to a 1932 decree that grants it exclusive rights as a city garbage collector.
“We think getting $ 100 million back for taxpayers and commercial residents in San Francisco … is a real success,” said Herrera at a news conference on Thursday. “And what will happen to the future garbage collection service in San Francisco is something that I am sure lawmakers will analyze and debate.”
District three supervisor Aaron Peskin said his office is already investigating ways the city could break Recologia’s monopoly. On Tuesday, Peskin will ask the city to form a task force to study other waste collection options, including municipal services or bidding.
The objective, he said, is to present the decision to voters as a next electoral measure.
“This task force will eventually lead San Francisco’s old-fashioned garbage collection regime into the 21st century, where it can be cleaner, more efficient and more accessible,” he said.
The announcement came about four months after federal prosecutors accused former Recology executive Paul Giusti of bribery and underhanded money laundering, claiming he channeled more than $ 1 million to Nuru over the course of several years. Nuru’s previous position allowed him to play a key role in approving increases in garbage collection rates, 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 officials, despite a San Francisco law that prohibited giving or receiving gifts from restricted sources.
Officials said that from 2016 to 2020, Recology and its affiliated companies regularly provided cash gifts, meals and accommodation to city officials, allegedly to influence decisions that affected Recology.
Some of those in attendance, officials said, were channeled through a non-profit organization and used to pay the bill for employees’ holiday parties promoted by Nuru.
“The ramifications of our work with the city attorney in this investigation are not abstract – there are real financial consequences for the Franciscans,” said city controller Ben Rosenfield.
Nuru was arrested and charged last year after federal officials claimed he tried to bribe an airport steward and for lying to the FBI. A federal investigation revealed how he allegedly orchestrated a pay-to-play scheme that involved contractors bribing public officials to obtain favors while bidding on lucrative municipal contracts.
Federal officials claim that Giusti has quietly embezzled money from Recology to Nuru and the Department of Public Works using nonprofit organizations like the Lefty O’Doul’s Foundation as an intermediary. Federal and municipal investigators looked at how the money flowed between contractors and municipal departments and said non-profit organizations helped launder allegedly illicit payments.
Meanwhile, Herrera and Rosenfield began their own investigation into Nuru and various departments in the city, contractors and non-profit groups, focusing on violations of city rules.
Several members of the Board of Supervisors and the Mayor of London Breed praised the deal as an important step in the city’s efforts to regain the trust of its residents.
“This is a terrible case for our residents and businesses who have been paying too much for their garbage fees for years,” Breed said in a statement. “The good news is that, thanks to the city attorney, they are going to get the money back now.”
Megan Cassidy is a writer for the San Francisco Chronicle. Email: [email protected] Twitter: @meganrcassidy