Recology, the company to which city voters in 1932 awarded a monopoly on hauling waste in San Francisco, has agreed to a settlement reimbursing city customers some $94.5 million. This comes after a City Attorney investigation revealed the company in 2017 applied for, and received, a rate that gouged San Francisco customers.
In a lawsuit filed today by City Attorney Dennis Herrera, he alleges that Recology failed to include anticipated revenues in materials submitted to the city’s garbage rate board in 2017 — thereby inflating its ask when applying for a rate hike with a city body dominated by ousted ex-Public Works boss Mohammed Nuru.
These rates increased 14.4 percent in 2017 and 5 percent last year, and a 1 percent rise was slated for 2021. The City Attorney said today, however, that had Recology not omitted its revenue, it would only have been justified in applying for a rate hike of about 7 percent in that first year.
Herrera today said these rate hikes affected some 160,000 San Francisco customers.
While the company disclosed this error in 2018 to the Public Works department, neither Nuru nor the department took corrective action. Rather, Recology continued to collect the inflated rate from city ratepayers for two years. (Recology today claimed it notified not only Public Works but also the Department of the Environment. The company claims “present senior leadership” only learned of this matter in November 2020, and promptly informed the City Attorney).
Nuru’s inactivity is no surprise: Former Recology exec Paul Giusti was federally charged in November in an alleged conspiracy scheme with Nuru to hike those rates.
Over the course of several years, Giusti, with the approval of his higher-ups, allegedly bribed Nuru with more than $1 million via payments to various nonprofits, through which Nuru would underwrite lavish holiday parties for Public Works employees and other city dignitaries. In exchange, Nuru allegedly used his position to influence rate increases for garbage services for San Francisco residents.
These gifts were cloaked as donations to a charitable nonprofit. In October 2020, Mission Local reported that Recology was the overt and covert source of the vast majority of the money within nonprofit funds controlled by Nuru — and that garbage rates skyrocketed during the period of these donations to his slush funds.
The dollars siphoned into Nuru-controlled nonprofits went toward pay for “deejay services, hats, t-shirts and other merchandise, Bay to Breakers entry fees for DPW employees, funeral-related expenses, and thousands of dollars to cover the costs of food and other vendors for DPW events, including photo booths, a chocolate dessert fountain, holiday quartets, and specialty lighting for the annual DPW holiday parties” — and, when needed, to buy additional booze for the lavish holiday party.
In the November charging documents, the feds also outlined a scheme to employ a son of Nuru’s, allegedly in return for Nuru’s help in pushing through the increased garbage rates. That son was working at Recology itself until it was deemed unseemly for the company to employ the child of its regulator.
Recology found Nuru’s son a job quickly because of time sensitivities regarding the pending rate hike, according to the November charging documents. Nuru’s son also kept this job despite reports of sleeping on the job, and verbally and physically harming young children.
“With this legal action, we are making San Francisco ratepayers whole and sending a clear message that cozying up to regulators won’t be tolerated,” Herrera said. “Mohammed Nuru may have had his challenges keeping the streets clean, but he clearly excelled at cronyism, slush funds, and indifferent oversight. While ratepayers were taking a hit to their wallets, Mr. Nuru was soliciting money for lavish parties from the company he was supposed to be regulating. It’s outrageous.”
But San Francisco’s odd, monopolistic system is also convoluted by the city itself benefiting from the rate hikes it approved — and which Recology today has agreed to pay back.
That’s because when Recology pocketed more money from San Francisco’s ratepayers, Recology paid more money to San Francisco’s government.
When those rates were hiked in 2017, Recology directed $11.5 million to the Department of the Environment and $8.5 million to Public Works itself — the department that, as noted above, has a great deal of influence on tabulating and approving Recology’s rates. What will become of this money is not presently known.
“Public Works is both Recology’s regulator — and an interested party,” Supervisor Aaron Peskin told Mission Local in December. “That behavior must be reformed. The regulator has to become independent.”
Per today’s agreement, Recology will refund San Franciscans some $94.5 million by Sept. 1, 2021 — a figure representing its overcharges, plus 5 percent interest. On April 1, 2021, it will lower its rates to what have been deemed the proper amount, saving city customers an additional $6.5 million between April and June. It has also agreed to a $7 million settlement payment to the city.
Finally, today’s settlement includes a four-year injunction on Recology making any gift to a city employee or contribution to a nonprofit at a city employee’s behest.
Herrera said today that attempts to bar Recology from doing business with the city would be complicated by its status as the voter-approved holder of an 89-year-old monopoly. The next steps, he said, will have to be decided by city politicians and voters.
Peskin says any move would require “blowing up the 1932 ordinance.”
When Quentin Kopp put a measure on the ballot in 2012 that would’ve broken this monopoly and subjected Recology to its first rounds of competitive bidding since the Hoover Administration, it was denounced by both the city’s Democratic and Republican parties, and spurned by 77 percent of the voters.
Should the ’32 ordinance be junked, San Francisco could go in multiple directions. It could put waste contracts out to bid — with the possibility being that the winner could be a company that provides worse customer service than Recology and does not treat its workers as well. Or it could potentially municipalize waste collection.
This is already done locally in Berkeley and, on a far grander scale, in New York City. Minus the profit motive, Berkeley customers pay less than their Bay Area neighbors.
Peskin said on Tuesday he will introduce an ordinance to form a task force “that includes experts in the field and labor leaders” to “ascertain whether we should be working to acquire Recology’s assets, including its transfer station and its fleet of specialized hauling vehicles, with an eye toward municipalizing trash collection in San Francisco.”
Wonderful journalism Mr Eskenazi. You did a great job on this article and it’s appreciated.
I actually feel Recology is doing a very good job in my district. I didn’t realize they were 100% employee owned. It shows as the workers are pleasant, even the customer service line team are nice.
I vote no change in service company, and definitely don’t wish SF Govt to run this operation.
Ed Lee, John Legnitto, Willie Brown, Paul Horcher, Jared Blumenfeld, Debbie Rafael, Robert Haley, David Assman. Sf environment and city attorneys office all knew about this behavior.
McNulty from The Wire, ” You better hope it’s dogs*!!t” in reply to ” I stepped in effing dogs**!” Envelopes of cash and chocolate fountains…
Recology reduced the number of cans at apartment buildings while gouging customers. My small Mission building’s cans have been overflowing and attracting rats and raccoons for years now. Thanks Nuru, slumlords, recology, and SF gov for wasting our money and stinking uo our beautiful city.
the building owner may have reduced the number of cans, not recology. owners pay per can and pickup frequency.
Weren’t there Kellys – Harlan & Naomi – + the Controller – Ben Rosenfield – part of the rate approval board for Recology? If that’s true – how can the Controller be involved in determining the amount of the refund due to the overcharging/alleged grift they (hopefully unwittingly) allowed all these years? That office is supposed to be devoted to cost documentation – he never asked about how the unusual rate hikes were justified? Something else to ask about.
https://sfpublicworks.org/sites/default/files/Nuru%20to%20Rate%20Board%20-%20Response%20to%20Objections.pdf
Does the fine that the city collects get reimbursed to resident’s who overpaid? Or does it just go into the city’s coffers? If it’s going to the city, that means that residents were just taxed more. Not fair! Also, when is Nuru going to jail?
Lyle —
The story clearly states that the ratepayers will be reimbursed. Also, Recology must pay the city a $7M fine.
JE
Ha. THE dishonest got caught.
Why is Willie Brown funding Mohammed Nuru’s Defense Fund?
Brown must be in it too.
Bunch of corrupters.
His girlfriend is also
corrupted so is he.
We have been paying $200 for every three months for 2 units while those used the corruption money for lavishly parties. Breed also got paid from Nuru on her car to mechanic $5000.
SHAME IN ALL OF THEM!!
I have a feeling the tendril’s of Nauru’s corruption will be found in many more places.
Recology has been 100% worker owned since 1986.
Would not all the owners of the company bear ultimate responsibility for the shenanigans?
Or is something else afoot regarding “worker owned”?
You had Michael Sangiacomo as CEO for over 30 years and now we have Salvatore Coniglio at the helm.
Are they workers like everyone else?
Do all the workers have a say on who runs the company?
Is there a vote?
On the flip side – Recology does a good job relatively speaking.
Dumping the relationship has a significant chance of worsening the situation.
And please – no municipalizing trash collection in San Francisco.
It’s sure to be run on the DBI/Muni model.
On a positive note – a bit amazing The City will actually let consumers benefit from a refund. Woulda bet the entire settlement going into the general fund and dissipating into the black hole of City finances. They’re running outta money, you know.
“a good job, relatively speaking …”
Not sure about that. My collectors almost never leave the cans where they got them from – often times in the street. With Covid, no one goes out until late and the street sweepers often have to go around the cans-left-in-the-street by Recology! Service? Meh.
As for the cost – its overpriced for what they do for us. YMMV. Maybe Berkeley has the right idea.
“On the flip side – Recology does a good job relatively speaking.
Dumping the relationship has a significant chance of worsening the situation”
the service has been and still is deteriorating, in the lower nob hill neighborhood, since they changed the pickup schedule from bi-weekly to every other day and combined trash/compost and have the recycling on their own.
in the last 2 years with regularity they miss pickups, sometimes for 5 days (that’s at least 2 pickups) while the receptacles are overflowing.
they also illegally collect trash in the night hours between 3:30 and 5:30am with 3 trucks (recycling, trash/compost and commercial) rolling through the hood making a racket.
No, Recology is not doing a good job relatively speaking. They did 12 years ago though.
Thank you very much for this.
Is there any way for me to find out if I will be receiving a refund, and, if so, in what amount?
Does the settlement agreement provide a deadline for issuing the refunds?
“It could put waste contracts out to bid — with the possibility being that the winner could be a company that provides worse customer service than Recology….” Then you put the contract out to bid again. Or why not divide the city into two or more parts, contract each to a different company, and find out who does the best job?
GREAT idea!!! Not sure how this would work logistically, but I’m sure people who are in the business of picking up GARBAGE would be able to figure this out… in any case this is an excellent idea.
Joe,
EXCELLENT REPORTING!!!
Keep up the good work..
I like the veiled threat — another company might be worse than Recology.
I think giving a few companies some kind of try-out would be great! Except somehow, just like they tried the twice monthly garbage pickup a few years ago in “select” neighborhoods (we had two babies in diapers in our building at the time, we will never forget), I am sure the East Mission will get the short end of the stick.
Great reporting Joe
Sounds like the city is equally at fault on this with their extravagant parties and spending. It’s a shame when heads of companies and public departments do this and employees suffer at the end.