A new department is being drawn into City Hall’s corruption scandal after the company with a monopoly on trash collection in San Francisco admitted to overcharging its customers for more than three years.
While other agencies have come under fire, San Francisco’s Department of the Environment has gone unscathed in the year since federal authorities first charged former Public Works Director Mohammed Nuru with fraud.
But that changed March 4 when City Attorney Dennis Herrera filed a lawsuit accusing Recology of leveraging its cozy relationship with Nuru to overcharge thousands of San Francisco residents and businesses.
Recology admitted to raising its rates for customers about twice as much as it should have, but said it alerted Public Works in December 2018 to a miscalculation that led to the overcharging. The company also said it notified the Department of the Environment of the issue that same month.
Supervisor Aaron Peskin is now raising questions about how the issue went unchecked for years. He alleged both Public Works and the Department of the Environment knew about Recology “fleecing” customers.
“There is evidence that supports those facts and we can’t just let it slide,” Peskin said. “It is important for department heads and senior government officials who knew, or should have known, to come forward and account.”
Peskin named names at the last Board of Supervisors meeting. He said Nuru, Public Works Deputy Director for Finance and Administration Julia Dawson and Department of the Environment Director Deborah Raphael either knew, or should have known, about customers being overcharged.
“We need to get to the bottom of that,” Peskin said. “This is a scandal.”
The Department of the Environment has disputed that it was made aware of the excessive billing. A spokesperson said the department has “not identified any notification from Recology about the rate error” and that Raphael was not notified about the overcharge until February 2021.
Recology declined to provide documentation that the company notified the Department of the Environment and Public Works in December 2018.
But emails obtained through a public records request appear to confirm that Recology executive John Porter discussed the issue during a December 2018 meeting with Ann Carey, a retired Public Works employee who was brought back for the rate-setting process.
Porter further explained the issue in a follow-up email to Carey and Dawson in January 2019.
A Public Works spokesperson said an internal investigation is ongoing into the rate issue and declined to comment further.
A Department of the Environment spokesperson said no one from the department attended the December 2018 meeting.
The issue dates back to when Recology proposed raising garbage rates for customers beginning in July 2017. Nuru and other officials signed off on the proposal resulting in rates being hiked by around 14%.
But it later turned out that Recology had underreported its revenues and the rates should have only increased by about 7%.
Nuru was responsible for ensuring that the rate-making process was fair and correct as the director of Public Works. The Department of the Environment also played a role in reviewing the proposed hike.
Both agencies receive funding through the garbage rates charged to customers.
While Recology said it reported the error in December 2018, Herrera said Public Works took no action to disclose or correct it.
At the same time, Nuru was putting on holiday parties for himself and other city employees with donations funneled from Recology through nonprofits.
“This overcharge to rate payers was the direct result of the cozy relationship and lax oversight of Recology that the Department of Public Works had under its former Director Mohammed Nuru,” Herrera said.
Recology, however, has said that the overcharging was the result of an unintentional mistake. The company has agreed to pay back its customers nearly $100 million including interest for the excessive billing.
“Nothing matters more to us than our relationships with our customers, and we know that even beyond the settlement we reached with the City Attorney, we have a lot of work to do to regain their trust,” spokesperson Robert Reed said. “We fell short of our community’s expectations.”
Editor’s note: This story has been updated to correct a reference to the rate hike. The rate increase was doubled, Recology did not charge its customers twice as much as warranted.