San Francisco’s Board of Supervisors on Tuesday unanimously approved a $100 million settlement with Recology after City Attorney Dennis Herrera sued the trash hauling monopoly over allegations of illegal gifts and inflated customer rates due to underreported revenue.
The lawsuit followed a federal investigation of City Hall corruption that first became public with last year’s arrest of former Public Works head Mohammed Nuru, who has been charged with fraud.
Under the settlement, both residential and commercial customers will receive a refund for the overcharges dating back to 2017, when the rates were set erroneously through the city’s rate-setting process after Recology submitted incorrect information on its revenues. The refund includes 5% interest.
The average residential Recology customer who had service since July 2017 is expected to get back about $190 under the settlement. Amounts differ for commercial customers.
If the settlement is ultimately approved by a San Francisco Superior Court judge, which is expected as early as June, customers should expect the refunds by Sept. 1, Chief Deputy City Attorney Ronald Flynn told the Board of Supervisors Government Audit and Oversight Committee last month.
For those who are no longer ratepayers, The City will “make sure that there is a robust outreach and efforts to reach those people to get the money back to the people who paid them,” Flynn said.
Recology must report to The City by January 31, 2022 on the status of the reimbursements.
A lower adjusted refuse collection rate went into effect on April 1.
The settlement includes $86.6 million in restitution of the overcharges plus $7.92 million in interest through March. The settlement also includes $7 million in civil penalties.
Flynn said the penalty amount sends a “strong message” to companies doing business in San Francisco that if they get caught in wrongdoing “you are going to have to pay a significant fine.”
The settlement is expected to include a four-year injunction prohibiting Recology from giving gifts to city employees and making payments to a third party at the request of a public official, sometimes referred to as “behested” payments, according to Flynn. It would also require public disclosure of any financial error or emission at the time it is discovered.
Recology and Public Works employees have been aware of the 2017 rate-setting error at least since December 2018, but the higher rates continued to be charged. Julia Dawson, who was the director for finance and administration for Public Works, was alerted in January 2019 or earlier of the error and worked with an outside consultant to analyze it. Dawson retired last week, the San Francisco Examiner previously reported.
Two former Recology executives, Paul Giusti and John Porter, are facing federal corruption charges for allegedly bribing Nuru with $20,000 in 2018 to increase the fees The City government pays the company for dumping material. Federal prosecutors alleged the bribe was part of a larger pattern of more than $1 million in benefits flowing from Recology to Nuru to keep him “happy,” as Nuru was the trash company’s regulator.
The board is expected to take a second and final vote on the settlement next week.