Three subsidiaries of San Francisco garbage contractor Recology agreed Thursday to pay $36 million in criminal fines for conspiring to bribe now-ousted public works director Mohammed Nuru over a five-year period.
Their parent company Recology Inc., maintains a monopoly on trash collection in the city. But it is not named as a defendant in the three-year deferred prosecution agreement announced Thursday.
The deal, subject to court approval, involves three subsidiaries known as the SF Recology Group.
Under it, they agree to pay the $36 million fine, cooperate with federal prosecutors and revise corporate practices. If they comply, the case will be dropped after three years.
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Prosecutors say the subsidiaries now acknowledge having paid $150,000 annually into a fund maintained by the nonprofit San Francisco Parks Alliance over a five-year period ending in 2019.
NBC Bay Area’s Investigative Unit was first to report about that off-the-books Parks Alliance fund. It was financed by not only the Recology firms but other city contractors. Public Works officials tapped the fund to pay for parties for their Public Works employees, along with entry fees for some events for employees and other swag, such as branded hats.
Prosecutors say the Recology subsidiaries contributed to that fund “with the knowledge that Nuru could ultimately control how this money was used.” The intent of the contributions, they say, was “influencing Nuru to act in the SF Recology Group’s favor.”
Among other things, Nuru was involved in the garbage collection rate-setting process. He also played a role, prosecutors say, in awarding a contract that a Recology subsidiary currently has to operate a concrete recycling facility on port land.
Prosecutors say $60,000 in SF Recology Group contributions paid for an annual DPW holiday party through the Lefty O’Doul’s Foundation for Kids. That foundation was run by restaurateur Nick Bovis, who has agreed to plead guilty and cooperate against Nuru.
Prosecutors also allege that a top SF Recology Group official helped Nuru’s son get a job at one of its companies and separately funded internships for him at a nonprofit it helped operate.
SF Recology Group, prosecutors say, paid $3,500 in funeral expenses for a DPW worker and financed a two-night stay at a New York hotel for Nuru and an unnamed “high-ranking” city official at $865.34 per room, prosecutors said.
One former top Recology official, Paul Giusti, has agreed to cooperate in an earlier deal with prosecutors. It was Giusti, prosecutors say, who provided the gifts and donations with the knowledge of other officials, including his boss John Porter, who is still facing federal prosecution.
Prosecutors say Giusti, Porter and a third unnamed executive “each acted within the scope of their employment and for the purpose of benefitting the SF Recology Group.”
The named subsidiaries of the group are Recology San Francisco, Sunset Scavenger and Golden Gate Disposal & Recycling Co.
In a statement, Sal Coniglio, Recology’s new Chief Executive Officer, said the company acted quickly when it learned about conduct it describes as “wrong and unacceptable.”
“We must ensure that something like this never happens again,” he said.
He said the deal with prosecutors builds on “the substantial steps we have taken over the past year to strengthen our leadership team, ensure we have appropriate internal controls, and significantly modify our approach to community engagement.”
The company says the $29 million in the federal fine and the $7 million payment to San Francisco will not be paid for out of rates or charged off to customers. The company has moved to dismiss those responsible for misconduct, revamped its compliance and training efforts under new leadership, implemented new policies over charitable contributions and a “no-gift policy for public officials.”
The company separately agreed this year to a nearly $100 million settlement with the City Attorney for overcharging customers due to what it now calls a “miscalculation” in setting rates. That settlement is not part of the federal deferred cooperation agreement, however.