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Recology agrees to pay $36 million for role in bribes to city official

San Francisco Chronicle logo San Francisco Chronicle 9/9/2021 By Megan Cassidy

Three waste management companies that are part of Recology Inc. have agreed to pay $36 million for their role in a corruption scheme that included high-dollar kickbacks to former San Francisco Public Works Director Mohammed Nuru.

The resolution comes as federal prosecutors announced a charge of conspiracy to commit honest services fraud against the three subsidiaries, which officials said conspired to bribe Nuru for favorable treatment with the trash company’s city contracts. In his former role, Nuru had considerable sway in the rate-setting process with Recology.

“San Francisco citizens were victimized for years in a bribery scheme involving public contractors and a powerful, corrupt San Francisco public official,” Acting U.S. Attorney Stephanie Hinds said in a statement. “Today, the SF Recology Group and its parent company Recology, Inc. are taking positive steps to rectify that flagrant wrong and have committed to full cooperation in the ongoing investigation into San Francisco City Hall corruption.”

Nuru was arrested and charged by federal officials last year for an alleged attempt to bribe a San Francisco airport commissioner in a probe that has since exposed a sprawling pay-to-play and corruption scheme within City Hall.

Court hearings for Nuru have been delayed several times over the past year, partly because of the pandemic. Nuru’s next court date was scheduled for Sept. 28.

If approved by a judge, the federal case will enter into what’s known as a deferred prosecution, which requires the company to complete a series of remedial measures to avoid criminal charges. In addition to the $36 million fine, Recology must fully comply with government investigations, implement a “corporate compliance program” that includes a no-gift policy for public officials, and provide annual reports on its progress to the U.S. Attorney’s Office.

“This resolution, and the improvements we have agreed to, will build 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,” said Recology CEO Sal Coniglio, who took over on Jan. 1.

The three companies named in court filings — Recology San Francisco, Sunset Scavenger Co., and Golden Gate Disposal & Recycling Co. — are each privately held subsidiaries of Recology Inc., which provides trash collection services for San Francisco.

The federal case is separate from but related to a $100 million settlement laid out between Recology and the San Francisco City Attorney’s Office earlier this year, after city officials said the waste management company had improperly increased its rates over the past four years. Those funds went to reimburse the tens of thousands of San Francisco customers who overpaid in trash collection fees, and nearly all of the customers have now received their payment, according to a spokesperson for the company.

The company paid a $7 million fine to the City Attorney’s Office, which was included as a credit in the $36 million federal agreement. The rest, $29 million, will go to the U.S. Treasury.

City Attorney Dennis Herrera said his office is pleased that Recology is now facing federal criminal consequences in addition to the remedies required by its civil settlement.

“We will continue to root out corruption wherever we may find it, and we welcome the efforts of other law enforcement agencies as we each endeavor to ensure good, ethical government for the people of San Francisco,” Herrera said in a statement.

Recology officials have described the rate increases as an inadvertent error caused by a miscalculation.

The federal case, meanwhile, stems from the actions of two of Recology’s former employees, Paul Giusti and John Porter, whom prosecutors said lavished Nuru with gifts to curry favor with the ex-Public Works director.

The bribes included an annual $150,000 payout to a nonprofit organization that Nuru controlled; $60,000, disguised as charitable donations, to foot the bill of Nuru’s annual holiday parties from 2016 to 2019; and other gifts that included a two-night stay for Nuru and another city official at a New York hotel that topped $800 per room.

In total, prosecutors said, Recology spent more than $900,000 in bribes for Nuru.

Giusti was charged in November with bribery and money laundering and has since pleaded guilty to one count of conspiracy to bribe a local official and commit honest services fraud and agreed to cooperate with federal investigators. Porter was charged this year with bribery and money laundering, and his case remains underway.

“As a matter of law, Recology’s San Francisco companies can be responsible for the acts of their current and former employees, and Recology takes that obligation very seriously,” Recology officials said.

Megan Cassidy is a San Francisco Chronicle staff writer. Email: megan.cassidy@sfchronicle.com Twitter: @meganrcassidy

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