Thursday, February 7, 2013

A Pretty Trashy Story!

I don't expect to win converts overnight, but, trash is nasty, and there is a fascinating,disturbing garbage monopoly story about a company in San Francisco that wants to spread to Oakland, Solano County and other parts of northern California.

Recology has held a 70-year monopoly on trash-hauling in San Francisco (you might remember it in a previous iteration as Nor-Cal).

Last year it spent $1.7 million to defeat a city referendum that would have opened garbage collection to competitive bidding. Last weekend a state appeals court reinstated a lawsuit by a former Recology employe who says the company made fraudulent overpayments in its recycling program and fired him for reporting it to superiors and police.

According to the San Francisco Chronicle, Brian McVeigh was a supervisor at Recology's Pier 96 recycling center and later managed its buy-back center in Brisbane, where customers would be paid cash for turning in glass and metal to be recycled. At both sites, he said, he learned that employees were over-reporting weights for the trash they took in and were overpayng customers, perhaps in exchange for kickbacks.

Luke Thomas outlined the fraud scheme in the Fog City Journal last May.

McVeigh, his lawyers say, was shocked to discover that employees at the Recology recycling center where he worked were regularly inflating the weight of cans and bottles brought in by certain individuals. After further investigation McVeigh and his lawyers claim in court filings, they uncovered broader schemes to bilk government recycling programs. David Anton, one of McVeigh's lawyers, said those schemes could cost the company nearly $10 million in false claim fines. Under the False Claims Act, McVeigh could be awarded 15 to 25 percent of any recovery.

How did the scheme work? Recology’s scheme defrauded two separate government programs, Anton said. At the state level, money paid by consumers when they purchase goods in cans or glass bottles goes into the California Redempton Value (CRV) fund. Money is given back to the consumer when they recycle those goods at centers like Recology’s. Recology applied for reimbursement from the CRV funds based on the weight of the recyclables whey collect and that value is reported by employees who received kickbacks for inflating the weight for certain customers, McVeigh contends in court filings. At one center, Anton said, the inflation accounts for $1-2 million in increased CRV claims for Recology.

In San Francisco, Recology receives bonuses from the city when it meets certain thresholds for diverting waste away from landfills and into recycling programs. According to McVeigh and his lawyers, Recology over-reports the amount of diverted waste by co-mingling it with waste from third party facilities, as well as other schemes. The fraud, Anton said, is largely possible because of Recology’s monopoly on waste removal in San Francisco.

“Recology has a non-competition situation, they’re able to make San Francisco look good by having good recycling programs,” Anton said. Recology “shouldn’t need to fake the numbers to get a few million more dollars into their pocket, but they’re been doing that.”

If true, imagine the potential for further fraud if the scheme was extended to Oakland under a waste contract awarded to Recology that would permit San Francisco waste to be brought to Oakland and hauled together up to Yuba County or Solano County.

The kicker about fraudulent claims actually took place last October, when Mayor Ed Lee, who has enjoyed political support from Recology, announced with great fanfare that San Francisco had reached 80 percent of landfill diversion, waste that was being recycled instead of going into landfills. A bold and impressive claim, except that it was promptly questioned by a source no less credible that a national waste association. Chaz Miller, state programs director for the Environmental Industry Associations, wrote in Waste 360 last month about how San Francisco’s shiny new diversion rate begins to break down under scrutiny.

You may need a calculator to sort this out, but San Francisco brags that it is recycling 80 percent of its waste, meaning it sends only 20 percent to landfills and the rest is landfill diversion. However, the only figure the city’s press release gave was for 444,000 tons of waste that were landfilled. It gave no tonnage or percentage figures for recycling or composting, nor did it say how much waste was generated. So how, Miller asks, can it say how much it diverted and if it set any recycling records?

If the city sent 20 percent of its waste to landfills, then it generated 2,220,000 tons of waste. If San Francisco stands by that number then each man, woman and child in San Francisco generated 2.73 tons of trash last year, or more than three times as much as EPA’s estimated national per person waste generation rate.

Yet, the City announced grandly in October its 80-percent landfill diversion rate!

More on this to come, sooner than later. If you have any information to help us explore this amazing story further, email me at madivan@rocketmail.com

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