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TABLE OF CONTENTS
I. Introduction II. Company History III. Environmental Problems IV Significant Environmental Cases V. Organized Crime Connections VI. Public Corruption VII. Anti-Trust and Unfair Business Practices VIII. Waste Management, Inc., in San Diego IX. Conclusion X. Attachments not Included in this DocumentReturn to theWMX Profile
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In late 1990, Waste Management, Inc., filed for a major use permit seeking to develop a privately owned and operated landfill site to be located at Gregory Canyon in San Diego North County. For this project to proceed, the San Diego County Board of Supervisors needed to approve a number of permit and zoning change applications presented by Waste Management, Inc. On November 21, 1990, prior to such approval, the Board passed a resolution requesting that the District Attorney conduct an investigation of Waste Management, Inc. In a memorandum to this office, dated December 10, 1990, Supervisor Susan Golding listed the following specific concerns regarding Waste Management, Inc.:
Allegations of price-fixing and other anti-trust violations Allegations of criminal conduct
Allegations of environmental contamination and illegal dumping of toxic and hazardous materials
Allegations of inadequate liability insurance held by WMI on their municipal and hazardous waste operations
Allegations of organized crime connections
Initially, we anticipated the full cooperation of Waste Management, Inc., which would have included the company granting waivers of confidentiality and defamation liability. We considered these conditions essential for a full and complete investigation.
Our investigation has consisted of acquiring information from a number of sources including the public media, the public records of various governmental bodies, prior investigations conducted by both public and private organizations and the reports and records of other law enforcement agencies.
In 1987, the News Sun-Sentinel of South Florida published the results of an investigation conducted by a team of reporters who examined the nationwide operations of Waste Management, Inc., and Browning-Ferris Industries, Inc. [A copy of that report is included as Attachment A.]
Waste Management, Inc., is currently involved in efforts to open a privately operated landfill in Ventura County near Ojai. A member of the Ventura County Board of Supervisors, Maggie Erickson-Kildee, requested that the Ventura County Sheriff's. Department conduct a background investigation of the company and its activities. On September 20, 1991, the Ventura County Sheriff's Department issued their report. The Ventura report includes a survey of environmental and anti-trust violations committed by the company. The fines and settlements related to these violations total approximately $52.3 million. [A copy of the report is included as Attachment B.]
Our investigation also included an inquiry into the activities of Waste Management, Inc., in San Diego County. District Attorney investigators interviewed a number of witnesses who had either past or present associations with Waste Management, Inc., to determine if the company or its associates had committed criminal violations of law while engaging in local political or business activities.
A synopsis of our investigation and initial conclusions was presented in an interim report to the San Diego County Board of Supervisors in August 1991. At that time our investigation was still underway, so the Interim Report was presented confidentially. This Final Report is a public document and contains all the data which appeared in the Interim Report as well as additional material developed from the investigation from August 1991 to the present.
In 1968, Waste Managment, Inc., was formed by the combination of three smaller companies. Those companies were Ace Scavenger Service and Acme Disposal Company of Chicago, and Southern Sanitation Service of Fort Lauderdale, Florida. Ace Scavenger Service was owned and operated by Dean and Elizabeth Huizenga Buntrock. Southern Sanitation Service was owned by Mrs. Buntrock's cousin, Wayne Huizenga. The main principle of the third company, Acme Disposal, was Lawrence Beck. Dean Buntrock, Huizenga and Beck became the principal officers of the corporation with Mr. Buntrock as chairman of the board and president.
The company is incorporated under the laws of the State of Delaware and its headquarters are located in Oak Brook, Illinois (a suburb of Chicago). The company went public in 1971 and since that time has exhibited an aggressive and rapid rate of growth. The primary method of expansion has been acquiring and assimilating smaller waste hauling companies. Once having acquired a smaller company as a subisidiary, it was the general practice to maintain the management of that company in place. A number of these subsidiaries have continued to do business under their origninal business titles. An example of the rate of growth of the company can be seen in its corporate acquisitions from 1980 through 1986. During that period, the company acquired over 350 businesses involving the transfer of over $250,000,000 and 5.5 million shares of stock. Waste Management, Inc., is currently the largest waste disposal firm in the world, with operations throughout the United States, Europe, Asia, Latin America and the Middle East. The company's operations include municipal and rural trash cartage, hazardous waste cartage, the operation of waste landfills, hazardous waste incineration and municipal recycling programs. In 1990, its revenues exceeded $6.03 billion, with earnings of $684.8 million.
In addition to the proposed Gregory Canyon landfill project, Waste Management has a considerable presence in San Diego County which include the following companies: Waste Management of San Diego, Waste Management of North County, Universal Refuse Removal of EI Cajon, Independent Waste of Fallbrook, and Oceanside Disposal.
Since its establishment, Waste Management, Inc., and its subsidiaries have been defendants in a significant number of legal actions involving environmental violations. Most of these alleged violations arose from operations involved with the storage and incineration of hazardous wastes. The fines and assessments levied as a result of these environmental law violations have totaled millions of dollars. For instance, the combined fines and civil settlements levied in cases involving Waste Management sites located at Vickery, Ohio, and Emelle, Alabama, have amounted to over $30 million. This figure does not include the amount of money spent by Waste Management in defending itself.
Greenpeace has estimated that since 1980 the company has paid over $43 million in fines, penalties and out-of-court settlements related to alleged violations of environmental laws at its dump sites. At least forty-five Waste Management owned or operated waste sites have been found to be out of compliance with Federal or State environmental regulations, and at least five sites have been ordered closed by regulatory agencies.
Greenpeace has also reported that between 1980 and 1983 over 547 citations and orders related to pollution violations were issued against Waste Management. Between 1984 and 1987 the number of citations and orders were estimated to have increased to 632.
A 1989 United States Securities and Exchange Commission (SEC) report related that Waste Management had admitted that it was under United States Environmental Protection Agency (EPA) investigation in eighty-nine Superfund cases. Its subsidiary, Chemical Waste Management, was involved in twenty-five Superfund investigations. To what degree these investigations may affect the company's ability to financially underwrite future environmental damages is unknown, but the ability to acquire liability insurance could be impacted. Citizen's Clearinghouse For Hazardous Wastes, Inc., has reported that the terms of its major policy require the company to indemnify its insurer for any losses. The effect is more akin to an open letter of credit than an insurance policy.
In its 1990 report to stockholders, Waste Management, Inc., stated that if "the company continues to be unsuccessful in obtaining risk transfer Environmental Impairment Liability Insurance coverage, the company's net income could be adversely affected."
The insurability status of Waste Management, Inc., presents a problem since it is not clear whether a governmental authority can effectively insulate itself from financial responsibility by approving privatization of waste disposal operations. If a governmental entity acquires subsequent ownership of a landfill, perhaps even a minor interest, it may also acquire liability for environmental damages occurring at the site.
In Pennsylvania v. Union Gas Company (1989) 109 S.Ct.2273, the United States Supreme Court determined that the states retain responsibility for pollution costs at disposal sites acquired from private entities, even if the property interest is merely an easement. Since environmental damage may not be discovered for many years after a facility has been shut down and the operator's withdrawal, the potential for future governmental liability bears serious consideration. Although lower courts have ruled that the granting of permits to private enterprise to operate waste dumps does not confer liability on the government, this issue has yet to be addressed by the Supreme Court. In the event that a private party falls victim to the pollution of a bankrupt permittee's wrongdoing, the Court may rule that public policy mandates that a governmental body must assume a de facto underwriter's position when granting a permit for the enterprise.
It is difficult, if not impossible, to compare Waste Management's environmental record with that of the industry or its competitors. Given the fact that it is nearly twice the size of its nearest competitor, and in many instances enjoys a virtual monopoly of certain aspects of the hazardous waste disposal market, the figures simply do not lend themselves to meaningful comparison.
What follows is a discussion of some of the more significant environmental cases revealed during the investigation. Many of the cases took a number of years to resolve while some remain active cases. The cases are listed as examples only and represent only a portion of the environmental law violations charged against the company.
Alabama: Chemical Waste Management (a 70-percent owned subsidiary of Waste Management, Inc.) is a company handling hazardous waste disposal nationwide. The company operates the largest hazardous waste landfill in the United States, which is located in Sumter County, Emelle, Alabama.
In January 1984, the EPA charged Waste Management with thirty-eight counts of improper disposal of highly toxic polychlorinated biphenyl (PCB) chemicals. Later that year, traces of PCB were found in a drainage ditch and swamp located outside the landfill. Well test samples indicated there had been chemical migration from the landfill into local water supplies. Six months later, laboratory tests indicated that dioxin, a highly toxic chemical, was present in the site at unacceptable levels. At the end of 1984, the EPA entered into a consent decree with Waste Management which included fines of 5600,000 for improper handling and storage of PCB. During April 1985, a fire at the Emelle site required the evacuation of all personnel from the area. Later that year, a pipe failure caused over a quarter of a million gallons of liquid waste to flow onto adjacent properties. In 1987, the landfill emitted a chemical cloud which caused headaches and eye irritations to the adjoining residents.
Waste Management, Inc., has been awarded several major cleanup contracts under federal Superfund legislation, including those from the Department of Defense. In 1983, the company certified to the Pentagon that all hazardous DDT military waste entrusted to it had been incinerated; when, in fact, an undetermined amount of the DDT waste had been mixed with 250,000 gallons of other toxic chemicals at the Emelle, Alabama, disposal site.
California: Chemical Waste Management operates a chemical and hazardous waste dump at Kettleman Hills, California. In 1985, the EPA and Waste Management agreed to a consent decree involving fines of $4 million stemming from the mishandling of hazardous waste, including PCB.
Since March 1988, a number of problems have occurred at the Kettleman Hills landfill. The integrity of the hazardous waste site was breached when a landslide surged forward and downslope, tearing out part of the liner system and displacing waste deposited. at the site. In July 1989, Chemical Waste filed a lawsuit against Encom Associates of San Jose, charging that the accident was caused by design failure. Encom designed the facility's plans and specifications, including depth, degree of slope, waste capacity and operational requirements. An independent investigation of the accident concluded that the slide was caused by incorrect fill configuration. In reply to this allegation, Encom's president, Thorley Briggs, stated the company did not accept any liability for the accident or admit any negligence or guilt and added, "This is a very complicated technical issue and frankly no one is quite sure what happened." While the accident caused no injuries or environmental damage, the EPA has ordered Chemical Waste to suspend operations, excavate more than one million cubic yards of waste, and repair the liner system before operations can resume. Encom Associates agreed to a $5 million settlement with Chemical Waste Management, Inc. Grundle Lining Systems, Inc., of Houston, Texas (manufacturer and installer of the liner) agreed to pay Chemical Waste an undisclosed amount.
The California Department of Health Services imposed a fine of $363,000 against Chemical Waste Management, Inc., for violations in the manner in which it operated its Kettleman Hills facility. The fine was imposed for eleven administrative and operational violations in the operation of its hazardous waste landfill. During 1988, the company was assessed a fine of $80,000 in connection with a fire at the landfill.
During 1984, the EPA fined Chemical Waste Management $2.5 million for a total of 130 violations at the Kettleman Hills landfill. Among other incidents, the EPA charged the company had allowed leaks from the landfill to contaminate local water supplies.
A lawsuit has been filed against Chemical Waste Management, Inc., alleging civil rights violations in its attempts to install and operate a toxic waste incinerator at its Kettleman Hills facility. The suit alleges Chemical Waste Management made a pattern of singling out poor, minority-populated communities as incinerator sites.
During March 1989, the San Jose Mercury News reported that the Kirby Canyon Sanitary Landfill (operated by Waste Management in Santa Clara County) was leaking toxic substances which posed a threat to the ground water assets of the County. Waste Management's initial response was to deny that any toxins were leaking beyond the site of the landfill. For the next year, the Regional Water Quality Control Board sought Waste Management's cooperation in identifying the source of the leakage and to take steps to rectify it. During July 1990, Waste Management was advised that at least part of the leakage was attributable to a six-inch leachate line which had ruptured and was leaking its contents into the surrounding earth. Although the pipeline ultimately was repaired, the environmental damage caused by the leakage has yet to be determined. Contrary to Waste Management's assertions, it is clear that the toxins have leaked beyond the boundary of the Waste Management landfill site.
Illinois: During 1983, Chemical Waste Management was subject to a $2.2 million suit filed by the Illinois Attorney General for violations of environmental laws at its CID Landfill located at Calumet City, Illinois.
The EPA fined Waste Management, Inc., $37,250 in penalties for environmental violations at the hazardous waste dump located near Joliet, Illinois. The EPA cited Waste Management for failure to provide the agency with adequate information on ground water monitoring and waste treatment activities at the site. An EPA statement said Waste Management has "violated Federal Resource Conservation and Recovery Act regulations regarding the management of hazardous waste."
The EPA proposed a $22,800 fine against SCA Chemical Services, Inc. (a subsidiary of Waste Management, Inc.). The EPA charged in its complaint that SCA Chemical Services failed to follow regulations to undertake a more aggressive monitoring program to learn the type and amount of chemicals located at its facility in Chicago. SCA Chemical Services was alleged to have operated a toxic waste incinerator without having checked for ground water contamination after indications of chemical seepage. Under regulations of the Federal Resources Conservation and Recovery Act, SCA Chemical Services was required to check monitoring wells for seepage from four ponds located at the site. Samples taken from the wells in July 1986 showed contamination.
The Illinois Environmental Protection Agency filed a suit to temporarily shut down the SCA Chemical Services, Inc.'s, southeast Chicago, toxic waste incinerator for environmental control irregularities. It was alleged that air monitoring devices at SCA were disconnected at least four times during 1986 and 1987 and that chemical waste containing toxic PCB was fed into the incinerator at rates 30 percent higher than allowed under state and federal permits.
Chemical Waste Management, Inc., (the parent company of Trade Waste Incineration, located in Sauget, Illinois) agreed to pay a $250,000 penalty to the State of Illinois and make payment of $30,000 to Illinois' hazardous waste fund instead of fighting a suit alleging that the company was in violation of the Illinois Environmental Protection Act. Trade Waste was acquired by Chemical Waste Management, Inc., in 1983. It has four incinerators used to destroy industrial and institutional hazardous waste. It was alleged that the company failed to properly monitor its incineration process and that as a result hazardous wastes were emitted into the air. In addition to paying the fines, the disposal company agreed to make improvements in its operating procedures.
Chemical Waste Management's incinerator No. 4, located at Sauget, failed test burns conducted during 1990. The unit was issued a permit in 1988 by the Illinois Environmental Protection Agency on the condition that such test burns occur prior to its full operation. Due to these failures of the facility to pass the test burns, the company faced significant delays in obtaining applications for two hazardous waste incinerators to be located in Niagara County, New York.
Mayor William Ottilye of Geneva, Illinois, asked the Geneva City Attorney to investigate the possibility of filing a complaint with the Illinois Environmental Protection Agency against the Settler's Hill disposal facility (operated by Waste Management, Inc.). The residents had complained, over a period of months, about the odors emanating from the disposal site. Those complaints resulted in a shut down of the operation for a short time during 1990 and officials of Waste Management, Inc., vowed to address the problem. A company spokeswoman stated that the firm had temporarily closed the facility it operated near Grayslake because of complaints about the odor, but stated the company would be seeking a Lake County permit to resume operations as a compost facility.
According to the January 19, 1990, issue of the Belleview News Democrat, a spokesman for the Illinois Environmental Protection Agency had stated that a chemical cloud released at Trade West Incineration, Inc., could have endangered people if it had floated over a populated area. The cloud was organic acid created from a chemical reaction in a machine used to blend waste products before they are burned. The company claimed the cloud was harmless; however, 70 employees were evacuated from the site. The company faces a maximum fine of $10,000 for the release of the chemical into the environment.
Under a settlement announced by the EPA, Chemical Waste Management will pay a record $3.75 million fine for pollution violations at its hazardous waste incinerator located on the south side of Chicago. The EPA called it the largest administrative penalty ever imposed on a single facility in EPA history. The fine stems from agency investigations of a whistle-blower's charges that during 1987 employees disconnected air pollution monitors while overloading the incinerator with highly toxic PCB. The EPA originally proposed a $4.47 million fine for the monitor tampering last year, and Chemical Waste Management chose to appeal. Under the settlement, the company will drop its appeal and pay the reduced fine, but does not have to admit any wrongdoing at the plant.
Kansas: During 1982, the Kansas Department of Environmental Health shut down the Waste Management disposal site at Furley, Kansas, (near Wichita), when toxic chemicals were found to have leaked into ground water.
New York: In 1988, Chemical Waste Management was facing up to $1.3 million in EPA fines for failing to comply with PCB handling regulations. The EPA said that the company was in violation for not testing every truckload of PCB tainted sludge that came into the Porter, New York, disposal facility from February to June 1985. A fine of $25,000 a day for 48 days during the four month period was being assessed. The company also faced fines of $85,000 for a series of separate, lesser violations during 1985 and 1986. Those violations also arose as a result of failure to comply with federal regulations for handling PCB.
Chemical Waste Management was fined $1.32 million by the EPA for violations in its operation of a PCB Detoxification Unit at its Model City toxic waste disposal plant in Niagara County. Daniel Kraft, Chief of the EPA's Toxic Substances Section, said that the $1.32 million fine stemmed from Chemical Waste Management's 1985 purchase of a mobile unit from Accurex Waste Technologies designed to dechlorinate the PCB. Kraft stated that when Chemical Waste Management applied to have the unit transferred from Accurex to Chemical Waste Management, they did not notify the officials that the unit had undergone "major modification." Initially, the EPA proposed a fine of $890,000; however, on June 18, 1990, the penalty was raised to $1.32 million, after determining that the unit had been in use for a longer time than first reported.
During 1991, the communities of Lewiston, Porter, and Niagara County, New York, filed suit to intervene in a lawsuit between National Solid Waste Association and Chemical Waste Management, Inc., regarding the disposal of hazardous waste at Chemical Waste Management's No.12 landfill in Porter. The communities and other environmental groups were opposed to the disposal of hazardous waste imported from other jurisdictions for disposal at a landfill they claimed was suffering from leaks and problems with its leak detection system.
Chemical Waste Management faces fines of $7 million by the EPA stemming from charges that it was involved in improperly disposing of PCB contaminated sludge at its Model City plant in Niagara County, New York. The EPA complaint alleges that General Motors shipped 31,000 tons of the contaminated sludge between February 1, 1984, through August 15,1987. Of that total, 10,000 tons went to Chemical Waste Management for disposal of which 2,500 tons were shipped to Chemical Waste Management's facility in Emelle, Alabama. General Motors and Cecos International were also charged in the complaint.
Ohio: Chemical Waste Management's site at Vickery, Ohio, has given rise to a number of actions brought by the EPA and the Ohio Attorney General's Office. During 1983, the EPA charged the company with numerous violations of permits related to the handling of hazardous waste. The charges included selling home heating oil contaminated with PCB and dioxin. During 1984, the Ohio Attorney General's Office and Chemical Waste Management entered' into a stipulated settlement whereby the company agreed to pay fines and assessments amounting to $10 million. During 1985, the EPA brought actions against Chemical Waste Management alleging violations of the Toxic Substances Control Act and the Resources Conservation Recovery Act and sought fines in the amount of $6.8 million. However, later that year, Chemical Waste Management agreed to pay a penalty of $2.5 million to settle the suits. Since 1985, Chemical Waste Management has been cited for a number of other violations occurring at the Vickery site. The most recent violation arising in 1988 involves fines that may total as much as $2 million.
Oregon: Chemical Waste Management operates a hazardous waste disposal site at Arlington, Oregon. During 1985, the company was fined $360,000 by the EPA for failing to keep proper records of what types of waste were received at the dump. The settlement also' involved a $250,000 donation by the company to the Oregon Environmental Fund.
Texas: Chemical Waste Management operated a chemical waste dump at Port Arthur, Texas. During 1985, the State of Texas imposed a $1 million fine for operations which included violations for an improper collection system and inadequate ground water monitoring.
Wisconsin: During 1986, the Wisconsin Attorney General filed suit against Waste Management, Inc., and Waste Management of Wisconsin alleging that the companies failed to comply with rules and regulations for the operation of their landfill known as Omega Hills North. The complaint alleged that nearby ground water had been contaminated by hazardous materials leaking from the landfill and that the company had a deficient ground water monitoring program. In April 1989, Waste Management, Inc., and its subsidiary entered into a stipulated judgment with Wisconsin wherein they agreed to pay fines in the amount of $800,000. This was the largest fine payment ever made in an environmental lawsuit in the State of Wisconsin.
Mexico: Chemical Waste Management, Inc., owns a $20 million incineration plant, Tratamientos Industriales Tijuana Internacional, S.A., located approximately five miles south of the international boundary on the Pacific coast near Tijuana. Despite company ,assurances to the contrary, local and national environmental groups have expressed concern over the manner in which the plant may be operated and the threat that it poses to the environment.
Canada: Waste Management, Inc., lost a $28 million recycling contract in Vancouver due to its record of convictions.
Historically, the refuse industry has been reputed to be infiltrated by members of organized crime. In many instances, this is a well-deserved reputation. The waste cartage business in certain areas of the country, primarily the northeastern seaboard, continues to be known as an industry with strong ties to traditional organized crime families. Where organized crime is involved in the hauling industry it is common to find a "property rights" system at work wherein customers are considered the "property" of the hauling company. Thus, there is no competition and the companies are free to set high service fees without concern that customers will be lost to competitors. Where organized criminals are involved in waste storage or landfill operations, fee skimming and money laundering are commonly applied schemes. In many instances, the disposal companies associated with organized crime have been fairly blatant in their disregard for state and federal environmental regulations. However, such unlawful business practices have not been limited to organized crime operated businesses.
The definition of "organized crime" is generally assumed to be merely another term for the Mafia, or traditional organized crime families. However, now the term "organized crime" may be applied to many criminal enterprises with divergent interests. Any enterprise which is organized to circumvent the law for profit may properly be described as "organized crime."
In early 1960, Dean Buntrock (one of the founding members of Waste Management, Inc.) was charged with unfair business practices along with eleven other individuals. Most noteworthy are allegations that those charged had used threats of physical harm and intimidation against their competitors. The allegations in the complaint describe behavior and methods most typically associated with organized crime operations. Among the eleven individuals named in the lawsuit were relatives of John Mandella (a former head of the Librizzi-Mandella organized crime family of Milwaukee, Wisconsin).
Prior to the formation of Waste Management, Inc., Dean Buntrock operated Ace Scavenger Company. In 1962, the Wisconsin Attorney General filed suit in Milwaukee Circuit Court against eleven trash hauling companies, including Ace Scavenger. The companies were charged with engaging in a "conspiracy to restrain trade, to willingly injure the business of others, to hinder others from performing lawful acts, and an attempt to monopolize the rubbish collection, waste removal or disposal business in and around Milwaukee County." The owners of the companies, including Buntrock, were charged with "threatening physical harm to the owners of competing firms. . .and their families and destruction or damage to their property and equipment, or threaten to haul all their accounts for nothing" if they competed against the accused firm's. The Milwaukee Circuit Court issued an injunction against the firms which remained in effect for eight years. During 1970, the action was dismissed after the company owned by Buntrock and a number of the other accused firms became subsidiaries of the newly formed Waste Management, Inc. [See Attachment C.)
Ace Scavenger was a member of the Chicago Refuse Corporation, a trade association of trash haulers. During 1971, the Chicago Refuse Corporation was sued for price fixing and harassing competitors for the prior six years. The lawsuit was settled when Chicago Refuse Corporation paid $50,000 as part of a consent decree, a clause of which indicated that the settlement did not involve an admission or denial of guilt.
During 1980, Waste Management, Inc., and SCA Services, Inc., were jointly charged with price fixing and restraint of trade in a federal anti-trust case in Georgia.
In 1984, Waste Management, Inc., proposed a tender offer for the acquisition of SCA Services, Inc. At that time, SCA Services, Inc., was the third largest waste handling firm in the nation with 1983 revenues of approximately $391 million.
In September 1984, the United States Department of Justice announced the filing of a civil anti-trust suit, challenging the proposed acquisition, and a consent decree which resolved the alleged anti-trust violations. Under the terms of the consent decree, Waste Management, Inc., would promptly divest itself of about 40 percent of SCA Services, Inc., revenue-producing operations to a third company, Genstar Corporation of Canada.
SCA Services Inc., was the target of numerous Justice Department investigations into its alleged ties with organized crime figures. The president of SCA Services Inc., Thomas C. Viola, was described by federal law enforcement officials to a congressional subcommittee investigating the rubbish industry as being "a business associate of organized crime." Viola had operated one of the largest trash hauling firms in northern New Jersey since 1952 until he sold it to SCA Services Inc., in 1972. In 1959, he was indicted in New Jersey in two cases involving bid rigging in connection with the rubbish industry; however, following the disappearance of a prosecution witness, Viola was found not guilty. The other case was dismissed.
During 1980, Peter Iommetti, owner of a New Jersey waste company, was observed and photographed at a meeting held with a high ranking organized crime figure and Ernest Palmeri, the business agent for the Teamster's local that helped organized crime elements enforce turf rights in the New Jersey rubbish industry.
During 1972, lommetti and his brother sold their solid waste company to SCA Services, Inc., however, they continued as managers. During 1972, Ralph Mastrangelo, owner of a rubbish firm, was involved in extortion with August Vergaletto. According to law enforcement intelligence sources, Vergaletto was closely associated with the acting boss of the De Cavalcante organized crime family in New Jersey. In 1973, Mastrangelo sold his rubbish company to SCA Services, Inc., but remained in the business as an officer of SCA Services, Inc. During 1976, a New Jersey rubbish operator, Alfred Di Nardi, was murdered. Di Nardi had been underbidding SCA companies. After Di Nardi's death, a "peace meeting" was held in East Harlem, New York, by Mafia figures and the rubbish representatives. They decided that SCA Services, Inc., should get back some of the territories taken by Di Nardi. In one instance, SCA Services, Inc., was the sole bidder for some of Di Nardi's old contracts, despite attempts by the user of the service to solicit eight other bidders.
During 1978, Gabriel San Felice (another New Jersey rubbish operator) was murdered. He had been contesting the rubbish "property rights" of Crescent Roselle, owner of a subsidiary of SCA Services, Inc. On December 22, 1980, Roselle was murdered and a congressional witness testified that Roselle might have failed to abide by the East Harlem agreements. During 1980 and 1981, a congressional subcommittee heard testimony from federally protected witnesses and law enforcement officials who charged that the New Jersey rubbish industry was essentially controlled by the Gambino and Genovese organized crime families, as well as the New Jersey Teamster's Union Local.
In 1972, Waste Management, Inc., acquired Universal By-products located in Los Angeles. This acquisition included the subsidiary known as Universal Refuse Removal Company of EI Cajon, California. The owner of Universal By-products was Louie Visco. Visco had been the target of organized crime investigations for some period of time prior to 1972. He gained considerable notoriety in 1955 when Los Angeles Mayor Norris Poulson labeled him the "San Fernando Valley Rubbish Czar." A State Assembly subcommittee investigating the rubbish industry in Los Angeles was presented taped conversations in which Visco claimed to control the Los Angeles City Council, Board of Supervisors and the State Legislature. At the time of the merger, Visco owned 22 percent of Universal Refuse Removal. He was reported to have received $1.7 million in Waste Management stock and options equal to 5.39 percent of the outstanding stock. During 1981, J. Steven Bergeson, General Counsel of Waste Management, contended that Visco had divested himself of all stock he had acquired as a result of the merger. It is unknown what role or influence Visco has had in Waste Management, Inc., subsequent to 1981.
The waste hauling and disposal industry is one subjected to constant regulation and review by public agencies, including operations, franchises and contracts. The waste industry has a fairly significant history of public corruption, although it is generally quite difficult to detect and prove violations of the law. Nevertheless, officials of Waste Management, Inc., subsidiaries have been the targets of corruption investigations and in some instances have been convicted of criminal offenses. In nearly all cases, company management has denied prior knowledge of the offender's conduct or official company involvement.
The SEC conducted an investigation into the operations of Waste Management in Florida regarding allegations that unlawful political contributions were being made. They alleged that Waste Management was skimming dump fees and using the proceeds to create an illegal "slush fund" to be used for political contributions. During 1976, Waste Management agreed to cease making "unlawful political contributions."
During 1983, three of five Hillsborough County commissioners were indicted and ultimately convicted on charges of attempting to extort $75,000 from a developer. Harvey Sharp (an operations manager in the employ of Waste Management, Inc.) testified under a grant of immunity that he had offered bribes and gratuities,, to the county commissioners as a means of influencing their votes on matters pertaining to waste hauling contracts. Sharp later stated that his activities were unknown to Waste Management corporate leadership.
In 1984, Florida State Representative Jack Tobin and four other individuals were indicted on bribery and unlawful compensation charges by a Broward County grand jury investigating alleged corruption in Margate city government. One of those indicted, Hal Stocket, was an official of Waste Management, Inc., which at the time dominated Broward County's waste management disposal industry. Among the allegations investigated was the award of a five-year garbage collection contract to Waste Management in spite of the fact that a competitive bid had been made which was $884,640 less than the bid by Waste Management. Apparently no convictions emanated from this prosecution.
During 1985, John Forack (the general manager of HOD Disposal, a Waste Management, Inc., subsidiary in Illinois) was indicted and charged with mail fraud and Racketeer Influenced and Corrupt Organizations (RICO) forfeiture charges. It was alleged that he had bribed the mayor of Fox Lake, Illinois, and another public official in order to obtain a waste hauling contract. Forack was convicted after a jury trial, sentenced to jail and fined $25,000. Waste Management officials maintained that Forack acted on his own and without corporate knowledge. Forack testified that he had paid the bribe money with his own funds, but expected he would be reimbursed by Waste Management officials.
During 1987, Raymond Akers, Jr., (a lobbyist and marketing representative for Waste Management, Inc.) was indicted along with Chicago Alderman Clifford Kelley. The United States Justice Department sought the indictments at the conclusion of an investigation entitled, "Operation Incubator." They alleged that Akers had bribed Kelley in order to acquire an option to buy land for a waste transfer facility. Prior to trial, both Akers and Kelley pled guilty. Waste Management claimed that Akers acted on his own and not in the interest of the company.
On October 6, 1988, the superintendent and the director of the Department of Sanitation of New Orleans, Louisiana, reported that two municipal employees conducting an investigation of alleged over-charging of the city by American Waste, a Waste Management subsidiary, were threatened by employees of the company. The allegations were investigated by the Department of Justice, but no criminal indictments were issued.
During October 1988, Commissioner Garry Mclntyre, of Clay County, Florida, was indicted for allegedly taking unauthorized payments from Waste Management, Inc. The prosecution alleged that Mclntyre had applied for a job with Waste Management, Inc., at the same time that he was chairman of the Waste Disposal Committee with the Clay County commission. Charges against Mclntyre were ultimately dropped.
Over the years, Waste Management, Inc., and its subsidiaries have been the targets of numerous investigations related to anti-trust activities. The company, its subsidiaries and employees have faced anti-trust lawsuits and government investigations in 17 states. Waste Management and its subsidiaries have paid millions of dollars in fines and other settlements for price fixing, bid rigging and other alleged illegal means of discouraging competition and establishing monopolies.
There appears to be a fairly consistent pattern of attempts by Waste Management, Inc., to dominate the market by acquiring smaller, independent operators, or forcing them out of the market by using predatory pricing methods.
Given the size and resources available to the company, few, if any, of its competitors are capable of resisting its efforts to control local markets. Following is a discussion of some of the more significant cases involving Waste Management, Inc., including three cases involving the company's activities in Southern California, two of which are directly related to its operations in San Diego County.
Arizona: During July 1976, the Attorney General of the State of Arizona filed a complaint against Universal Waste Control of Phoenix (a subsidiary of Waste Management, Inc.) and its general manager, Joseph Klimoski, alleging that in 1973, Universal Waste Control began to acquire other local trash hauling companies and in so doing gained a substantial amount of the business in and around Phoenix. The Attorney General alleged that Universal Waste Control engaged in predatory practices to exclude competitors and that they also solicited agreements from competitors not to compete with Universal Waste Control. The suit was settled with the company agreeing not to violate anti-trust laws and to pay a $15,000 fine. Klimoski was fined $2,500.
During October 1976, Universal Waste Control was named in a federal civil anti-trust action filed by two competitors in Phoenix charging that the company had violated anti-trust laws by conspiring to fix prices since 1971.
During December 1981, a class action lawsuit was filed by the same two companies in Maricopa County Superior Court, Phoenix, Arizona, against Waste Management, Inc., Universal Waste Control and two other haulers. The complaint alleged violations of anti-trust laws and was ultimately settled with Waste Management, Inc., and Universal Waste Control agreeing to jointly pay $80,000 of the $ 110,000 settlement.
California: In June 1987, the Los Angeles District Attorney filed a criminal anti-trust action against Waste Management of California (a subsidiary of Waste Management, Inc.) and Western Waste Industries of Gardena and Angeles Houston, Inc., (a Los Angeles garbage hauling firm). The firms, along with five employees, were charged with operating an illegal cartel which divided up customers among themselves, eliminating competition and inflating prices to artificially high levels. Wiley A. Scott, Jr., the operations manager of the Waste Management subsidiary, and Clifford R. Chamblee, the general manager for the Gardena, California, operations, pleaded no contest to criminal charges. Waste Management agreed to pay a $ 1 million fine to settle what prosecutors later dubbed, "The largest criminal anti-trust case in California history."
On December 28, 1989, an information was filed against Dewey's Rubbish Service (a subsidiary of Waste Management, Inc.). The company was charged with engaging in customer allocation and price fixing in Orange County, California. On February 13, 1990, the company entered a plea of guilty and was fined $ 1 million. [See Attachment D.]
On February 13, 1990, Waste Management of California, Inc. (doing business as Daily Disposal Service) pled guilty to one count of a criminal violation of the Sherman Anti-trust Act in connection with a conspiracy to allocate customers and fix prices of commercial and industrial trash hauling services in San Diego County beginning in 1983 and continuing thereafter through 1984. The company agreed to pay a fine. in the amount of $500,000 in settlement of the case. (See Attachment E.)
In November 1990, Waste Management, Inc., agreed to pay $19.5 million to settle a class action civil anti-trust lawsuit charging price fixing for container refuse service. The lawsuit alleged that Waste Management, Inc., and Browning Ferris Industries, Inc., of Houston, (the nation's two largest waste haulers· had engaged in a nationwide conspiracy to violate anti-trust laws. San Diego County was named as one of the jurisdictions affected by the anti-trust activities of the companies. [See Attachment F.)
In September 1991, an investigation by the San Jose Police Department resulted in the execution of a search warrant upon the offices of Waste Management of Santa Clara County (a subsidiary of Waste Management, Inc.). The investigation revealed that Waste Management trucks were making collections outside the contract area for the City of San Jose, but were dumping the trash collected at the Newby Island landfill site claiming that it was collected within the franchise area. The City of San Jose's contract with BFI Inc., operator of the landfill, provided a rate nearly half of the regular "gate rate" for non-franchise area trash haulers. Thus, Waste Management of Santa Clara County was paying only half what it should have been for dump fees, while at the same time using up volume allocations reserved for the 'City of San Jose under its contract. [A copy of the affidavit for the search warrant is included as Attachment G.)
Florida: During 1986, the manager of United Sanitation Services (a Florida subsidiary of Waste Management) was fined $10,500 and sentenced to two years probation in an anti-trust action alleging price fixing and customer allocation.
On January 15, 1988, Waste Management, Inc., pled no contest in federal court to charges involving anti-trust activity occurring in Dade and Broward counties, Florida. The company was fined $1 million.
In February 1988, United Sanitation Services of Florida (a subsidiary of Waste Management, Inc.) settled a long-running anti-trust case brought against it by the Florida Attorney General. The cases involved allegations of illegal customer allocation schemes headed by United Sanitation. The two civil anti-trust cases were settled for a total of $725,000 in fines paid by Waste Management. In November 1987, Waste Management filed a plea of nolo contendere in federal court in Fort Lauderdale, Florida, to criminal charges based on the same anti-trust activity occurring in south Florida.
During 1990, Mid American Waste sued Waste Management, Inc., in Jacksonville, Florida, under Florida's new "Bad Boy Law" to enjoin Waste Management from being granted a $34 million city disposal contract since they fall within the jurisdiction of the "Bad Boy" legislation. The legislation forbids government entities in Florida from doing business with companies which have been convicted of felonies. Mid 'American also filed an additional lawsuit claiming that Waste Management, Inc., undercut Mid American's bid by charging prices lower than they charge other Florida cities.
Georgia: During May 1980, Georgia Waste Systems (a subsidiary of Waste Management, Inc.), SCA Services, Inc., and two other solid waste disposal companies and their respective managers, were indicted by a federal grand jury in Atlanta, Georgia, for conspiring to fix prices and allocate customers during the years 1974 through 1979. The action was dismissed before trial based on a challenge to the grand jury's selection process.
During 1983, Georgia Waste Systems was found guilty of conspiring to fix prices in an anti-trust suit and was ultimately fined $350,000. The general manager of the subsidiary was also found guilty and sentenced to a jail term which was suspended on condition of successful completion of probation.
Illinois: During 1971, an Illinois anti-trust action resulted in fines totaling $50,000 and consent decrees involving three Waste Management subsidiaries and a number of other Chicago area companies.
New York: During 1986, Bestway Disposal (a subsidiary of Waste Management, Inc., located in Henrietta, New York) was charged with anti-trust violations and with engaging in an agreement to allocate customers. During 1988, the company entered a plea of nolo contendere and was fined $250,000.
Ohio: In October of 1987, Waste Management, Inc., and Browning Ferris, Inc., of Houston, Texas, pled guilty to criminal felony charges involving price fixing and customer allocations in Toledo, Ohio. Each was fined $1 million.
Pennsylvania: On October 7,1991, the Wall Street Journal reported that Waste Management, Inc., had been fined $4.1 million for exceeding volume limits allowed under permits granted for a 470-acre dump in Erie, Pennsylvania. The fine was assessed because Waste Management dumped 38,319 tons in excess of the allowed amount between April 24, 1990, and July 4, 1990. The article reported that Waste Management's dump managers are paid bonuses based, in part, on profit. Since costs for landfill operations are mostly fixed, additional volume over permit levels is almost entirely profit.
Washington: In 1990, Bayside Disposal (a subsidiary of Waste Management, Inc., serving Seattle, Washington) was charged with failing to pay nearly 5400,000 in utility taxes to the city. The practice of failing to pay the utility taxes began prior to the acquisition of Bayside Disposal by Waste Management, but apparently continued for at least three years after that time. Other haulers in the area claimed that they had lost out on contracts with Seattle because they included the costs of paying the taxes in their contract bids, while apparently Waste Management did not.
As previously mentioned in this report, Waste Management, Inc., has a number of ongoing business operations in San Diego County. As part of this investigation an examination of the company's local activities was undertaken. The investigation included inquiries into the company's acquisition of property in Gregory Canyon, its relationships with local politicians and its methods of operation in the political arena.
Gregory Canyon: Waste Management, Inc., is seeking to develop a privately owned waste landfill in North San Diego County. The site now known as Gregory Canyon is located near Pala off of Highway 76. The area is primarily agricultural and previously consisted of a number of separately owned parcels. Some of the property was acquired by a partnership formed by Hal Jensen and David Lowry, who subsequently entered into a partnership with Waste Management, Inc., which acquired the remaining properties.
At the time of the acquisition of the properties, Lowry (a North County businessman and land developer) was the Chairman of the Fallbrook Community Planning Group. Our examination of the circumstances and timing of his efforts to acquire property. in the Gregory Canyon area indicates a possible conflict of interest may have occurred.
On March 17, 1988, a community meeting took place in Fallbrook to discuss potential landfill sites in North County, including a site located off Aspen Road which was partially located within the boundaries of the Fallbrook Community Planning Group.
On March 18,1988, Lowry, in his position as chairman of the group, appointed a special subcommittee to make a report to the planning group on the proposed Aspen Road landfill site.
On April 7, 1988, at a special meeting of the Fallbrook Community Planning Group, the subcommittee's report was considered, which opposed selection of the Aspen Road site. The report was adopted by the planning group, which voted to recommend to the county that the Aspen Road site not be selected for development as a landfill. Lowry chaired this meeting and cast his vote against the Aspen Road site. At that meeting he announced that he intended to seek an alternative landfill site.
In response to allegations that Lowry had committed a conflict of interest in voting against the Aspen Road site, the Office of County Counsel) was directed by the Board of Supervisors to conduct an inquiry. In a letter dated July 3, 1989, County Counsel reported its findings to the Board of Supervisors. The letter contained the following conclusions:
At the time of the Planning Group recommendation on April 7, 1988, on the Aspen Road site, Mr. Lowry had taken some preliminary steps to locate an alternative site, but he had acquired no property interest in the land fill site now being proposed by him. The decision on the Aspen Road site, while it tended to provide better chances for selection for alternative sites, did not make it reasonably foreseeable that Mr. Lowry's alternative site would be selected by the County, especially since on April 7, 1988, Mr. Lowry had no property interest in the site. Under these circumstances, we conclude that it was not reasonably foreseeable that the Fallbrook Community Planning Group's decision in regard to the Aspen Road site would have a material financial effect on Mr. Lowry or his development aspiration and that he did not violate applicable conflict of interest prohibitions by participating in the planning group decision..
In reaching this conclusion, County Counsel considered statements provided by Lowry about the timing of his involvement in seeking an alternate landfill site. Lowry maintained that he had no involvement in looking for landfill sites, or acquiring options to any property, prior to the Fallbrook Planning Group taking a position on the Aspen Road site. He later changed his statement, saying that he started looking for an alternative site prior to April 7, 1988. However, he apparently did not reveal the full extent of his activities. Our investigation revealed additional facts which were apparently not known to County Counsel prior to its rendering its opinion on July 3, 1989.
According to John Mitchell (previous owner of Century 21 /Transworld Properties of Valley Center), between late February and early March of 1988, he was approached by Hal Jensen about the possibility of acquiring property in the Gregory Canyon area. Jensen, the owner of Palomar Grading and Paving Company and a member of the Valley Center Planning Group, requested that Mitchell determine who the owners of the various parcels were with a view toward attempting to purchase the properties. Mitchell related that as part of the agreement to acquire the properties for Jensen, he was to use the services of Jensen's younger brother, David Jensen. At this time, David Jensen was awaiting the results of the California real estate agents examination. He passed the examination and was licensed as a real estate agent on April 7, 1988.
Mitchell states that after determining the identities of the property owners from tax assessor rolls, he began making contacts with parcel owners on behalf of Hal Jensen. His first contact was with Joseph Lucio, which Mitchell believes occurred prior to April 1, 1988. Lucio operated a dairy on land he owned in the Gregory Canyon area. Mitchell recalls that he had one or two contacts with Lucio before an offer to purchase the property was tendered. Mitchell said that when he returned to his office with the initial offer he was met by Hal Jensen and David Lowry. It was only at this time, according to Mitchell, that he was made aware that Jensen and Lowry were working together on the project.
Joseph Lucio stated that his first contacts about selling his property were with Mitchell and David Jensen. However, he stated that all his subsequent dealings were with Lowry directly. The actual purchase contract for the property was dated April 13, 1988, and was presented to him by Lowry.
James Guthrie (another property owner) related that he was initially contacted by Mitchell and David Jensen regarding the purchase of his property. The land purchase contract for his property was dated April 8,1988. The listed purchaser was Palomar Grading. and Paving, Inc.
Hal Jensen was interviewed regarding his involvement in the Gregory Canyon properties. He stated that he and Lowry were motivated to look for a potential landfill site by a comment made by Supervisor John MacDonald who said, "If you can find a better landfill [than those currently being considered), then find one." According to Jensen, in early 1988, he and Lowry flew in Jensen's private airplane over San Diego North County looking for potential landfill sites. They subsequently discovered a site near Rosemary Mountain that they felt presented possibilities. This site later became known as Gregory Canyon.
Glen Brown, of Law Environmental (a consulting service), stated that he had met with Jensen and Lowry on April 8, 1988, at Jensen's office. Brown was provided topography maps of the proposed landfill area and was asked to give his evaluation of the site based on the maps and his visit to the site. Brown said that it was his understanding that an engineering firm had already studied the site and had made estimates of its potential capacity.
Contrary to his assertions to County Counsel, it appears Lowry was intimately involved in a business venture with Hal Jensen to obtain a landfill site at Gregory Canyon weeks prior to the planning group's vote on April 7, 1988. Rather than merely "looking" for a possible alternative site, it appears that Lowry and Jensen were in the process of acquiring a site that had been already located. In voting against the Aspen Road site, Lowry essentially was insuring that there would be less competition against the site that he and Jensen were acquiring. County Counsel's opinion did not contemplate the true nature of Lowry's involvement. Thus, the opinion that Lowry did not commit an act which constituted a conflict of interest, may well bear reconsideration, given the facts as they are now known.
Lowry's failure to disclose his conflict of interest appears not to be prosecutable under the Political Reform Act since its provisions do not apply to advisory groups. Since no contract emanated from the vote taken on April 7, 1988, there has been no violation of Government Code section 1090 or-1091. However, his actions may have been contrary to the provisions of Board of Supervisors Policy I-1 as it existed in April 1988. This policy provides that:
[N]o member of a planning or sponsor group shall make, participate in making or in any way attempt to use his or her position as a member of the group to influence a decision in which he or she knows or has reason to know that he or she has a financial interest.
Ultimately several of the parcels in the area of the site were acquired by the Jensen-Lowry partnership. They entered into a partnership/joint venture with Waste Management, Inc., to develop a privately held landfill operation to be located at Gregory Canyon. Lowry and representatives of Waste Management, Inc., have been actively engaged in lobbying members of the Board of Supervisors and others in county government for support of the Gregory Canyon project.
Public Relations Campaign in San Diego: Waste Management, Inc., has undertaken a multi-faceted public relations campaign in San Diego in order to gain support for its Gregory Canyon Landfill project. The company has retained the public relations firm of Stoorza, Ziegaus & Metzger, Inc., to represent its interests in San Diego and also uses in-house media experts to sway public opinion. This campaign has involved the use of traditional communications techniques, such as personally contacting public officials, disseminating informational brochures to the public and distributing press releases to the local media. However, Waste Management, Inc., appears to also have been involved with efforts to manipulate the local media by using intermediaries.
On February 9, 1992, an article appeared in the opinion section of the San Diego Union-Tribune entitled, "Lost amid county's garbage is a likely solution: privatization." The article, a copy of which is included in this report as Attachment H, was written by Lynn Scarlett, vice president of research of the Reason Foundation. The article is critical of the San Diego Board of Supervisors for adopting a policy against the privatization of landfills in the county and expounds the benefits of privatization.
We have acquired materials which suggest that Waste Management, Inc., may have provided funds to the Reason Foundation in exchange for a "research project ", the findings of which would support the company's efforts to open a private landfill in the county. In a memorandum dated November 2,1990, Rick Daniels, then special projects manager for Waste Management, Inc., advised company officers of a plan to fund such a study, using the San Diego Taxpayers Association as an intermediary. (See Attachment I.) This plan apparently was in response to a solicitation by Lynn Scarlett on behalf of the Reason Foundation in a letter dated October 22, 1990. In her letter, Ms. , Scarlett indicates that a favorable report could be generated in exchange for a contribution of $34,678 by Waste Management, Inc. Included with the letter was a proposal indicating what would be provided in exchange for the contribution. The (letter and proposal are included as Attachment J.
In an article dated November 30,1990, the San Diego Tribune reported the plans of Waste Management, Inc., to fund the study by the Reason Foundation. A copy of this article is included as Attachment K. An opinion article by Scarlett, printed by the same publishing company 26 months later, did not mention ties between Waste Management, Inc., and the Reason Foundation. While on the surface Scarlett's article might appear to be a non-biased report, the correspondence between Waste Management, Inc., and the Reason Foundation suggests otherwise. This use of the media is an example of a method used by Waste Management, Inc., to gain public approval of its enterprises and bring pressure against public officials.
Political Activities In San Diego: Waste Management, Inc., has been highly active in the political arena, both on a local and national level. These activities include making donations to political campaigns, hosting fund raisers and lobbying. Some past occurrences wherein company employees were prosecuted for unlawful political activities are discussed elsewhere in this report.
An example of the company's political activities can be seen in Marana, Arizona, where Waste Management, Inc., is presently attempting to win approval for the establishment and operation of a privately owned landfill. As part of its claimed "Good Neighbor Policy," the company promised to pave the streets of Adonis Mobile Home Park and build a meeting hall for park residents if the $20 million project is approved. Two of the mobile home park residents, Reverend Elwin Clifton, Jr., and Doug Mostyn, are members of the council that will decide if the landfill should be allowed.
In addition to the promised improvements to the mobile home park, in June 1991, Waste Management, Inc., made a $7,000 donation to the Marana Regional Arts Council. Town Council Member Bill Schisler's wife is the statutory agent and chief fund raiser for the Arts Council. The donation was made just before a June 30,1991, deadline for the Arts Council to raise $10,000 or lose matching funds for a Town Hall arts project.
Waste Management, Inc., also proposed contributions to the Marana Health Center where the Mayor of Marana, Ora Mae Harn, is employed as a program director for community services.
Waste Management, Inc., has made similar contributions to civic programs promoted by public officials in San Diego. One program receiving a considerable donation from the company was headed by a member of the San Diego Board of Supervisors, the body currently considering the company's application to operate a private landfill in North County.
Waste Management. Inc.. and Sail San Diego: The 27th America's Cup Defense Committee, Inc., (doing business as Sail San Diego) is a California non-profit corporation which operated an organization known as the South Bay Syndicate. The Syndicate consisted of a coalition of South Bay cities, including Chula Vista, National City, Imperial Beach, Coronado, the County of San Diego, the Port of San Diego and the promoters of the 1991 Chula Vista Yacht Club challenge for the Little America's Cup.
The president of Sail San Diego was Supervisor Brian Bilbray. Sail San Diego was administered out of Supervisor Bilbray's office at the County Administration Center, primarily by Jeff Stafford, an administrative assistant to Supervisor Bilbray. Stafford divided his time between his duties as an administrative assistant and as coordinator of Sail San Diego/Little America's Cup. His salary was partially paid by the county and partially by Sail San Diego.
The primary mission of the South Bay Syndicate was to compete in the Little America's Cup Challenge that took place in Melbourne, Australia, in January 1991. Contributions were solicited from business, government and community organizations to fund the building of a boat, training of a crew and transportation to Australia for the competition.
A secondary mission of the Syndicate was to develop a series of community- oriented educational programs involving boat design and competitive sailing. Sail San Diego recently changed its name to the San Diego County Youth Sailing Foundation.
On October 21, 1989, NORCORP, Inc., was granted corporate status by the Secretary of State, State of California. David Lowry is the chief executive officer and Hal Jensen is the chief financial officer. Simultaneous to the creation of this corporation, a fictitious business statement for a company known as North San Diego County Development Company was filed. This is a partnership between NORCORP, Inc., and Waste Management of California, established to develop a private landfill at Gregory Canyon.
Lowry had been active in the America's Cup program and local sailing endeavors. Lowry arranged a meeting between David Ross and Rick Daniels of Waste Management, with Jeff Stafford and David McGuigen of Sport F/X, a sports promotional firm. The purpose of the meeting was to encourage Waste Management to contribute to Sail San Diego. According to Lowry, as a result of this first meeting, a second meeting was set up with Supervisor Bilbray at his office.
On March 22, 1990, a meeting took place in Supervisor Bilbray's office at the County Administration Center. The following individuals were present at the meeting:
Supervisor Brian Bilbray
John Woodard, chief of staff for Supervisor Bilbray
Jeff Stafford, administrative assistant to Bilbray
David Lowry, chairman of NORCORP, Inc.
David McGuigen, of Sport F/X
John DeTar, of Sport F/X
Tom Blackman, Western regional vice president of Waste Management of California
David Ross, project manager for Waste Management of California
When interviewed, David Ross stated that during this meeting a request was made for a donation by Waste Management to Sail San Diego. He recalled that David Lowry made most of the presentation on behalf of Sail San Diego, and that Supervisor Bilbray also participated. Ross stated that the privatization of landfills and the development of Gregory Canyon were also discussed at this meeting.
John DeTar and David McGuigen both stated that during the meeting a presentation was made to Waste Management officials about Sail San Diego. They specifically recall that a request for a $50,000 contribution was made.
In interviews conducted as a part of this investigation, neither Supervisor Bilbray nor his staff could recall any details of this meeting, nor could they recall who was in attendance. Although his office calendar contains an entry for March 22, 1990, indicating a 2:00 p.m. meeting with Tom Blackman, Supervisor Bilbray stated, "The March 22 one, really just sort of draws a blank for me. That one I really can't tell you. I don't know, I could try and guess." Supervisor Bilbray was unable to recall a meeting in which a $50,000 donation to Sail San Diego was requested. Supervisor Bilbray did recall, in detail, a series of meetings with Waste Management officials over a period 'of months, which occurred after March 22, 1990.
Rick Daniels (a special project manager for Waste Management) stated that he was advised that a donation in the amount of $50,000 was agreed upon by company officials. Daniels stated that all contributions must be approved by corporate headquarters. He said that he prepared a Charitable Contribution Approval Request Form and sent it through company channels for approval. He said that the contribution was approved and authority was given to make the contribution.
On May 7, 1990, a check in the amount of $50,000 was presented to Tom Money (the vice president of Sail San Diego) by John Lusignan (the local operations manager for Waste Management, Inc., of San Diego). Lusignan states that the contribution was a corporate transfer of funds from Waste Management, Inc., of America, Oakbrook, Illinois, to Waste Management, Inc., of San Diego.
Our investigators requested that Waste Management provide a copy of the Charitable Contribution Approval Request Form prepared by Rick Daniels. David Kelly (a regional counsel and vice president of Waste Management of California) forwarded a copy of the form described by Daniels. It described the purpose of the funds to be, "To support the America's Cup Organizing Committee for the Little America's Cup Race." The amount requested was 550,000. The document provided for written approval by various managers and officers of the company, depending on the amount requested. In cases where the requested donation is in excess of $2,500, the document indicates that the chairman or the president of the company must sign off. In this case, the document appears to have been signed by Phil Rooney, president of Waste Management of America.
Of some concern is the fact that the Approval Request Form is dated June 13, 1990, some five weeks after the check for $50,000 was presented to Sail San Diego. Phil Rooney's signature is dated June 22, 1990.
David Kelly was re-contacted and asked why the document requesting approval for the donation was dated after the donation had already been made. Kelly was unable to clarify the situation. He said the actual approval possibly was made by telephone and that the written request was made later, merely for record keeping purposes.
Rick Daniels was also re-contacted. Daniels was asked if he had made the written request after the donation had actually been made. Daniels stated that he was sure he had made the written request shortly after the March 22 meeting in Supervisor Bilbray's office. Daniels said it would be contrary to company policy to give a donation, especially one of $50,000, without prior written approval. Daniels was unable to explain why the document was dated so long after the donation was made.
In addition to the $50,000 donation from Waste Management, Inc., Hal Jensen and David Lowry each contributed $10,000 to Sail San Diego. However, Lowry's contribution was later returned to him, having been considered a "loan" to the organization.
An examination of the financial records of Sail San Diego by our investigators revealed that the donations by Waste Management, Inc., and Hal Jensen were made at times; when the organization was in serious financial trouble. On May 14, 1990, Sail San Diego had cash on hand in the amount of $8,267.28. Its accounts payable at that time amounted to $7,392. The organization was also incurring obligations for construction costs for the organization's catamaran that greatly exceeded its cash reserves. Waste Management's check in the amount of $50,000 was deposited on May 15, 1990. It is clear that without this infusion of cash that Sail San Diego would probably have become insolvent.
On December 20, 1990, Sail San Diego had cash on hand in the amount of 5351.55 and accounts payable of $23,654.81. Hal Jensen's donation of $10,000 was received on December 27, 1990. Without this donation the organization would not have been able to pay its outstanding debts at a time when final preparations were being made for the race in Australia the following month.
In January 1991, Supervisor Bilbray attended the Little America's Cup race in Australia. By January 16, 1991, the cash reserves of Sail San Diego had dwindled to $1,418.17. The most recent bank statements provided to our investigators indicate that on October 31, 1991, Sail San Diego had cash on hand of $216.78. At this time the organization does not appear to be financially viable.
El Cajon City Councilman Mark Lewis:
In 1964 the City of EI Cajon entered into an exclusive contract with Elmer's Disposal Service for trash collection citywide. The ten-year contract was assumed by Universal Refuse Disposal which purchased Elmer's Disposal Service in 1968. Universal Refuse Disposal (a subsidiary of Waste Management, Inc.) has continued to have an exclusive franchise for refuse collection through the Spring of 1991.
On April 15, 1991, EI Cajon City Councilman Mark Lewis submitted a memo to the city recommending that the city seek competitive bids for its refuse collection and provide Universal Refuse Disposal with a five-year notice of termination in accordance with the current contract. Councilman Lewis voiced concern over the lack of competition for the contract due to the longtime exclusive nature of the franchise. He also pointed out that the proposal by Universal Refuse for a recycling program was not in compliance with the requirements set forth in AB939.
On May 21, 1991, the EI Cajon City Council held a public hearing regarding rubbish collection and recycling for the city. After public comment and debate on the issues the City Council voted to notify Universal Refuse Disposal that their franchise agreement with the city would be terminated effective July 1, 1996, and that prior to the termination date the franchise would be put out for competitive bid. Councilmen Lewis, Miller and Hansen voted for the measure and Councilmen Stockwell and Shoemaker voted against it.
Subsequent to the vote that evening, Councilman Lewis states he was confronted in the restroom at city hall by two individuals he recognized as past employees of Universal Refuse Disposal, and who were now employed by Waste Management, Inc. He knew one of the men as "Francisco." Councilman Lewis said that "Francisco" approached him and stated, "How come you don't like Universal no more?" Lewis responded that he had no problem with Universal, but did not agree with its proposed recycling plan. He said "Francisco" then said, "You know, you might not have a job tomorrow."
Councilman Lewis is employed by the County of San Diego, Solid Waste Division. His supervisor, Bob Allen, reported that prior to the May council meeting he had heard employees of Waste Management, Inc., discussing a possible move to charge Lewis with conflict of interest because of his activities on the City Council and his employment with the county.
Allen stated that on May 13, 1991, he attended a conference at Lake Tahoe sponsored by the Government Refuse Collection Disposal Association. Allen recalled that as he was leaving dinner he ran into Nikki Clay (whom he knows is employed by Stoorza, Ziegaus and Metzger, a San Diego public relations and consulting firm working for Waste Management, Inc.). Allen related that Clay asked him whether he knew that Mark Lewis was an EI Cajon City Councilman. Allen stated that he told Clay that he was aware of that fact and had discussed the matter with Lewis in order that possible conflicts could be avoided. Allen reported that Clay told him Waste Management, Inc., "was talking seriously about pursuing a conflict of interest case against Mark Lewis." Allen noted that Clay attended the conference with Gaye Soroka (an employee of Waste Management of San Diego).
Francisco Maldonado (supervisor of Solid Waste Operations of Waste Management of San Diego) was interviewed about the incident occurring at the May 21, City Council meeting. Maldonado admitted attending the meeting with other Waste Management employees to "show support for employees of Universal Refuse Disposal." Maldonado also admitted making the comment to Lewis, "Why don't you like Universal no more?" However, he denied making any threats or comments about Lewis' job. He said that he was in the company of Waste Management employee Joe Valenzuela when he spoke to Lewis.
Nikki Clay was advised of the statement attributed to her by Bob Allen. Clay admitted that she attended the conference at Lake Tahoe and that she knew Allen. However, Clay denied making any statement about bringing conflict of interest charges against Mark Lewis.
We believe that it is unlikely that the comments made to Bob Allen and Lewis by those in the employment of Waste Management, lnc., were merely coincidental. Furthermore, the circumstances and timing of these occurrences clearly support the implication that representatives of the company were attempting to intimidate Lewis.
Two other incidents involving Councilman Lewis appear to support the conclusion that Waste Management, Inc., has attempted to improperly influence and coerce him on issues affecting their operations in San Diego County. In a letter dated June 11, 1991, Gaye Soroka advised Lewis that, "pursuant to the California Political Reform Act," Waste Management was advising him that two lunches, paid for by Waste Management in April and May of 1991, had a combined "gift value" of $18.50. Lewis expressed surprise that such a trivial "gift" would be brought to his attention, since, the law only requires gifts of over $50 to be reported. He was also concerned that Soroka mailed the letter to his place of employment with the county, rather than to his councilman's address in EI Cajon.
We asked Ms. Soroka why this letter was sent to Mark Lewis at his place of employment with the County of San Diego, as opposed to his office in the City of EI Cajon. Soroka said that Lewis had requested all documentation to be sent to him at the County facility. However, Councilman Lewis denied that he had ever requested that Soroka send any correspondence to him at his place of employment.
When asked the purpose of the letter, Soroka stated that a directive had been received from Waste Management of California to make such advisements. However, she said that the only letter sent was the one to Mark Lewis and subsequently the directive was rescinded. Soroka was unable to explain why Lewis was the sole recipient of such a communication from Waste Management, Inc.
Lewis also reported that in a May 20, 1991, meeting with Gaye Soroka, she advised him that she had heard a rumor that he was thinking of running for the Board of Supervisors. Soroka commented that Waste Management would be very supportive of his candidacy if his views were in favor of the Gregory Canyon landfill project. Soroka is reported to have told Lewis that Waste Management would put on a fund raiser for him in Mission Valley. She is also reported to have told Lewis the company would provide him with contributions in the form of checks from individuals in the employ of Waste Management from Los Angeles and Orange County in amounts of $250 or less in order to be in compliance with campaign contribution limitation statutes.
Waste Management, Inc.'s, methods of doing business and history of civil and criminal violations has established a predictable pattern which has been fairly consistent over a significant number of years. The history of the company presents a combination of environmental and anti-trust violations and public corruption cases which must be viewed with considerable concern. Waste Management has been capable of absorbing enormous fines and other sanctions levied against it while still maintaining a high earnings ratio. We do not know whether these sanctions have had any punitive effect on the company or have merely been considered as additional operating expenses.
We have reviewed recent practices and problems and our concerns have not diminished. The company's recent business practices and violations do not appear to be different from the past. We have been unable to determine whether Waste Management's history, as reflected by this report, has been due to a failure of proper management, or has been the result of deliberate corporate policy. Whatever the case, the company's history requires extreme caution by the San Diego County Board of Supervisors or any other governmental entity contemplating any contractual or business relationship with Waste Management.
Our examination of the activities of Waste Management in San Diego County causes us additional concern. When viewed in the context of their established history of business practices, it is clear that Waste Management engages in practices designed to gain undue influence over government officials.
One such practice was demonstrated by the treatment of Councilman Mark Lewis. First, a favor was offered; then, there appears to have been attempts at coercion to bring about Lewis's cooperation. Another such practice has been Waste Management's penchant for donating large sums of money, all with the appearance of altruistic or beneficent ends, to charitable entities or projects which are targeted for the greatest impact on persons exercising crucial approval authority over Waste Management business projects which are either proposed, pending or under review. This kind of practice appears to be Waste Management's primary reason for their $50,000 contribution to the financially troubled Sail San Diego. These practices suggest an unseemly effort by Waste Management to manipulate local government for its own business ends. If unchecked, these practices, like other more direct forms of improper attempts to gain influence, may have a corrupting impact on local government and lead to decisions unsuitable to the best interests of the public.
In view of the obvious ramifications of Waste Management's contribution to Sail San Diego, we believe that Supervisor Brian Bilbray would be well advised to abstain from voting on current Waste Management projects pending before the San Diego County Board of Supervisors. Such action will avoid any further appearance of impropriety or conflict of interest.
A. News/Sun Sentinel articles:
"The Titans of Trash"
B. Ventura County Sheriff's Department Report
C. Civil Complaint: State of Wisconsin v. Acme Disposal, et al.
D. Criminal Information and Settlement Agreement: United States of America
v. Dewey's Rubbish Service
E. Criminal Information and Settlement Agreement: United States of America
v. Waste Management of California, Inc.
F. Notice of Settlements: Containerized Solid Waste Haulers v. Waste
Management, Inc., et al.
G. Santa Clara County, Search Warrant Affidavit
H. Union-Tribune article: "Lost amid county's garbage is a likely solution:
privatization"
I. Waste Management, Inc., Memorandum by Rick Daniels
J. Letter and Proposal by Lynn Scarlett of the Reason Foundation
K. San Diego Tribune article: "Company may fund waste-services study"
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Last modified: May 2, 1997