A federal judge agreed that Recology has satisfied the terms of its deferred prosecution agreement in San Francisco and granted a motion to dismiss a pending bribery charge against the company.
Three San Francisco subsidiaries of the West Coast hauler collectively entered into the three-year DPA with the U.S. Department of Justice in September 2021 at the same time the government filed a one-count information that could have led to charging them with conspiracy to commit honest services wire fraud.
Two former Recology executives — Paul Giusti, local director of government affairs, and John Porter, his supervisor and head of the SF Recology Group — were sentenced last year for their role in what the DOJ described as “one of the largest corruption scandals in San Francisco history.” The complex, multiyear scheme involved a series of payments and other gifts to former Department of Public Works Mohammed Nuru in exchange for favorable business outcomes. Nuru was sentenced in 2022.
“I'm going to grant the motion, but I wanted to underscore for you and emphasize how corrupt the practice was that led to the criminal charges, and how skeptical I am that the criminal conduct within Recology didn't go higher than Mr. Giusti and Mr. Porter. I don't believe that,” said Judge William Orrick in a Thursday hearing.
Porter previously said he followed the lead of his predecessor Mark Arsenault in signing off on many of the bribes. Arsenault, who eventually became the company’s chief operating officer, resigned in 2020 as the local scandal was unfolding. DOJ filings repeatedly named an “Executive 2” who matched this description, but he has not been charged.
As part of the DPA, Recology also agreed to pay a $36 million fine, including $7 million to the City and County of San Francisco, as well as more than $100 million in ratepayer reimbursements. Since then, Recology has turned over much of its board of directors, longtime CEO Mike Sangiacomo resigned along with other top leadership, and the company implemented a range of new ethics and compliance protocols.
Orrick said he could have granted the DOJ’s motion to dismiss the case without a hearing but wanted to speak directly with Recology representatives in the court room.
President Cary Chen, who previously served as Recology’s chief legal officer and played a key role in working with the DOJ, spoke on the employee-owned company’s behalf.
“From the outset of the investigation, Recology has viewed this as an opportunity for improvement,” said Chen, reading from a broader prepared statement. “While rebuilding trust takes time, I can say that as a result of four years of hard work, we now have a much stronger culture of ethics and compliance across the whole company.”
Chen detailed “millions of dollars” worth of investment in hiring compliance professionals, building new governance structures, setting new ethics policies, training employees and implementing a host of other changes. When pressed by Orrick for further details, Chen cited changes such as setting an “appropriate tone from the top,” setting up a system of checks and balances that gives independent directors more insight into management decisions and creating a “continuous loop” of compliance and audit review systems.
Assistant U.S. Attorney David Ward said he viewed the agreement as a “success” and said “it did what a DPA on its best day is intended to do.” While he did not respond directly to Orrick’s assertion about others in the company being involved, Ward did make reference to a change in company culture.
“Recology in 2020 was a company that had deep-seated problems. The government concedes that. Its director of government affairs was engaged in egregious bribery. I think within the company there was a culture that turned a blind eye, often, to questionable conduct. In terms of criminal prosecutions, the government prosecutes the cases it believes it can prove beyond a reasonable doubt,” Ward said.
Ward credited Chen and others for their cooperation, which he said helped avoid a trial with Porter in 2023. Ward also said he was impressed by the company’s enactment of “robust” compliance measures and the hiring of personnel such as a former FBI official.
“This company, I believe, has changed. I believe they're committed to reform,” he said.
A civil suit requesting additional ratepayer reimbursements remains pending.
