City attorney outlines Recology settlement: refunds, injunction and $7 million penalty proposed

Deputy City Attorney Yvonne Marais and Special Counsel Ron Flynn briefed the Government Audit & Oversight Committee on a proposed settlement resolving city claims against Recology and related refuse companies.

Marais said the March 4 complaint prosecuted under California’s unfair-competition framework alleged two principal counts: (1) unlawful gifts and related campaign-and-government-conduct code violations tied to a ‘‘cozy’’ relationship between Recology and city officials and (2) omissions in Recology’s 2017 rate application calculations that led to ratepayer overcharges. She said the settlement is intended both to compensate affected customers quickly and to erect procedural safeguards to reduce the risk of future omissions or conflicted conduct.

Ron Flynn described the remedy package the city negotiated: a four-year injunction that would bar gifts to city employees and officers, require registration of Recology employees acting as lobbyists, and mandate public disclosure of financial errors and any covered payments to nonprofits greater than $1,000 tied to city contracts. Flynn said the settlement includes full repayment of the identified overcharge items (100% restitution) plus 5% interest to affected ratepayers, an immediate lower adjusted refuse rate that took effect April 1 to stop further overcharges going forward, and civil penalties in the amount of $7 million.

Flynn and Marais said the settlement’s release is limited to claims alleged in the city’s lawsuit — specifically the 2017 rate application and the gifts alleged in the complaint — and does not bar criminal prosecutions or unrelated municipal/state claims. Flynn acknowledged that individual private lawsuits could be affected because refunds provided to ratepayers would likely be subtracted from damages those private plaintiffs could seek, and urged private plaintiffs to consult counsel.

Public commenters raised concerns that the settlement process felt rushed and asked for more transparency about the specific calculation errors and how DPW and the Controller participated in the review. The City Attorney’s Office said the injunction portion must be entered by a court before the injunctive terms are in force and that the settlement document will be filed with the court. After a closed-session deliberation on the litigation items, the committee recommended agenda items 3 through 13 (including the Recology matter) to the full Board of Supervisors for consideration at its April 27 meeting.