=======================Electronic Edition========================
RACHEL’S HAZARDOUS WASTE NEWS #299
—August 19, 1992—
News and resources for environmental justice.
——
Environmental Research Foundation
P.O. Box 5036, Annapolis, MD 21403
Fax (410) 263-8944; Internet: erf@igc.apc.org
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THE SAN DIEGO REPORT
The District Attorney of San Diego County, California, Edwin L.
Miller, Jr., has issued a 260-page background report on Waste
Management, Inc. (WMI), the nation’s largest waste hauler. The
San Diego Report, as it has become known, draws the following
conclusions, which we quote verbatim:
** WASTE MANAGEMENT, INC.’S METHODS OF DOING BUSINESS AND HISTORY
OF CIVIL AND CRIMINAL VIOLATIONS HAS [sic] ESTABLISHED A
PREDICTABLE PATTERN WHICH HAS BEEN FAIRLY CONSISTENT OVER A
SIGNIFICANT NUMBER OF YEARS.
** WE [the San Diego DA and his investigative staff] 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.
**…[T]HE 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.
** …[I]T IS CLEAR THAT WASTE MANAGEMENT ENGAGES IN PRACTICES
DESIGNED TO GAIN UNDUE INFLUENCE OVER GOVERNMENT OFFICIALS.
** 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.
Background of the San Diego Report
In late 1990, Waste Management, Inc. (WMI), requested a permit to
develop a large garbage dump in Gregory Canyon, San Diego County.
The request needed approval by the County Board of Supervisors,
and the Board asked the District Attorney, Edwin L. Miller, Jr.,
to conduct a background check on WMI. The check took over a year
and resulted in a report, released in March, 1992, and updated in
July, 1992, containing the following chapters: Introduction;
Company History; Environmental Problems; Significant
Environmental Cases; Organized Crime Connections; Public
Corruption; Anti-trust and Unfair Business Practices.
There have been several reports on Waste Management in recent
years, but until now none has openly discussed the company’s
alleged connections to organized crime. In its section entitled,
Organized Crime Connections, the San Diego Report begins this way
(we are quoting verbatim):
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.) [and today the chairman of the board of
directors of WMI–P.M.] WAS CHARGED WITH UNFAIR BUSINESS
PRACTICES ALONG WITH ELEVEN [sic] OTHER INDIVIDUALS. [The
Attorney General of Wisconsin brought formal charges against Mr.
Buntrock and 13 other individuals in 1962; Waste Management, Inc.
was not formed until 1968.] 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 [sic] INDIVIDUALS
NAMED IN THE LAWSUIT WERE RELATIVES OF JOHN MANDELLA (A FORMER
HEAD OF THE LIBRIZZI-MANDELLA ORGANIZED CRIME FAMILY OF
MILWAUKEE, WISCONSIN).
The State of Wisconsin charged that 11 companies and 14
individuals, including Mr. Buntrock, had conspired illegally to
dominate the garbage hauling business in Milwaukee County. (See
Attachment C of the San Diego Report.) The then-Attorney General
of Wisconsin, John W. Reynolds, went on to allege other
activities in connection with the alleged conspiracy (we quote
verbatim):
THAT IN FURTHERANCE OF SAID CONSPIRACY THE DEFENDANTS THREATENED
PHYSICAL HARM TO THE OWNERS OF COMPETING RUBBISH COLLECTION,
WASTE REMOVAL AND DISPOSAL FIRMS, CORPORATIONS OR PERSONS ENGAGED
IN SAID BUSINESS AND THEIR FAMILIES AND DESTRUCTION OR DAMAGE TO
THEIR PROPERTY AND EQUIPMENT, OR THREATENED TO HAUL ALL THEIR
ACCOUNTS FOR NOTHING IF THEY OFFERED OR SUBMITTED COMPETITIVE
BIDS TO ACCOUNTS HANDLED BY THE DEFENDANTS OR IF THEY OBTAINED
ACCOUNTS PREVIOUSLY HANDLED BY SAID DEFENDANTS. FURTHER THAT THEY
TIED SUCH THREATS TO MYSTERIOUS FIRES AND ACTS OF VANDALISM BY
UNKNOWN PERSONS WHICH RESULTED IN DAMAGE TO THE TRUCKS AND OTHER
PROPERTY OF SUCH COMPETITORS.
The Milwaukee Circuit Court issued an injunction against such
business practices by the 11 firms and 14 individuals, including
Mr. Buntrock, an injunction that reportedly remained in effect
for 8 years.
Waste Management, Inc. officials did not return our phone calls,
so we cannot offer Mr. Buntrock’s rendition of his early years in
the waste business, nor can we present the company’s response to
the San Diego Report.
The San Diego Report contains a welter of detail about Waste
Management’s ongoing history of encounters with the law. For
example, September 20, 1991, the Sheriff’s Department of Ventura
County, California, issued its own report on Waste Management,
Inc. The entire Ventura Report is included as Attachment B of
the San Diego Report. The Ventura Report describes 225 different
criminal and civil actions in which Waste Management and its
subsidiaries have been charged during the past 13 years.
According to the Ventura Report, these 225 brushes with the law
cost WMI $52,321,933 in fines and penalties. The Ventura
Sheriff’s listing of 225 cases is not an exhaustive recounting of
WMI’s legal troubles, but it offers a fair spectrum of the kinds
of misdemeanors, administrative misdeeds, and felonies with which
Mr. Buntrock’s company and its subsidiaries were charged during
the 1980s. (It also shows unmistakably that the company’s
80-lawyer legal staff has been able to deflect many governmental
regulatory thrusts. In the vast majority of cases in which WMI
paid a fine, it did so after signing a consent agreement with a
government agency, often the EPA [U.S. Environmental Protection
Agency]. Such consent agreements let the government claim victory
while a company avoids coming to trial, avoids acknowledging any
wrongdoing, and avoids any dip in its profits.)
There is one area of company business that the San Diego Report
ignores entirely: recent allegations of bookkeeping
irregularities. For example, BUSINESS WEEK May 11, 1992 (pg. 89)
reported that WMI:
[B]UMPED UP EARNINGS 6.8% LAST YEAR BY COUNTING $53.5 MILLION IN
GAINS STEMMING FROM STOCK SALES AND OTHER SECURITIES TRANSACTIONS
BY THREE SUBSIDIARIES. THAT’S USUALLY REFLECTED ON THE PARENT’S
BALANCE SHEET BY ADJUSTING THE (OFTEN HIGHER) NEW VALUE THE
MARKET PLACES ON ITS STOCK IN THE SUBSIDIARIES. INSTEAD, WASTE
MANAGEMENT LUMPED THE STOCK APPRECIATION IN WITH ITS OWN
EARNINGS. THOUGH SEC [Securities and Exchange Commission] RULES
CALL FOR DISCLOSING SUCH GAINS AS A SEPARATE LINE ITEM,
REGARDLESS OF THEIR SIZE, THERE WAS NO SUCH ITEM IN THE COMPANY’S
FINANCIAL REPORTS. JAMES E. KOENIG, WASTE MANAGEMENT’S CHIEF
FINANCIAL OFFICER, DENIES THAT IT WAS TRYING TO ARTIFICIALLY
INFLATE NET INCOME: “WE FOLLOW PROPER ACCOUNTING, AND WE DON’T
PLAY GAMES.”
FINANCIAL WORLD June 23, 1992 (pg. 30) focused additional
attention on WMI’s accounting practices. After reporting that
WMI’s competitor, Chambers Development, had been forced to admit
artificially inflating its earnings–an admission that caused
Chambers stock to drop 60% in one week–FINANCIAL WORLD said:
WHILE THERE IS NO INDICATION WHATSOEVER THAT WASTE [Management,
Inc.] PLAYED THE KIND OF DOUBLE-CAPITALIZATION GAMES THAT
CHAMBERS’S ACCOUNTANTS DID, THE COMPANY CARRIES ON ITS BALANCE
SHEET $1.2 BILLION IN PREPAID EXPENSES AND “SUNDRY OTHER ASSETS”,
SOME OF WHICH REPRESENT OVERDUE ACCOUNTS RECEIVABLE. THESE ARE
THE SAME TYPE OF ACCOUNTS THAT CAUSED THE CHAMBERS WRITE-OFFS.
LOREN KELLOGG, WHO HAS TRACKED QUESTIONABLE ACCOUNTING PRACTICES
IN PUBLIC COMPANIES FOR YEARS IN HIS Financial Statement Alert,
WOULD LIKE THE DETAILS ON THESE ACCOUNTS, BUT WASTE [Management,
Inc.] WON’T GIVE THEM TO HIM.
FINANCIAL WORLD went on to describe why WMI’s stock has been
taking a beating in the marketplace (down 20% since February):
AFTER YEARS OF SEEKING TO MITIGATE LIABILITIES UNDER THE
SUPERFUND CLEANUP ACT, WASTE MANAGEMENT WAS FINALLY FORCED LAST
DECEMBER TO RECOGNIZE A POTENTIAL $296 MILLION IN CLEANUP COSTS.
THAT MAY NOT BE THE END OF IT. THE EPA SUPERFUND CLEANUP LIST
CURRENTLY INCLUDES 100 WASTE MANAGEMENT SITES.
Indeed, the salad days of ever-increasing profits may be over at
WMI, according to FINANCIAL WORLD. Citizen activists from across
the country are focused now on passing federal legislation giving
municipalities, counties and states the right to refuse entrance
to trash shipped in from other jurisdictions. Such “right to say
no” legislation (also called “flow control”) could hurt Waste
Management’s profit picture. The bill (S. 2877) passed the U.S.
Senate by a large margin July 21. Now the fight moves to the
House of Representatives. To keep abreast of this legislative
battle, contact Will Collette at the Citizens’ Coal Council;
telephone (202) 543-1394. To get the FINAL REPORT, WASTE
MANAGEMENT, INC., send $32.75 to: Clerk of the Board of
Supervisors, Room 402, County Administration Center, San Diego,
CA 92101-2471. Phone: (619) 531-5430. Be sure to ask for the full
260-page version.
–Peter Montague, Ph.D.
Descriptor terms: san diego, ca; waste managment, inc; organized
crime; john mandella; san diego report; chambers development;
wmi; waste hauling industry;