Santa Clara County Grand Jury • 2004-2005

2004-2005 Santa Clara County Civil Grand Jury Report San Jose Trash Deal – How the City Was Duped Into Wasting $11.25

Published: June 09, 2005 32 pages
Ver PDF original

Findings and Recommendations 17 findings

F1A
Prior to the Council’s first vote on Norcal in October 2000, the Mayor, his Policy and Budget Director, and Norcal knew that CWS would have to pay Teamsters wages instead of Longshoremen wages, and that this would cost CWS an extra $2 million or more a year. Thus, the Mayor, Norcal, and CWS anticipated the extra labor costs incurred by CWS. The Mayor and his Policy and Budget Director should have advised the Council of this information, but they did not do so, in apparent violation of the City Charter.
No recommendations for this finding
F1B
When initially interviewed by the Grand Jury in March 2005, the Mayor and his Policy and Budget Director insisted that the Mayor never met with the representatives of Norcal or CWS. At that time, the Mayor contended that, in order to avoid the appearance of impropriety, he did not meet face-to-face with Norcal or CWS because he did not want to be criticized about “backroom discussions.” In the second interview with the Mayor and in the third interview with his Policy and Budget Director, they admitted that indeed such a meeting had occurred on October 6, 2000, in the Mayor’s conference room, four days prior 22 to the Council’s vote on October 10, 2000 to approve Norcal as a vendor. The Grand Jury finds that the Mayor indeed met with the Norcal and CWS representatives on October 6, 2000. Either the Mayor and his Policy and Budget Director had a memory lapse or they did not tell the truth initially. In any event, the Mayor took part in “backroom discussions,” and this conduct was improper and appears to be in violation of the City’s Independent Judgment Policy and/or City Charter.
No recommendations for this finding
F1C
At this October 6, 2000 meeting, the Mayor asked Norcal and CWS representatives what the extra labor costs would be, and the President of CWS estimated the first year cost would be approximately $2 million, with additional increases each succeeding year. The Mayor assured Norcal and CWS that he would take the steps necessary to see that San Jose paid the increased costs.
No recommendations for this finding
F1D
For a period of almost four years, between October 2000 and early September 2004, the Mayor and his Policy and Budget Director concealed from the Council: (a) the occurrence of the October 6, 2000 “backroom discussion” the Mayor had with Norcal and CWS; (b) the Mayor’s October 6, 2000 assurance to Norcal and CWS that the Mayor would take the steps necessary to have San Jose pay the increased costs; (c) that the increased costs were known and anticipated prior to the Council’s October 10, 2000 vote; (d) that Norcal was willing to take less than the $11.25 million it requested; (e) that the primary purpose of the proposed nine percent garbage rate increase in FY 2003-2004 was to cover the increased costs to Norcal; and (f) that the threatened strike by the Teamsters in February 2003 was primarily caused by the Mayor’s delay in asking the Council to pay Norcal the $11.25 million.
No recommendations for this finding
F1E
The Mayor and his Policy and Budget Director made several misrepresentations to the City Council and the public, including: (a) that the increased costs were unanticipated prior to the October 10, 2000 vote, when in fact they were anticipated; (b) that the Mayor found out about the increased costs after the October 10, 2000 vote to approve Norcal as a vendor, when in fact he knew beforehand; (c) that the proposed nine percent garbage rate increase in FY 2003-2004 was needed for reasons other than to reimburse Norcal; and (d) that the Mayor stated that there would be no garbage rate increases as a result of the Council’s decision to pay Norcal the $11.25 million, when other City representatives have admitted that further increases would be required to fund the $11.25 million payment to Norcal. 23
No recommendations for this finding
F1F
The Grand Jury agrees with the two Councilmembers’ September 20, 2004 memorandum opposing payment of $11.25 million, including the assertions that: (a) The payment of $11.25 million appears to be a gift of public funds. The only way San Jose would have been justified in paying Norcal $11.25 million was if Norcal had provided consideration of $11.25 million in additional services; instead Norcal was offering at most $150,000 in additional services; (b) The October 2000 promise or representation by the Mayor to Norcal was not disclosed to the Council when the Council voted to approve Norcal as the preferred vendor in October 2000; (c) The Mayor’s assurance to Norcal to pay Norcal the extra labor costs, without Council approval, appears to be a violation of the City Charter and void under California law; (d) Allowing a side deal to alter the terms of the contract was not fair to the other vendors who participated in the Request For Proposal process but were not made aware of this arrangement; and (e) The additional labor costs amount to $11.25 million and will have to come from reserves and additional rate increases.
No recommendations for this finding
F1G
There were many discrepancies or versions of the facts related by the 18 people who were interviewed in this investigation by the Grand Jury. It appears that some of these individuals were not telling the truth, but at times it was difficult for the Grand Jury to determine, with reasonable certainty, fact from fiction. By the nature of this inquiry, these individuals were not under oath and their statements were not recorded. The Grand Jury finds that the only way to ascertain all of the facts, and the ultimate truth, is to have everyone testify under oath and under penalty of perjury.
No recommendations for this finding
F2
At the October 6, 2000 meeting, the President of Norcal advised the Mayor that, if the City of San Jose agreed to pay for the increased costs, Norcal would pass San Jose’s payment on to CWS. After this meeting, outside the presence of the other parties, Norcal and CWS then signed an addendum to their contract that was kept secret from the City of San Jose. This addendum, dated October 9, 2000, expressly stated that Norcal would pay CWS for the increased costs CWS would incur as a result of CWS having to use Teamsters. This addendum was not contingent upon the City of San Jose reimbursing Norcal. The terms of this addendum were not divulged to anyone at the City of San Jose for a period of four years, until October 7, 2004, when Norcal’s attorney provided it to the City Attorney. By that time the City Council had already voted on September 21, 2004 to authorize the City Manager to negotiate the terms of the increased payment to Norcal. The Grand Jury finds that Norcal, not the City of San Jose, owed CWS the $11.25 million, and that Norcal appears to have defrauded the City of San Jose by not disclosing the secret contract addendum.
Related Recommendations (1)
R2
The City Attorney or special investigator (see Recommendation 1) retained by the San Jose City Council should take the legal steps necessary to rescind the amended contract with Norcal. The rescission would be based on the fact that Norcal did not disclose to the Council the secret contract addendum between Norcal and CWS, and that Norcal thereby defrauded the City of San Jose. A rescission would result in the return of the millions of dollars San Jose has already paid to Norcal and CWS, and preclude any further payments to Norcal and CWS related to the amended contract. The return of the money would be subject to a reduction of the so-called extra “consideration” given by Norcal, which the Grand Jury believes has a value of approximately $150,000.
F3
No one on the Council, including the Mayor, could recall another time when the Council voted to amend a contract to pay a vendor additional funds, when the vendor knew, in advance of signing a contract with the City of San Jose, that the vendor would incur additional labor costs. The reason for this is fundamental: once a contract is signed, the parties are required to adhere to the terms of the contract. The Grand Jury has difficulty understanding how the Council could be duped into paying Norcal an extra $11.25 million when San Jose had no contractual obligation to do so. 25
Related Recommendations (1)
R3
San Jose should place in its Charter a provision that henceforth it shall never consider amending an existing contract with any vendor, wherein the vendor is aware of actual anticipated additional costs prior to being approved as the vendor.
F4
The Mayor and his Policy and Budget Director knew that Norcal was willing to take less than $11.25 million, but the Mayor chose not to negotiate, and the Mayor did not advise the Council that Norcal would take less than the $11.25 million. Further, the City Manager and Director of Environmental Services were authorized to negotiate with Norcal, but they made no effort to negotiate a lower settlement before the Council voted to approve the $11.25 million reimbursement. The Grand Jury observed that the Mayor and Councilmembers received contributions from Norcal and CWS, but could not determine what might have motivated the City’s actions.
Related Recommendations (2)
R1
The San Jose City Council should retain the services of a special investigator to: (a) Determine if the Mayor and/or the Mayor’s Policy and Budget Director or other key City employees violated San Jose’s Charter, Municipal Code, Independent Judgment Policy, ordinance, or any state code; (b) Determine if the Council’s vote to pay Norcal $11.25 million constituted a gift of public funds; (c) Determine if a reprimand, censure, or other sanction should be recommended against the Mayor, his Policy and Budget Director, or other key employees of the City of San Jose, if any are found to have acted inappropriately; and 24 (d) Conduct an open hearing wherein the Mayor, his Policy and Budget Director, the City Attorney, the City Manager, the Director of Environmental Services, the members of the Council, and other key employees of the City of San Jose will be asked questions under oath by the special investigator to ascertain what they knew, when they knew it, and what actions they took. If such conduct is inappropriate, the special investigator should recommend what reprimand, censure, or other sanctions to impose.
R4
In addition to the steps detailed under Recommendation 1, the special investigator should determine why the City Council chose to pay the entire $11.25 million to Norcal rather than, at a minimum, trying to settle for a lesser amount. The special investigator should: (a) Determine if some influence, such as political contributions from Norcal, CWS, their employees, and the Teamsters, played a role in the conduct of the Mayor or the Councilmembers who voted in favor of the $11.25 million payment; and (b) Determine if a reprimand, censure, or other sanction should be recommended against the Mayor, his Policy and Budget Director, other key employees, or the members of the Council who voted in favor of paying Norcal the $11.25 million, should any be found to have acted inappropriately.
F5
The October 6, 2000 meeting was initiated and chaired by the Mayor and it was held at the Mayor’s conference room at City Hall. The Mayor made it clear to the Norcal and CWS representatives that he wanted labor peace and he wanted the Teamsters to represent the CWS workers. It appears that the Mayor’s intervention on behalf of the Teamsters may have been a violation of federal and/or state labor law. 26
Related Recommendations (2)
R1
The San Jose City Council should retain the services of a special investigator to: (a) Determine if the Mayor and/or the Mayor’s Policy and Budget Director or other key City employees violated San Jose’s Charter, Municipal Code, Independent Judgment Policy, ordinance, or any state code; (b) Determine if the Council’s vote to pay Norcal $11.25 million constituted a gift of public funds; (c) Determine if a reprimand, censure, or other sanction should be recommended against the Mayor, his Policy and Budget Director, or other key employees of the City of San Jose, if any are found to have acted inappropriately; and 24 (d) Conduct an open hearing wherein the Mayor, his Policy and Budget Director, the City Attorney, the City Manager, the Director of Environmental Services, the members of the Council, and other key employees of the City of San Jose will be asked questions under oath by the special investigator to ascertain what they knew, when they knew it, and what actions they took. If such conduct is inappropriate, the special investigator should recommend what reprimand, censure, or other sanctions to impose.
R5
The special investigator (see Recommendation 1) should determine if the Mayor violated federal and/or state labor laws and, if so, report the result to the appropriate authorities.
F6
The current Councilmembers who were part of the Council in September 2000, and who were interviewed by the Grand Jury, acknowledged that they never read the documents pertaining to Norcal’s history and Norcal’s reply to the Request for Proposal, and, as a result, were unaware of Norcal’s problematic history in San Bernardino County.
Related Recommendations (2)
R6
Councilmembers should be required to review staff reports pertaining to long-term contracts involving millions of dollars of public funds. Each Councilmember should sign a check-off sheet to verify that: (a) they received the staff report; and (b) they reviewed and considered it prior to voting.
R7
When a new Councilmember is elected, and thereafter a vote is to be taken on a contract in excess of one million dollars that has been previously discussed and voted on, the new Councilmember should be required to review the prior staff reports and the prior minutes, and file a statement with the City Clerk that the prior staff reports and minutes have been reviewed.
F7
The current Councilmembers who were not part of the Council in September 2000, and who were interviewed by the Grand Jury, acknowledged that they never read the documents pertaining to Norcal’s history and Norcal’s reply to the RFP, and, as a result, were unaware of Norcal’s problematic history in San Bernardino County.
Related Recommendations (2)
R6
Councilmembers should be required to review staff reports pertaining to long-term contracts involving millions of dollars of public funds. Each Councilmember should sign a check-off sheet to verify that: (a) they received the staff report; and (b) they reviewed and considered it prior to voting.
R7
When a new Councilmember is elected, and thereafter a vote is to be taken on a contract in excess of one million dollars that has been previously discussed and voted on, the new Councilmember should be required to review the prior staff reports and the prior minutes, and file a statement with the City Clerk that the prior staff reports and minutes have been reviewed.
F8
Between January 2000 and December 31, 2004, every Councilmember received political contributions, including from Norcal. 27
Related Recommendations (2)
R4
In addition to the steps detailed under Recommendation 1, the special investigator should determine why the City Council chose to pay the entire $11.25 million to Norcal rather than, at a minimum, trying to settle for a lesser amount. The special investigator should: (a) Determine if some influence, such as political contributions from Norcal, CWS, their employees, and the Teamsters, played a role in the conduct of the Mayor or the Councilmembers who voted in favor of the $11.25 million payment; and (b) Determine if a reprimand, censure, or other sanction should be recommended against the Mayor, his Policy and Budget Director, other key employees, or the members of the Council who voted in favor of paying Norcal the $11.25 million, should any be found to have acted inappropriately.
R8
Prior to any vote on a contract in excess of one million dollars involving any party or entity that has contributed to one or more of the members of the City Council, the City Clerk’s office should prepare a staff report that identifies the names and affiliations of the contributors, the names of the recipients, and the dates and amounts of the contributions. This staff report should be available prior to any discussion or consideration of such proposed contract.
F9
The Mayor and/or his Policy and Budget Director received several relevant communications from Norcal, CWS and Teamsters. The Mayor and his Policy and Budget Director had a duty to disclose and provide those documents to the Council, but failed to do so.
Related Recommendations (3)
R1
The San Jose City Council should retain the services of a special investigator to: (a) Determine if the Mayor and/or the Mayor’s Policy and Budget Director or other key City employees violated San Jose’s Charter, Municipal Code, Independent Judgment Policy, ordinance, or any state code; (b) Determine if the Council’s vote to pay Norcal $11.25 million constituted a gift of public funds; (c) Determine if a reprimand, censure, or other sanction should be recommended against the Mayor, his Policy and Budget Director, or other key employees of the City of San Jose, if any are found to have acted inappropriately; and 24 (d) Conduct an open hearing wherein the Mayor, his Policy and Budget Director, the City Attorney, the City Manager, the Director of Environmental Services, the members of the Council, and other key employees of the City of San Jose will be asked questions under oath by the special investigator to ascertain what they knew, when they knew it, and what actions they took. If such conduct is inappropriate, the special investigator should recommend what reprimand, censure, or other sanctions to impose.
R9
When the Mayor’s office or any Councilmember receives written communications from a vendor, a lobbyist or union representative involving a planned contract or existing contract in excess of one million dollars, the Mayor or Councilmember should assure that copies of all such communications are provided in a timely fashion to the City Clerk, who will have the responsibility to provide copies to every member of the Council.
R10
When the Mayor’s office authors written communications to a vendor, a lobbyist or union representative involving a planned contract or existing contract in excess of one million dollars, the Mayor’s office shall ensure that copies of all such communications, and any responses thereto, are provided in a timely fashion to the City Clerk, who will have the responsibility to provide copies to every member of the Council. 28
F10
The Mayor’s Policy and Budget Director authored several communications to Norcal and CWS. Copies of those communications apparently were not provided to the Council prior to the Council’s vote.
Related Recommendations (2)
R9
When the Mayor’s office or any Councilmember receives written communications from a vendor, a lobbyist or union representative involving a planned contract or existing contract in excess of one million dollars, the Mayor or Councilmember should assure that copies of all such communications are provided in a timely fashion to the City Clerk, who will have the responsibility to provide copies to every member of the Council.
R10
When the Mayor’s office authors written communications to a vendor, a lobbyist or union representative involving a planned contract or existing contract in excess of one million dollars, the Mayor’s office shall ensure that copies of all such communications, and any responses thereto, are provided in a timely fashion to the City Clerk, who will have the responsibility to provide copies to every member of the Council. 28
F11
The three Councilmembers from Districts 1, 4 and 8 are commended for their efforts in opposing the increased payments to Norcal. These three Councilmembers demonstrated exceptional integrity and courage in voicing their concerns, in criticizing the Mayor’s conduct, and in attempting to save the City $11.25 million.
No recommendations for this finding

Additional Recommendations 1

These recommendations are not explicitly linked to specific findings.

Conclusions 50

No Responses Found 1

Government entities assigned to respond to this report. No response documents have been linked in our database.

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