Indicted executive fingers ex-boss in Nuru corruption case

It’s been more than a year since the Justice Department announced new charges in its investigation into corruption at San Francisco City Hall. But new reporting from The Standard suggests that, far from drying up, the allegations of corruption that prosecutors tapped may run deeper than previously known. 

A former employee of the waste-hauler Recology now alleges that a top company executive was actually responsible for payments made as part of an alleged bribery conspiracy meant to curry favor with the public official who signed off on garbage fee increases in San Francisco. 

John Porter, a former manager of Recology’s San Francisco operations, faces trial on charges he helped steer money to the company’s chief regulator, then-public works director Mohammed Nuru. But Porter said in a court filing, which has not been previously reported in the press, that responsibility for certain suspect payments should have fallen on his former boss, former chief operating officer Mark Arsenault.

“Mr. Porter refused to approve the payment unless instructed to by Mr. Arsenault,” Porter said in the December filing.

The dueling claims stem from a yearslong Justice Department investigation into allegations of corruption at City Hall. Aside from ensnaring Recology and Nuru, the probe has led to criminal cases against 16 people and high-level resignations involving former city officials. 

In April 2021 prosecutors indicted Porter on corruption, bribery and money-laundering charges. Shortly after, Recology executive Paul Giusti agreed to plead guilty to bribery and corruption charges.

The company itself was also indicted. In September 2021, prosecutors charged Recology with conspiracy to commit fraud. The company agreed to pay $36 million in criminal penalties. It also acknowledged its employees directed payments to Nuru to influence him to help the company. 

In March 2021, Recology reached a $100 million settlement with San Francisco for overcharges linked to the corruption allegations. Late last year, the company agreed to pay the city another $25 million to resolve further issues uncovered in public integrity reviews.

Recology’s agreement with federal prosecutors described a five-year conspiracy during which Giusti, with the approval of his supervisors, funneled around $1 million in benefits to Nuru over five years. Porter was allegedly one of these supervisors. The other is described in the agreement as “SF Recology Group Executive 2.”

“Executive 2” was described in the settlement agreement as the company’s vice president and group manager prior to Porter, and, following a promotion, this executive was chief operating officer of Recology until July 2020.

In July 2020, Recology announced the retirement of Arsenault, the company’s chief operating officer.

Prosecutors have not charged Arsenault with any crime, nor mentioned him in court papers alleging a criminal conspiracy directing bribes to increase profits. 

The Standard made attempts by telephone and email to contact Giusti and Porter, but received no response. Arsenault, through his attorney, declined to answer questions. Recology declined to confirm Arsenault’s employment dates, or answer any of the detailed list of questions The Standard sent the company. 

“I’ve always wondered what the top echelons of Recology knew, or ordered, and it seems highly unlikely their CEO and top leadership didn’t know what was going on,” said San Francisco Supervisor Aaron Peskin, who has sponsored legislation intended to rein in the political influence of public service providers. 

“I don’t think this was a low-level employee who went off on a wild mission to influence Mohammed Nuru. I think it was a corporate strategy that was blessed from the top,” Peskin opined.

Records uncovered during an investigation by The Standard suggest that Arsenault met regularly with Nuru, sometimes for breakfast in the early morning. The records also show that a letter addressed to Arsenault closely resembles a document prosecutors described as part of a scheme to disguise bribes as charitable donations.

Arsenault’s relationship with Nuru began showing up in public records obtained by The Standard in 2014. Copies of Nuru’s daily calendars show at least a dozen meetings between Arsenault and the public works chief, including several breakfasts at the now-closed Stacks restaurant on Hayes Street.

One such appointment was a June 2014 lunch at the 2G Japanese Brasserie located a few blocks from City Hall. The meeting was titled: Great Sweep.

Beginning in August 2014, Recology executives began funneling Nuru cash with the goal of influencing him to act in the company’s favor as one of their chief regulators, according to the settlement agreement Recology signed with prosecutors. 

Recology funneled the payments, $150,000 each year, through two different nonprofits: the San Francisco Clean City Coalition and the Parks Alliance, according to allegations in an investigation by the SF Controller’s Office. Porter states in court filings that the payments were ordinary charitable contributions made with no intent to influence Nuru.

The Standard obtained an August 2015 letter, via public records request, matching prosecutors’ description of how those payments took place. It places Arsenault at the center of the transaction.

In the letter, Executive Director Gia Grant of the SF Clean City Coalition thanked Arsenault for “another generous donation of $150,000 to support the SF Giant Sweep program.”

In the email sent along with the letter, Grant told Giusti and another Recology employee, “Mohammed asked me to send you the Giant Sweep donation letter for 2015-2016. It is on the same payment schedule as last year.”

Grant sent Arsenault a similar letter soliciting $150,000 in May 2017. Arsenault wrote back, stating: “Our commitment for 2017-2018 season will once again be $150,000 to be paid according to the installment schedule outlined in your letter.” 

Grant did not respond to phone and email inquiries.

Beginning in 2016, Recology began donating each year to the Lefty O’Doul’s Foundation, a youth baseball charity. The payments helped pay for lavish parties Nuru threw for employees, prosecutors allege.

In December 2016, a person prosecutors identified as “Executive 2” met with Nuru at City Hall and soon after signed off on a check request for a $5,000 “holiday donation” to Lefty O’Doul’s, prosecutors said.

The day after Recology issued the check to Lefty O’Doul’s, Arsenault submitted to Nuru a request to increase neighborhood trash collecting rates by 21%. Nuru eventually signed off on a rate hike. San Francisco’s city attorney later said Recology had overcharged residents and the company agreed to pay back nearly $100 million.

In court filings, Porter says that he never intended to bribe Nuru, and had merely forwarded a recurring annual payment approved by his predecessor. He also said he refused to approve the payment without instructions from Arsenault.

“Mr. Arsenault talked with Mr. Porter, and explained that it was an appropriate expense, and that it should be approved,” Porter said in a court filing.

As part of the settlement agreement with the U.S. Department of Justice, Recology acknowledged a December 2017 trip to New York. Giusti, and a person identified as “SF Recology Group Executive 2,” traveled with Nuru and another unnamed San Francisco public official.

Upon arrival at the group’s originally booked lodging, the Recology reps decided to find nicer accommodations for the public officials. They paid for rooms at a new hotel for Nuru and his companion, costing $865, according to information that Recology accepted as true under the Justice Department agreement.

In November 2017, Giusti emailed a Roosevelt Island representative to arrange a tour, according to a copy of an email obtained by The Standard via public records request. The dates of the trip were Dec. 2-5, 2017. 

In the email, Giusti named his travel companions: Mark Arsenault, Mohammed Nuru and Naomi Kelly.

Kelly was San Francisco’s city administrator at the time and has not faced criminal charges. Harlan Kelly, her husband, managed the city’s public utilities commission. He’s been accused of accepting bribes and is set to go on trial in June. Naomi Kelly resigned after her husband was first charged.

Naomi Kelly’s attorney did not respond to questions for this story.

Recology, for its part, continues to serve as San Francisco’s waste hauler. The company raised its rates in January.