How did we get here? Where do we go?

As the investigative process continues, officials ponder the dysfunction that led to Benz’ alleged defrauding of the public

Rebecca Neipp

News Review Staff Writer

While Ridgecrest’s recent settlement with Benz Sanitation (see related story, this page) seems to definitively close the book on the long and bitter dispute between the city and its former vendor, the guilty plea of the company’s owner seems to have only sparked battles on other fronts — including the threat of new lawsuits against the company and the county’s dilemma of whether to end a contract with a local economic engine that has broken public trust.

But more disturbing are the questions that surround the revelation that Benz had — for years — been falsifying records submitted to county and state agencies. Although officials are remaining tight-lipped on the record, citing continuing investigations, behind-the-scenes questions are focusing on 1. What bureaucratic dysfunction enabled the scandal and 2. Whether county staff and elected officials had information that should have yielded a much quicker resolution.

Some officials even conjecture that it was Benz that brought Ridgecrest to the attention of the California Integrated Waste Management Board, resulting in the city’s being cornered into the compulsory (and expensive) collection program that sparked the public controversy in the first place.

Although the News Review has been closely following and reporting on the public events since the city fell under the eye of the state board in 2006, many of the facts of the case seem to shift according to the source interpreting them. Many official documents remain withheld from the public pending the closure of the investigation.

However, a yearlong investigation by the News Review and interviews with more than a dozen sources representing virtually every interest involved have helped to retrace the steps that ultimately led to the contention between Benz and Ridgecrest.

City and county officials challenge Benz’ self-proclaimed public posture as the savior in the city’s diversion “crisis,” when it was the company’s defrauding actions that started the city down an expensive and tumultuous path in the first place.

“This was all based on fraudulent numbers fabricated by Benz,” said Councilman Steven Morgan, who served as mayor during the most heated part of the controversy.

“The state only demanded our participation in a recycling program, we only agreed to implement it, because of the false numbers they provided that called our compliance into question.

“When Benz pled guilty, that was an admission of guilt in my book. My only frustration is that since this will not go to trial, we may never know all the details that got us here.”

In 1990 California passed legislation that required cities to divert at least 50 percent of their waste into the recycling stream. In the mid 1990s, around the time Morgan got involved in city business, he recalled that a committee that included members of staff and public had researched the city’s recycling options.

Benz apparently came forward at that time and offered to implement a universal trash and recycling program, which was eventually brought to cities like California City and Mojave.

Based on the fact that the city was already in compliance with the state mandate, coupled with the general consensus that the residents did not want the added expense of a program, the city shelved the idea of implementing such a program.

But the game continued to change when the state legislature passed new legislation that required recycling programs regardless of diversion compliance.

So in 2006, the state board zeroed in on Ridgecrest, calling into question the city’s lack of a program and asking for a new base-year study. In 2007 the city signed an agreement with the board, agreeing to take those steps. But in 2008 the city — with the support of officials from Kern County Waste Management Department — came back to the board and showed proof of compliance to the state board. That formula was discredited by the state.

The board responded by fining Ridgecrest, and held the threat of further penalties (to the tune of up to $10,000 per day) over the city if a mandatory program were not immediately instated.

Ridgecrest was under a “10-year evergreen” contract with Benz for trash collection. This meant that the city could not cancel the contract without 10 years notice, and was automatically renewed if notice of cancellation was not given. Because the trash and recycling collection services were tied together, Benz was afforded great flexibility in naming their own price to provide service.

Overnight the cost of service more than doubled and residents were now forced to subscribe — even if properties were vacant. Public outcry was immediate. And loud.

That unrest launched recall attempts and a lawsuit against councilmembers (though none of those attempts were successful).

Meanwhile, CIWMB was disbanded and Cal-Recycles took over. The city was able to successfully beg the mercy of the new agency, which relaxed its stance and allowed the reversal of the mandatory program.

Then Benz cried foul. Managers said that they had invested $4 million to launch the program and would not be able to recover costs based on the new funding model. For more than a year Benz and the city embattled in a new conflict over what Benz claimed was a breach of contract.

In 2010 City Attorney Keith Lemieux found that by continuing to contract with Benz, the city was in violation of its own municipal code, which requires franchises to be rebid at least every 30 years. He announced notice of termination after briefing the council. Public outcry then shifted, with the lion’s share of that fury landing on the city.

The Superior Court upheld the city’s action, and the two parties were sent to arbitration to work out the remainder of their fiscal disputes — Benz claimed the city had not held up its agreement to pay delinquent accounts, the city claimed Benz had failed to pay franchise fees. (As the related article shows, the criminal investigation led to a settlement of the civil case.)

In the meantime, the city awarded a new contract for collection to Waste Management — which began providing the service to residents for less than half the cost.

After only one month of service, Morgan announced a 45-percent increase in diversion since Waste Management took over. It was this report that helped launch the investigation into Benz’ operations.

The Ridgecrest Police Department’s role as the lead investigator was not publicly announced until police raided Benz Tehachapi headquarters in March.

Benz and other critics of the city decried the raid as merely a tactic to sabotage the civil case between the city and vendor. RPD Chief Ron Strand said his agency was recruited as a result of massive layoffs in the California Department of Justice.

Other insiders said it was also an attempt to penetrate Kern County’s “good ole’ boy” network. Sources site Paul Benz Sr. as a businessman who is not only revered for his generous donations to Kern County communities, but protected by his friends who are among the top staff and elected officials of the county.

(Although those sources have gone so far as to document the identities and favors of these individuals, the News Review is still waiting for corroboration from police reports.)

After the Tehachapi facility raid in March, RPD released information that indicated that the Benz operation was picking up waste from L.A. County customers, processing it through its materials-recovery facility and dumping residual waste in Kern County landfills — thus avoiding L.A. County tipping fees and allowing Kern County residents to absorb the cost. Benz is accused of adjusting the numbers of waste volume for Ridgecrest and other clients to spread out the increase in volume.

In 2006 county staff apparently noticed that the volume had spiked by some 900 tons per month, presumably on account of the L.A. County volume. Although dumping out-of-county trash was forbidden in the Benz contract, the county had no oversight of the vendor’s operations. A recommendation to allow the county to audit the process and reporting was apparently quashed by the board of supervisors before it could be discussed on the record.

As part of the deal made by Benz, access to records and GPS trackers on the trucks will now be mandated as part of the county’s contract. But department director Doug Landon said he is not certain that is enough.

“It is too early to specify, but I think there may need to be other contractual changes,” said Landon.

He said that while the reports have been passing between key officials for months, most of the information was only revealed to staff this week. “We have just been given a lot of information to digest, and we need to be thoughtful about what direction to take.”

Landon said he expected the board and staff would be working together toward a plan that would probably be presented within the next few weeks. “I think at this point it is premature to speculate on any specific changes.”

Public response seems to vary widely, ranging from outrage at Benz and wishes for an immediate cancellation of the contract to outrage on the devastating effect of the massive job and tax-revenue loss of a company with more than 140 staffers — most of whom ostensibly knew nothing of the implications of the company’s alleged fraud.

An e-mail circulated last week showed that one lawyer is already poised to lead a class-action suit by ratepayers who effectively overpaid for service.

Waste Management attorneys said they were also considering litigation options on the grounds of unfair practice. WM General Counsel John Newell said that Benz was able to undercut other vendors because it did not have to pay the same tipping fees as its competitors.

He said the company he represents is one of the many victims of Benz’ criminal actions.

“I hope this is not an end, I hope this is just the beginning of the process of seeking justice for us and other entities,” said Newell.

“Benz is a company. I have a hard time believing one man committed fraud and no one else knew about it.”

The News Review asked 1st District Supervisor Jon McQuiston what impact Benz’ plea has on the county’s contract and whether the county will take any further action to investigate the purportedly false reporting to the county.

He has not responded to those inquiries.

However, Benz released a statement on the day of his arraignment, maintaining that he was innocent despite his guilty plea. (It was not made clear whether he was referring to the civil or criminal charges — the latter of which he has not seen the evidence for.)

“Today is the day that I’ve had to make the difficult decision to give up fighting an unwinnable battle,” reads the statement.

He called the lawsuits a battle waged by local government to put him out of business. “In conjunction with other powerful forces against me, they have made me realize that facing an adversary with unlimited resources and operatives is a battle I cannot win.”

Benz said he had hoped the judicial system would uncover the ruse of the criminal investigation for what it was. He added that the negative publicity surrounding it had already hurt those around him.

“While these facts are obvious to anyone who knows the case details, the judicial system has failed to intervene.”

He said while it is against his nature to forgo the fight, “I look forward to moving on with my life absent of the turmoil these last few years have brought.”

Story First Published: 2012-10-03