Trash Firm to Pay $3-Million Settlement in Biggest Fraud Victory for Prosecutors

Laidlaw Waste Systems Inc., one of the nation’s largest trash-hauling firms, settled a consumer-protection and fraud suit Tuesday by paying San Diego prosecutors $3 million, the most money local prosecutors said they have ever recovered in a civil consumer action case.

The company, though admitting no liability, agreed to pay the cash after being accused of deceiving thousands of San Diego area customers into signing service contracts in 1988 and of overcharging customers for certain landfill cost increases, prosecutors said.

The $3-million settlement, which involves a complex fine and restitution system, was announced by the San Diego County district attorney’s office after filing the suit earlier Tuesday. The agreement had been worked out before the suit was formally filed. The San Diego city attorney and California attorney general also participated in the case.

“In terms of dollars and in terms of people protected, this is one of the largest consumer actions in California history,” Dist. Atty. Edwin Miller said in a statement announcing the settlement.

Derek Cathcart, a Laidlaw vice president at its regional headquarters in Chula Vista, said the firm, a Canadian-based corporation with sales of $800 million annually, was pleased that the case is over. It had endured two-plus years of investigations, he said.

“We’re not admitting any wrongdoing,” Cathcart said, adding that Laidlaw officials decided it was in “the company’s best interests and the best interests of our customers to settle (the suit) rather than incur litigation costs and management time.”

Laidlaw hauls trash to city or county landfills under contract with businesses, individuals and municipalities.

The suit accused Laidlaw of attempting to deceive San Diego area customers into signing multi-year service contracts in the spring and summer of 1988.

Prosecutors put the number of customers at 20,000. Cathcart said that figure was too high. “I don’t have the precise numbers, but it wasn’t that many,” he said.

According to the suit, Laidlaw sent its customers documents that appeared either to be insurance forms or acknowledgements that customers would not deposit hazardous waste into trash bins.

On the front of the form, Deputy Dist. Atty. Clifford P. Dobrin said, was a peel-off sticker that said the forms were “for insurance purposes.”

“Unfortunately, on the back of the document, in very small print, was a three-year contract,” Dobrin said Tuesday. “Most people simply signed this, thinking they were signing an insurance form and not realizing they were signing a contract.”

When the documents were signed and returned to Laidlaw, according to the suit, the stickers were peeled off and thrown away, and the signed contracts were filed.

When customers complained and sought to cancel service, they were told they had approved long-term agreements and would be sued unless they continued to take Laidlaw’s service or paid the company a cancellation fee equal to six months of charges, the suit said.

Customers complained to the district attorney’s office and to the San Diego city attorney, sparking the investigation and Tuesday’s settlement.

The inquiry was broadened to include allegations that Laidlaw overcharged customers for landfill cost increases incurred by the company in 1988 and 1989, officials said Tuesday.

The settlement enables customers who signed the 1988 contracts to cancel, provides for civil penalties and creates special funds for nearly half of the $3 million.

It calls for Laidlaw to pay the district and city attorneys’ offices $688,750 apiece in civil penalties and $100,000 in investigative and legal costs. The state attorney general’s office will receive $122,500, according to the settlement. The total in penalties and costs comes to $1.7 million.

Laidlaw will place the remaining $1.3 million into special funds.

Half of the $1.3 million will be placed into a unique legal trust that allows the money to be used for general charitable purposes. The $650,000 will be split evenly between the California District Attorneys Assn., for continuing education of prosecutors, and the nonprofit Consumer Protection Prosecution Trust Fund, which was created by a 1989 court settlement.

The remaining $650,000 will go directly to customers who show they were overbilled for landfill charges, said Steven J. Casey, a spokesman for the district attorney’s office. “If we run out of money before we run out of victims, Laidlaw will pay more,” Casey said.