FBI’s Scrutiny of Waste Firm Extends to O.C.

Kosti Shirvanian has gone from picking up trash in a battered Chevy truck in the 1950s to being chauffeured around in his personal limousine and living in a multimillion-dollar mansion on Newport’s Linda Isle.

Along the way, he has won the admiration and friendship of a number of politicians, who see his transformation--from penniless Iranian immigrant to a mogul of the waste business--as a true Horatio Alger story.

But lately, he has also attracted the attention of a task force of FBI and Internal Revenue Service agents, who are conducting a broad investigation of suspected political corruption and bribery into his former company, Western Waste Inc.

The probe has widened from Riverside County and Los Angeles into Orange County, where federal agents have been interviewing potential witnesses about the company’s local activities, which include a $3-million-a-year contract in Mission Viejo and a recent push for more business in Newport Beach, The Times has learned.

Shirvanian’s friends say the scrutiny comes at a time when the 66-year-old hauler was contemplating semi-retirement to enjoy the $130 million or so he received when Western Waste was bought out last year.

Instead, Shirvanian has seen increasing federal interest in the company’s operation.

In October, former Compton City Councilwoman Patricia Moore was convicted of extortion and tax fraud after confessing to receiving from $500 to $1,000 a month from a Western Waste vice president to ensure her support for the firm on the council. Western has an exclusive contract to pick up commercial waste in Compton but was not charged in the Moore case.

Moore’s conviction came two months after another Western Waste vice president pleaded guilty to arranging for the company to pay $150,000 for a worthless parcel of land owned by a Louisiana state representative who was helping the company obtain a landfill permit near Baton Rouge. The vice president was placed on probation in exchange for his cooperation.

Then the FBI moved on to Riverside County, where the county’s Board of Supervisors was ordered to produce public and private records involving Shirvanian and Western Waste for presentation to a grand jury. The supervisors are considering a proposal by Western Waste to expand the capacity of the company’s El Sobrante landfill from 8 million to 108 million tons.

Federal officials have declined to comment on the ongoing investigation, but there have been indications of continuing FBI interest.

In early September, during a pretrial hearing in the Moore case, FBI Agent Kevin Adley acknowledged that Western Waste was targeted by a public corruption probe in 1994. Asked if anyone had been indicted, Adley replied: “Not yet.”

The FBI’s interest in Western Waste’s dealings in Orange County appears to be an outgrowth of the investigations into political corruption in Compton and Louisiana, sources said.

Sources said that the FBI’s Organized Crime and Public Corruption units, which are investigating Western Waste, are interviewing people connected to the Mission Viejo contract. Speaking on condition that their names not be used, two people have told The Times they’ve been questioned by investigators.

In June, Mission Viejo awarded an exclusive commercial franchise to Western Waste and also awarded its exclusive residential franchise to BFI Industries, a Western rival.

At least four commercial firms that lost out when the city awarded Western Waste the exclusive commercial franchise have since complained about the bidding process.

“The lobbying forces went to the back room of City Hall and came back with a deal for Western,” said Madeline Arakelian, an Irvine hauler whose company is being sued by the city because she has refused to give up her contracts in Mission Viejo.

Western Waste’s success in Mission Viejo came six years after the firm launched an aggressive campaign to land the contact.

In 1990, the company expressed interest in the Mission Viejo contract when the firm contributed $8,000 to a pair of political action committees that eventually helped elect three council members who became critics of the city’s trash hauler.

The council members, led by then-Councilman Robert Curtis, accused Dewey’s Rubbish Service of fraud and of overcharging the city for its trash hauling and vowed to find a way out of the contract or to put it up for bid when it expired in 1995.

Curtis left the council in 1992, but Western Waste pursued the Mission Viejo contract.

Last year, the company hired Curtis, who runs a private law office one floor above Mission Viejo City Hall, to join what the former councilman called Western’s “bidding team” that competed for the city’s hauling contract.

Mission Viejo Mayor Sherri M. Butterfield, who voted to award Western Waste the commercial franchise, said she would be surprised “if they found anything. We handled everything in a careful manner.”

Butterfield said she received a $500 campaign contribution from Western Waste last year and attended a reception hosted by Shirvanian for council members across the state at last year’s League of Cities annual meeting in San Francisco.

But “no campaign contribution would influence my vote on any issue,” Butterfield said. “I always look at the merits of a particular issue.”

Curtis, the former councilman, said Western Waste won the city’s commercial contract because the firm submitted the best proposal. “It’s totally ridiculous to suggest” otherwise, he said.

Shirvanian declined to be interviewed for this article. He said he was “skeptical” about talking to reporters, citing recent newspaper reports about Western Waste’s troubles. But in a previous interview, Western’s chief operating officer, Leslie N. Bittenson, denied any wrongdoing by company officials.

The increased scrutiny was not something Shirvanian had in mind when he took a $2-million loan in 1994 to buy a house on Linda Isle, not far from Irvine Co.’s Donald Bren, the county’s only billionaire.

Friends say Shirvanian simply wanted to spend his semi-retirement in Orange County, cruising around Newport Bay in the electric boat that came with his waterfront property or on the new sailboat that he bought last month during a trip to Italy.

Shirvanian’s semi-retirement caps a 41-year career that began in 1950, when he came to the United States. Shirvanian had hoped to become a medical student but instead he enlisted by error and served in the U.S. Army, he said in two previous interviews.

According to Shirvanian’s story, his roommates at Atlantic Union College in Springfield, Mass., told him he had to enlist in the Army.

Shirvanian said he served for three years, including an 18-month stint in Korea, where he saw combat action as a medic.

Army records show that Shirvanian was released in August 1954 under a special order from Fort Devens, Mass., three years before his scheduled release.

Shirvanian moved to Southern California in 1955, where he and his sister, Savey Tufenkian of Glendale, started a scavenging business around the time that many Armenians were setting up small waste-hauling companies.

While Tufenkian handled the books and worked at a law firm to supplement their income, Shirvanian drove his old truck up and down the streets of Inglewood to collect waste from small gas stations.

Shirvanian recalled in a previous interview that one of his first successful transactions was a decision to buy another hauler’s route for $800. By 1990, Western Waste had blossomed into a regional giant, with more than 1,500 employees and hundreds of distinctive orange trash trucks.

The company has contracts with about 90 municipalities in California, many of which are exclusive and long-term. They help to account for much of Western Waste’s revenues, which last year exceeded $270 million.

In 1990, Forbes magazine listed Shirvanian among the 200 Best Small Companies’ Chief Executives.

Shirvanian, who for years rejected offers to sell his company, agreed to be acquired by USA Waste Services of Dallas in a $525-million stock deal last year. Under the deal, Western became a subsidiary of the Dallas firm.

Shirvanian, who became a vice chairman of USA Waste, is busier than usual, said John Hartunian, his friend of 40 years.

Almost daily, Shirvanian starts his 18-hour work day with an early breakfast at his favorite eatery--the Coco’s Family Restaurant at Fashion Island. He is a lunch regular at The Ritz, a cell phone constantly to his ear.

“He’s always doing business,” said Judy Muncy, a Newport Beach real estate broker who is a friend of Shirvanian. “He’s always looking for a deal, and he doesn’t overpay.”

Muncy said she got a good idea of Shirvanian’s influence when she attended a $500-a-plate fund-raiser for Los Angeles Mayor Richard Riordan at Shirvanian’s Linda Isle home last year. Shirvanian’s firm has a $1.1-million contract to pick up waste for several Los Angeles city departments, a city spokesman said.

“Kosti Shirvanian is a what America is all about,” said Dave Ellis, an Orange County political consultant who has worked for Shirvanian on a few projects. “He’s a true Horatio Alger story.”

Friends and critics of Shirvanian say that the hauler owes a large part of his success to his ability to negotiate exclusive contracts with cities, guaranteeing a steady and abundant source of revenue for Western.

John Waddell, editor of Refuse News, a monthly publication that covers the waste industry in the West and Midwest, said Shirvanian also took advantage of a 1990 California law requiring all municipalities to recycle 25% of their solid waste by 1995, and 50% by 2000.

Shirvanian’s sales pitch has been that a single large hauler like Western Waste could better coordinate a city’s recycling goals, Waddell said.

Kevin J. Murphy, city manager of Newport Beach, which contracts with 12 haulers to pick up residential waste, said Shirvanian walked into his office a few years ago and told him Western was willing to pay the city $2 million for an exclusive franchise to haul Newport’s residential trash. Murphy said he later told Shirvanian that he and other council members were overwhelmingly opposed to entering into such an agreement.

However, the rejection did not discourage Shirvanian from continuing to pursue business in Newport Beach. Last month, the company contributed $1,387 to support Measure Q, which eliminated the city’s responsibility for collecting trash from about 200 small businesses in Newport Beach. Those businesses will now have to hire their own trash collectors, and Western Waste was first in line to make a sales pitch to the affected business, city officials said.

Over the years, Shirvanian and other company officials have seized the opportunity to develop friendships with city council members and other politicians. Records and interviews with city council members show that Shirvanian and his company gave gifts--ranging from lunches, dinners and cowboy boots--and contributed thousands of dollars to help elect city council members.

Hy Weitzman, a former Sacramento lobbyist for the hauling industry, said Shirvanian has a reputation for seizing upon business opportunities.

“He leaves no stone unturned when it comes to pushing a business deal, going after a city’s trash contract or putting together a landfill deal,” said Weitzman, who is executive director of California Refuse Removal Council, a trade group representing 80% of the state’s haulers. “He pays attention to every detail. Nothing is left to chance.”

Contributing to this report were Times staff writer H.G. Reza and correspondent Hope Hamashige.