Recycler Audit Response Splits Orange Council

City Council members are breaking into two camps in response to the criminal investigation over the city’s recycling contract--those who approved the deal in 1994 and those elected to the council since then.

Councilmen Michael Alvarez and Dan Slater want to know why it took nearly 20 months for top city employees to alert the council or police after learning there were major problems with the financial records of Orange Resource Recovery Systems Inc.

Mayor Joanne Coontz and Councilman Mike Spurgeon, who voted for the deal, insist that internal controls at City Hall worked.

The fifth council member, Mark Murphy, is on his honeymoon and could not be reached for comment.

The Police Department and the district attorney’s office are investigating whether members of the Hambarian family, which owns the recycling company and the city’s trash collector, misappropriated public funds. This week, an Orange County contractor told police he had cashed up to $1 million worth of third-party checks, which should have gone to the city, for Jeffery Hambarian. Hambarian was president of Orange Resource Recovery but was removed when the criminal investigation started in April.

The city, through a garbage bill surcharge, agreed to pay off a $6.5-million bank loan the Hambarians took out to build a recycling plant. Under the terms of the contract, the family owns the plant and its equipment.

Alvarez said he is very concerned about the inaction of city officials from the time they received the first red-flagged audit in October 1995 to the resignation of the company’s auditor, which triggered notification of police in April 1996.

“That has me pretty angry right now,” he said. “A number of people turned their heads and simply ignored it. . . . I want to be sure that this investigation is going to go full court no matter who they uncover. . . . People have to be held accountable.”

Alvarez said he has requested a closed council session next week with the city manager to find out who knew what when.

“No matter what shakes down, the public is being ripped off,” he said.

*

City Manager David L. Rudat, who left his post as fire chief to become city manager in 1995, has said that he and others who were alerted to problems in audit reports and financial statements from the company moved cautiously but not slowly. He said they wanted to hire an independent auditor to review the situation, which they did several months ago.

When the investigation became public, Rudat released a statement that Orange was not sure “that these alleged improprieties resulted in any financial loss to the city. . . . It may be several months before we can gather enough information to come to a definitive conclusion as to whether any improprieties occurred. . . .”

Rudat could not be reached for comment Thursday.

Slater said he wants to make sure no information is covered up.

“It’s becoming quickly apparent that the losses may be far greater than originally suspected,” he said. “I’m going to insist we get to the bottom line of this whole mess and that the public is completely informed on the whole matter.”

While Slater said he did not have enough evidence to suspect city employees of wrongdoing, he is concerned about the time lag from the original audit to notification of authorities.

He said the auditor made it clear as early as October 1995 that the problems were serious.

“Since the beginning, I have had deep concern about the timeline of who knew what and when at City Hall and why the council or the police was not immediately made aware of the problem,” Slater said. “I’m disgusted at what has been taking place under our noses and I have to ask for how many years this has been going on.”

But Coontz and Spurgeon said they think the situation has been handled appropriately.

“I am very satisfied we had the procedures in place and the city manager and staff members took the necessary actions once they were aware of the red flags,” Spurgeon said. “I have complete confidence in the abilities and integrity of Dave Rudat.”

Coontz agreed that the city manager did the right thing: “Why would you jump into a problem without doing a little research? I wouldn’t want to be responsible for accusations that are not correct or accuse an individual of doing anything wrong. So you just keep your mouth shut.”

Meanwhile, the phones of community watchdogs are ringing with more frequency.

“People are very upset with the mayor and the City Council,” said Carole Walters of the Orange Taxpayers Assn. “The people feel we don’t have officials who look out for the citizens.”