Recycling Theft Allegations Stir Residents

Angry taxpayers confronted the Orange City Council on Tuesday, demanding to know why it took no action until recently to investigate the suspected theft of city funds by a recycling contractor when that contractor’s own auditor warned of serious irregularities as long ago as 1995.

Neither City Manager David L. Rudat nor the five-member council would answer the question.

As residents steadily berated city officials for an hour in a full, tense chamber, council members said almost nothing until Mayor Joanne Coontz, obviously bristling at the criticism, finally snapped:

“We can’t guarantee that war [won’t] happen. We can’t guarantee that floods [won’t] happen. And we can’t guarantee that fraud won’t happen.”

Her tone startled resident Herman Martinez who had asked if the city “could guarantee this won’t happen again.”

A circumspect Rudat said, “We must patiently wait for the conclusion of the investigation,” by the Orange Police Department.

But residents, angry about allegations that the city’s recycling company, Orange Resource Recovery Systems Inc., skimmed as much as $6 million from the sale of recycled material, demanded to know why City Hall hadn’t been more diligent.

“The residents of Orange have no faith in the mayor or the City Council at this time,” said Carole Walters, president of the Orange Taxpayers Assn., a City Hall watchdog group.

Walters urged the council to promptly end the contracts with the Hambarian family, owners of the company that has collected the city’s garbage since 1955.

In 1994, without competitive bidding, Sam and Alyce Hambarian and their sons Michael, Donald and Jeffery were given an exclusive 10-year contract and a $6.5-million loan with repayment guaranteed by taxpayers to operate the recycling company.

The Hambarians own Orange Disposal Service Inc., the parent company of the recycling operation.

Z. Harry Astor, attorney for all of the Hambarians except Jeffery, who he said earlier was fired by his family in March, strongly defended his clients.

“I can state categorically that we, on behalf of the corporation, take exception to criticism of these companies,” Astor said. “And the Hambarians personally take exception to criticism from the City Council.”

Astor reminded officials “the City has an obligation to its contractor. This isn’t a one-way street.”

Jeffery Hambarian is represented by criminal attorney Robert L. Shapiro.

The suspected theft first came to light when longtime family accountant Steven V. Nakada again reported to city officials in January 1996 that Jeffery Hambarian, then head of the recycling center, and his operations manager, Rodney Agajanian, deliberately obstructed his efforts to account for city funds from the sale of recycled material.

In February 1996 and again in April 1996, Nakada sent the city letters and reports detailing his findings that he could not account for money belonging to the city and that checks written to the company were deposited into unknown bank accounts.

Rudat, who said last week that he didn’t learn of Nakada’s concerns until last October, finally notified the council in January. After Nakada quit in February, the city manager hired a national accounting firm, which confirmed the auditor’s suspicions.

Rudat then turned the matter over to police.