Check-Cashing Probe Details Offered

For a struggling paving contractor, said Mark S. Dix, it was the kind of deal that couldn’t easily be turned down.

The terms were simple: If Dix would help businessman Jeffery Hambarian cash a few checks that were payable to Hambarian’s Orange recycling business, then Hambarian would steer some lucrative concrete work Dix’s way.

So, about once a month for the next four years, Dix says, Hambarian would hand him a pile of checks totaling $10,000 to $40,000, and he would cash them in Signal Hill at Curley’s Cafe, a landmark frequented by oil field workers and construction crews.

“I’d walk into the bar, hand the checks to the bartender, and he’d take them into the back. When the money was ready, they’d count it out and I’d stuff it into my pockets and boots,” Dix said in an interview.

Under most circumstances, such unorthodox check-cashing transactions between a couple of private businessmen probably would be just another matter for Internal Revenue Service auditors.

But Hambarian’s family, exclusive trash haulers in this central Orange County town since 1955, was involved in a unique recycling partnership with the city, and most of the money Dix handed over to Hambarian in cash should have gone into city coffers.

Dix was the first person to come forward and tell police about his involvement in what has become a municipal scandal that has temporarily cost the local police chief his job, led to conflict-of-interest findings against the city manager, whose wife had undisclosed dealings with Hambarian, and prompted a citizens group to threaten a recall effort aimed at the city’s mayor and some of its council members.

In an interview with The Times, Dix has now gone public for the first time, describing how he became embroiled in what city officials have said in court papers was “the misappropriation for personal use by one or more members of the Hambarian family” of money due the city from the sale of recyclable materials collected as part of the city’s trash.

Dix’s attorney, William Dougherty, said his client was granted limited immunity by prosecutors after he agreed to tell investigators, in the words of his agreement with the district attorney’s office, how he had taken part in the “laundering of checks due the city of Orange . . . and shared the proceeds with suspect Jeff Hambarian.”

The Orange County district attorney’s office and the IRS believe Jeffery Hambarian misappropriated more than $6 million in recycling revenue, according to official sources who spoke on condition that they not be identified.

Dix, a burly 37-year-old who has answered to the nickname “Tank” since his days at Villa Park High School, said he was drawn into the check-cashing scheme while doing some concrete “patch work” at Orange Disposal Inc., the trash-collection firm founded in the early 1950s by Sam and Alyce Hambarian, Jeffery’s parents.

Dix said that Jeffery Hambarian first asked him in 1993 if he knew where he could get some checks cashed. Dix said there was a nearby gas station where he knew the owner, and Jeffery asked him to cash a couple there.

It was the first of many requests to come.

Although Dix said he considered the check-cashing requests “a hassle,” Hambarian “dangled like a carrot” the prospect of more work for Dix’s small company--work orders that eventually totaled $100,000 to $200,000.

Needing the work, Dix has told investigators, he began regularly cashing checks for Hambarian, and early on recommended to Hambarian that he cash them at Curley’s Cafe, a hilltop bar and restaurant distinguished by three large, bobbing oil well pumps in the parking lot in front.

David Frick, owner of Curley’s, said Dix has been a regular for years. “We have a legitimate check-cashing business. Guys come here, cash their payroll checks and drink beers,” Frick said. “They’ve been doing it for 65 years.”

Dix said he received $400 to $600 for every batch of checks he cashed for Hambarian, and that Curley’s kept from 1.5% to 2% of the amount cashed. He said Hambarian once told him of another person who cashed checks in Los Angeles, and he said he got the impression from Hambarian that perhaps two other people may have cashed checks at other locations. He said he never met any of the others.

The contractor said he asked Hambarian twice whether the money belonged to the city of Orange. “He said the city had just loaned the money to build the [family-run recycling facility],” Dix said, and the revenue from the sale of plastics, metals and paper culled from the city’s trash belonged to the business.

In point of fact, the controversial contract under which Orange residents effectively gave the Hambarian family a $9.5-million trash-processing plant in 1993, calls for the city to receive 90% of the recycling revenue until at least 2000.

The loan that paid for construction of the Orange Resource Recovery Systems facility is being repaid by a $2.25 surcharge on every resident’s trash bill.

Orange officials have defended the arrangement as an important “public-private partnership” that benefited residents through lower trash rates and would satisfy city obligations under state law on trash recycling.

That something was amiss first came to light when the City Council cryptically announced in June that Orange police had opened an investigation. City officials refused to divulge any details at the time, and have been loath to discuss the matter ever since.

But key elements of the investigation have surfaced from time to time. One of the most telling was a search warrant affidavit, still under seal, that described how Jeffery’s older brother, Michael Hambarian, was surreptitiously recorded by police during a meeting with City Manager David L. Rudat.

Michael Hambarian, the president of the family’s major business, admitted that he suspected Jeffery was embezzling money.

The two met in early May, three weeks after police had quietly opened their criminal investigation, based on a report by the Hambarian family’s longtime accountant of suspected embezzlement and confirmed in a fraud audit secretly commissioned by the city.

According to the affidavit, Rudat asked Michael Hambarian, “Was [Jeffery] stealing money?”

“Between you and me, yeah, he’s stealing,” Michael Hambarian responded.

Why would the 43-year-old Jeffery Hambarian, who was paid an annual salary of more than $150,000 and lived in a $1.9-million house in Anaheim’s exclusive Peralta Hills, resort to theft?

“One reason was basic greed,” Michael Hambarian told Rudat. “The second reason was that Jeff had been poisoned by the thought that those at the [recycling company] did all the work . . . but all their money went to the city.”

Disclosure of the affidavit’s contents apparently set in motion the events that culminated in the police chief’s being put on indefinite administrative leave.

Because an Orange County Superior Court judge had ordered that the affidavit, vividly detailing the Police Department’s knowledge of the case at that point, remain secret, Chief John R. Robertson ordered a parallel investigation into the leaking of the document.

Robertson knew that a copy of the affidavit had been given to the city manager.

And the chief’s attorney said he finds it suspicious that Robertson’s removal occurred shortly after a forensics technician, examining fingerprints on the city manager’s copy, found evidence that numerous people had handled the document.

“This is a very complex criminal investigation and it has tentacles that reach out like branches on a tree,” said David L. Miller, the chief’s attorney. “This one area of the affidavit just happens to be one of those branches.”

Miller said “it is a reasonable conclusion that the chief was retaliated against” for vigorously pursuing the investigations.

The chief was placed on paid administrative leave by the city manager three weeks ago, ostensibly for creating “a hostile work environment” in the Police Department.

Citing the confidentiality of personnel matters, City Atty. David A. De Berry would not comment on the action against Robertson.

Robertson’s removal prompted some 100 residents to crowd into last week’s council meeting, express their support for the chief and threaten to recall some of the council members if he is not reinstated.

“We’re very upset over this,” said Carole Walters, president of the Orange Taxpayers Assn. “Chief Robertson got too close to people at City Hall and they didn’t want him to finish his job. The question is, why?

“We’ve got the money to start a recall campaign and we will,” she added.

Rudat remains under investigation by the district attorney’s office.

De Berry concluded after an internal city investigation that the city manager had run afoul of state conflict-of-interest laws because he had failed to recuse himself from city decisions after his wife, a local real estate broker, sold a $580,000 home for Jeffery Hambarian, earning a $13,735 commission.

Although Rudat has said that “there’s no damn conflict,” De Berry concluded otherwise, and referred the matter to the district attorney’s office, which has not made known its findings.

Jeffery Hambarian has not commented publicly since the scandal erupted this summer. His attorney, Marshall M. Schulman, who recently replaced O.J. Simpson “dream team” member Robert Shapiro, said, “We haven’t had an opportunity to explore the case in tremendous depth and I think it would be premature to comment until we have.”

Z. Harry Astor, who represents Michael Hambarian and his parents, has repeatedly said that the family has acted properly and has guaranteed the repayment of any missing funds. He has said that Jeffery Hambarian was removed as head of the family’s recycling business in March.

Dix said he met with Jeffery Hambarian in a parking lot shortly after his meeting with investigators. He said Hambarian “looked miserable” and appeared extremely nervous. He said that Hambarian, apparently worried that Dix might be wearing an electronic bug, tried to communicate almost entirely by gesture: “He’d take care of me and pay for a lawyer.”

Dix said he declined the offer.

In all, Dix said, he collected between $7,000 and $10,000 from Jeffery Hambarian for cashing checks, and added: “I feel pretty stupid now.”

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Times correspondent Lesley Wright contributed to this report.