Memo Accuses City Manager of Conflict

City Manager David L. Rudat violated state conflict-of-interest laws when he handled contract issues with Orange’s recycling company after his wife sold the house of a top company official, according to a confidential memorandum written by the city attorney.

Rudat’s alleged conflict came to light in April, when police began investigating Orange Disposal Service Inc., the city’s longtime trash hauler, and Orange Resource Recovery Systems Inc., an affiliated recycling company, for alleged misappropriation of as much as $6 million due the city. No charges have been filed in that case.

The Aug. 13 memo obtained by The Times has been turned over to the district attorney’s office, City Atty. David A. De Berry said. The district attorney is investigating the possible civil violation of the Political Reform Act.

Rudat did not return telephone calls Wednesday, but he said in a July interview, “I didn’t even think of it as a conflict.”

Carol Rudat said she blames city officials for not informing her husband of the conflict-of-interest law when he took office.

De Berry agreed his office should have explained the law to David Rudat, like it did to two new councilmen who sell real estate.

“No one has ever explained to Dave or myself that if you have a spouse who works, you need to be concerned about certain things,” Carol Rudat said Wednesday.

De Berry said he does not think Rudat intentionally violated the law.

“Mr. Rudat apparently did not recognize the potential legal conflict until I brought it to his attention in 1997, which was after the relevant time period,” De Berry said in the memo.

Rudat could be fined as much as $5,000 if found guilty.

The criminal investigation focuses on Jeffery Hambarian, who was vice president of the recycling company. Neither Hambarian nor his attorney, Robert L. Shapiro, have returned The Times’ calls to discuss the allegations.

Rudat’s alleged conflict began in September 1985, about two weeks after he was appointed interim city manager. At that time, his wife sold Jeffery Hambarian’s house on Crest de Ville for $580,000, earning a commission of $13,735, De Berry’s memo stated.

According to the Political Reform Act, Rudat should have waited a year before taking part in city actions involving Orange Resource Recovery Systems, the memo said.

De Berry noted at least 13 instances during that year in which Rudat took part in decisions affecting the Hambarians, ranging from reviewing memos to discussions of possible increases in trash collection rates.

“It appears that Mr. Rudat did make or participate in the making of decisions which had a reasonably foreseeable financial effect on Jeff Hambarian during the relevant 12 months,” the memo said.

In one instance cited by De Berry, Jeffery Hambarian’s brother complained to Rudat in May 1996 that a rumor was circulating that the trash and recycling companies were being investigated for fraud. Rudat asked police to check out the source of the rumor. Although some city employees told police the Hambarians’ auditor was conducting a fraud audit and others said they suspected theft, Rudat did not ask police to pursue the allegations, the memo said.

It was not until February 1997, when the auditor quit Orange Resource Recovery, that Rudat hired a national accounting firm to conduct a fraud audit. Rudat turned over the case to police two months later.

Carol Rudat said that she must now ask all her clients whether they have business with the city to avoid future conflicts.

“Where do you say what’s reasonable?” she said. “I told him not to take this job.”