A Year Later, Few Answers in Orange

It’s been a year since the city of Orange dropped this bombshell on its residents:

The operator of the city’s waste recycling plant may have “misappropriated” perhaps millions of dollars for personal use that belonged to the city, and Orange police and the district attorney’s office were investigating.

No one knew that simple announcement would plunge the city into a roiling scandal.

So far, it has cost the police chief his job, dragged the city manager into a district attorney’s investigation and triggered a recall campaign against the mayor. It has also left residents wondering how their city had landed in yet another municipal mess.

A year later, the controversy continues and several critical questions remain unanswered. Among them:

* Why haven’t city officials given residents a detailed explanation of what happened?

* Why can’t the city say how much money was allegedly diverted? Estimates have ranged from $6 million to $10 million.

* Why did the city continue the exclusive, no-bid contract with the family that has collected the city’s garbage for 40 years to run the recycling center?

The official silence bothers community activists, such as Carole Walters.

“City Hall won’t tell us what happened,” Walters said. “Instead, they fired the police chief for trying to find out.”

For their part, city officials cite the ongoing criminal investigation, saying they can’t tell the public what they know, at least not yet.

“We’re in a difficult position because the city and the City Council doesn’t know what it’s going to do until the D.A.’s investigation is done,” said City Atty. David A. De Berry. “We definitely have to find out how much was taken, how much is owed [the city]. We’re hoping the D.A. will help us iron that out.”

The scandal has divided this central county city of historic homes and large shade trees, and darkened the mood of many residents whose rising anger often flashes at City Council meetings.

Supporters of former Police Chief John R. Robertson shoot hostile questions at the mayor and two council members who voted in February to terminate him. City officials say Robertson showed poor judgment in investigating the leak of a sealed search warrant affidavit that laid out the criminal case in vivid detail.

At a recent meeting, for example, resident Norm Phillips chided the council about the appearance of dumping the chief right in the midst of the trash scandal, prompting Councilman Mike Spurgeon to bristle at the suggestion of impropriety.

“I’ll tell you what, Norm,” Spurgeon barked, leaning over the council dais. “If you think you’ve got something on us, you take it to the D.A. You put up or shut up.”

Mayor Joanne Coontz, too, who voted with Spurgeon and Mark Murphy to oust the chief, snapped at another resident, “Anything else you want to complain about?”

*

At the center of the criminal investigation is Jeffery Hambarian, the youngest son of Sam A. and Alyce Hambarian, who have been the city’s only garbage haulers since the 1950s. Their son was president of the recycling operation when the funds were reported missing.

Jeffery Hambarian, who was briefly represented by former O.J. Simpson attorney Robert Shapiro, has consistently refused to comment on the case. His current attorney, Marshall M. Schulman, did not return a call for comment.

The criminal investigation is months from completion, according to sources familiar with it. So far, authorities have analyzed more than 1.5 million canceled checks and have begun poring over tens of thousands more, part of the laborious process of building what will likely be a money laundering and mail fraud case.

The conflict-of-interest probe into allegations against City Manager David L. Rudat, meanwhile, is apparently closer to completion, according to the sources, although Rudat said he has not been contacted by the district attorney’s office about the status of the case.

Last fall, City Atty. De Berry concluded that Rudat had participated in decisions that had a financial impact on Hambarian and referred the matter to the district attorney.

Rudat’s wife, Carol Rudat, a real estate broker with Seven Gables Realty, collected a $13,735 commission for selling Hambarian’s $580,000 house in November 1995.

Under California law, it’s illegal for public officials who directly or indirectly accept income from a contractor to then influence official decisions involving that contractor.

Rudat has repeatedly denied that his wife’s business arrangement with Jeffery Hambarian in any way colored his judgment. “There’s no damn conflict,” he said.

But in his letter to the district attorney, De Berry wrote that “it appears that Mr. Rudat did make or participate in . . . decisions which had a reasonably foreseeable financial impact on Jeffery Hambarian” and had done so 13 times.

*

In January, district attorney’s investigators began questioning city building inspectors and others involved in the controversial sale of Jeffery Hambarian’s house on Crest de Ville Ave.

The buyers, Farzin N. Ghodsi and Margaret C. Leahy, found numerous undisclosed defects and extensive modifications that had been made without city permits.

Rudat did not deny intervening in the dispute that developed when Ghodsi threatened a lawsuit, saying he personally had to monitor how city employees handled the matter lest the city be named in the lawsuit.

Carol Rudat denied that Ghodsi and Leahy had been defrauded. The couple eventually sold the house at a loss of $100,000 and returned to Michigan.

The larger aspect of the district attorney’s investigation--and the one that has riveted the attention of Orange residents--involved what critics called the ultimate sweetheart deal: the city’s recycling center.

In order to comply with a state law requiring all municipalities to recycle half their waste by 2000, the city awarded the Hambarians, without bidding, a 10-year contract to build and operate the center.

The city guaranteed the repayment of a $6.5-million construction loan by slapping a $2.25 surcharge on every customer’s monthly bill and it assured the Hambarians a 10% profit. Even though residents will have paid off that loan by 2003, contract terms require Orange to give the Hambarians “fair market value” for the facility if the city decides to bring in another operator.

*

Under the deal, 90% of the revenues from the sale of glass, paper, aluminum and other material from the city’s waste stream was to go to the city treasury for several years.

But in October 1995, when the Hambarians’ independent auditor tried to verify the sales, he was unable to trace all the money. Over the next year, he alerted city officials several times about the problem, but no official action was taken until early last year.

Finally, after a Big Six accounting firm hired by the city verified the auditor’s suspicions that money had been diverted, the police were called in.

Weeks later, Mark S. Dix, a paving contractor, told police he had cashed checks for Jeffery Hambarian at a restaurant-bar in Signal Hill and smuggled the cash out in his boots.

Dix said he received $400 to $600 for every batch of checks he cashed and ultimately was hired to do $100,000 to $200,000 worth of concrete “patch work” at the recycling center in exchange.

Last summer, the D.A.’s office took over the investigation, but not before relations between Robertson and Rudat had soured and eventually led to the chief’s firing.

“It’s beyond me how this city through gross misfeasance lost millions of taxpayer dollars and has done virtually nothing to hold those people accountable who lost the money,” said Robertson. “And yet I was terminated for doing my job.”

Despite the revelations about missing funds, Hambarian supporters, such as Coontz, have often reminded residents that Orange has among the lowest trash rates in the county.

*

But that may be changing. As they did last year, the Hambarians have once again asked the city to approve a 32% rate hike. The council would not approve it last year.

“Odd is not the word for it,” said De Berry. “Given what happened last summer, [asking for a rate increase] evidenced a lot of chutzpah, if nothing else.”

But the city’s lack of action, and explanation, frustrates community activist Shannon Tucker.

“I think the consensus among the average Joe Citizen is there is a lot more going on and we’ll probably never find out the whole story.”