Orange Sues Trash Firm for Damages

In the latest skirmish of a long-running case over an alleged embezzlement scheme, the city of Orange filed suit Monday against the only trash company that has ever served its residents.

The suit filed in Orange County Superior Court charges the owners of Orange Disposal Services Inc. and its subsidiary recycling arm with breach of contract, fraud and racketeering. Also named are companies associated with the recycling company, Orange Resource Recovery Systems Inc., that may have contributed to the theft of $4.2 million in municipal funds.

In December, the Orange County district attorney’s office filed 65 criminal charges against Jeffery Hambarian, the former recycling executive alleged to have embezzled the funds. But the city’s suit names all five members of the Hambarian family who are associated with the company.

City Atty. David A. De Berry said the city has been negotiating with the family for months and still hopes to reach a settlement, but the statute of limitations mandated taking action now.

“We’re pretty close,” De Berry said of the negotiations.

But, he added, the city will still go after Jeffery Hambarian even if it settles with the rest of the family.

“Just from a fundamental, philosophical point of view, he has several million dollars he has benefited from, and we could not in good conscience let him go,” he said of Jeffery Hambarian.

The case dates to 1997, when police began investigating the trash and recycling companies for possible fraud.

The trash company, headed by Sam and Alyce Hambarian, has served the community since 1955. When the state forced cities to reduce landfill waste, city officials arranged with the Hambarians in 1994 to run a recycling plant.

Under the schemes alleged in the civil and criminal complaints, the company underreported the sale of recycled materials, proceeds of which should have gone to the city, and inflated company expenses.

The embezzlement charges fanned a full-blown crisis at City Hall, including the firing of the police chief over his handling of the case and a conflict-of-interest charge leveled against the city manager.

Jeffery Hambarian, who eventually was fired, is free on $500,000 bail and awaiting a preliminary hearing in late summer or early fall.

De Berry said that the civil suit will seek to recover the $4.2 million plus interest, with the addition of punitive damages. Marshall Schulman, attorney for Jeffery Hambarian, had not seen the lawsuit Monday but dismissed the move as “a political statement.”

“They just have to look good,” he said. “I don’t believe the city of Orange is out anything. It’s all going to come out in the wash.”

City officials and the Hambarians have been trying to find a trash company to buy Orange Disposal Services Inc. At that point, the city will settle with all members of the family except Jeffery Hambarian, and residents should suffer little effect from the change in trash-hauler, De Berry said.

Z. Harry Astor, the attorney representing the Hambarian family, said Monday that the city’s lawsuit comes as no surprise, given the statute of limitations.

“They are preserving their legal rights,” Astor said.

Terms of settlement are so close now, Astor added, “that it’s simply a matter of drawing up the appropriate contract to cover the settlement and getting City Council approval.”