Legal Lode: Clean Up, Clean Out, Clink

The late Michael Jackson, actress Winona Ryder, pop superstar Chris Brown: these are some of the high-profile personalities who have hired attorney Mark Geragos. Now, add Jeffrey Hambarian to his client list.

Hambarian's father, Sam, began collecting garbage in Orange, Calif., in the 1950s using a pickup truck. As the city steadily grew, Sam built an empire of companies, particularly Orange Disposal Services (ODS) and Orange Resource Recovery Services (ORRS), which dominated the local trash collection business for decades. Meanwhile, he contributed time and money to his community, cleaning up parks, feeding the homeless, and helping found the Orange County Performing Arts Center.

As a teenager, Jeffrey Hambarian began helping his parents. With his older brothers showing no interest in the trash business, he eventually took over management of the family companies.

Local residents were dumbfounded when Hambarian, reared in a humble, philanthropic family, seemingly wandered astray and was charged with swindling his hometown out of $4.3 million. The prosecutors put it this way: He was “cleaning out the city's coffers while cleaning up the city's streets.”

ODS provided trash collection and ORRS performed recycling services under contracts requiring the companies to provide the city with annual financial statements. For its part, the city agreed to pay ODS and ORRS ten percent above their operating expenses. If what the city paid was driven by the costs the companies incurred, then, as Hambarian figured it, padding expenditures was the key to soaring profits. For example, when ordering trucks from Peterbilt, he sought upgrades that hiked the purchase price. The invoices included these additional costs, and the companies paid them in full.

Later, Hambarian would tell the dealer he wanted other vendors to do the upgrade work. When the dealer handed over checks payable to these vendors, he slipped the checks to accomplices who were able to cash them and return the proceeds minus a small fee. Hambarian then pocketed the money without doing the upgrades. He also would cancel orders for truck parts that ODS had already paid for, and then cash the refund checks and keep the money.

Hambarian's schemes succeeded because vendors and suppliers were afraid of losing the companies' business if they didn't play along. He persuaded some to overcharge for goods or to charge for goods they never provided, and then to kick back the over-payments directly to him. To hide the scam from detection, he supplied them with phony invoices and work orders. Besides his check-cashing tricks, Hambarian diverted large amounts of cash from his companies' scrap metal sales. Overall, he stole more than $2 million from the family companies.

Hambarian negotiated a reduced tipping fee for ORRS at a landfill by taking a “broker's fee” for bringing his business to the facility. ORRS ended up paying $27 a ton for disposal, and the landfill gave Jeffrey a $7.55 per ton fee. Under the deal, he ended up pocketing more than $600,000 in broker fees, which he never disclosed to the city. As a result, the city paid ORRS for disposal costs with no offset for the kick-backs.

He was charged with multiple crimes that caused serious financial harm to the various family-owned businesses he was running and to the city. Following a four-month trial, delayed while defense attorney Mark Geragos finished representing convicted wife-killer Scott Peterson, Hambarian was convicted of 47 felony counts including grand theft, fraud and money laundering. The jury deliberated for 11 days and deadlocked on eight other felony counts alleging he had defrauded the city.

The trial judge sentenced him to nearly 15 years in prison and ordered him to pay millions of dollars in fines and restitution. On appeal, his conviction was upheld, but, on a technicality, his jail time was reduced by two years.

[People v. Hambarian, No. G036716 (Cal.App.Dist.4, June 25, 2009)]

Barry Shanoff is a Rockville, Md., attorney and general counsel of the Solid Waste Association of North America.

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail: [email protected].

Related Stories