By Dan Christensen, FloridaBulldog.org
Now we know what Waste Management wanted to hide.
Newly public documents show that attorneys for the trash giant duped federal and state antitrust regulators with misleading statements and outright misrepresentations about what would happen to local competition – and municipal recycling rates – after it acquired the assets of Southern Waste Systems (SWS) and its affiliate Sun Recycling.
Among other things, Waste Management’s attorneys at K&L Gates and Bracewell & Giuliani flatly assured regulators that their client would not acquire “any interests” in Sun Bergeron, the joint venture (JV) that had contracts with 19 Broward municipalities, mostly for single stream recycling. Sun Bergeron was owned 50-50 by Sun Recycling and Bergeron Environmental and Recycling, owned by Davie businessman Ron Bergeron.
Sun Bergeron “will continue to be free to compete in Broward County for disposal contracts as it does today,” attorneys Brian McCalmon and Daniel Hemli wrote to Justice Department antitrust lawyer Frederick Parmenter in an Aug. 20, 2015 letter. Likewise, the lawyers assured the government lawyers that Sun Bergeron’s access to Sun’s processing facilities would not be impeded and that its contracts with its municipal customers “will remain unchanged, potentially through July 2, 2028.”
As other formerly hidden documents show, however, that wasn’t so. Within six months of those promises Waste Management acquired all of Sun’s economic interest in Sun Bergeron, took over its operations, began to close off access to needed processing facilities, and when its municipal contracts expired in July 2018, effectively shut down the joint venture. The result: Waste Management reestablished its Broward monopoly, recycling prices skyrocketed and that environmentally friendly practice diminished.
Bergeron Environmental’s multi-million dollar equity in the joint venture was wiped out.
A Waste Management subcontract
There was more. Waste Management and Sun also signed a subcontract in which Sun, which had various contractual obligations to Sun Bergeron, handed control of Sun Bergeron’s municipal contracts to competitor Waste Management.
Antitrust regulators apparently found that subcontract arrangement acceptable for reasons they have not explained publicly. What they did not know, because Waste Management’s attorneys didn’t disclose it, was that at closing the company would give Sun affiliate John Casagrande a $283,000 consulting contract with a noncompete clause so he could assist “concerning the integration [of] personnel and assets into the operations of Waste Management following the acquisition.”
Casagrande was then installed in a control position on Sun Bergeron’s board by Sun’s principal owner Anthony Lomangino. Ron Bergeron was told about Casagrande’s board appointment, but not his lucrative consulting deal with Waste Management.
Three months later, Casagrande assigned his consulting agreement to Sun (by now known as LGL Recycling). That put the same entity that was supposed to supervise Waste Management under the subcontract to keep Sun Bergeron independent and competitive was now directly beholden to its competitor, Waste Management.
Here’s how attorney McCalmon of K&L Gates characterized the subcontract arrangement in an Oct. 9, 2015 letter to both the Justice Department and the Florida Attorney General’s office:
“We have spent many hours constructing a subcontract arrangement that will preserve the status quo for at least the next eight years in every material way,” McCalmon wrote. “That should be sufficient to resolve any legitimate competitive concerns that the Antitrust Division and Florida Attorney General’s Office may have.”
Today, Bergeron Environmental is suing Waste Management, Sun and executives Anthony Lomangino, his son Charles Lomangino, nephew, Charles Gusmano, and Casagrande. Its most recent complaint is 140 pages, plus another approximately 1,100 pages of exhibits, including contracts and correspondence.
In addition to providing many new details about the dispute, the complaint alleges several counts of conspiracy, including creating a monopoly and wrongful interference with contracts against all defendants, as well as other individual counts.
Virtually all of the complaint – a few paragraphs remain blacked out – and all of the exhibits were hidden until late last week by extraordinary confidentiality rules demanded by Waste Management. Their release followed legal action begun in February by Florida Bulldog that asked Broward Chief Judge Jack Tuter to unseal numerous confidential records in the case. Tuter ordered the records to be made public in May, and an appeals court later agreed.
Besides the documents ordered to be unsealed, the courts also opened to the public an important Oct. 2 hearing at which Waste Management will have the opportunity to rebut Tuter’s finding last fall that it may have sought legal advice in order to perpetrate a crime or fraud. Waste Management wanted it closed. If the rebuttal fails, other sensitive documents Waste Management is trying to shield on grounds of attorney-client privilege would no longer be confidential.
The terms and conditions of Waste Management’s $510-million purchase of SWS’s assets – including $400 million in “goodwill” and other intangibles – are spelled out in the now public Asset Purchase Agreement (APA) and related contract documents used to make the purchase. Bergeron contends they were hidden from him for years to disguise the “impropriety” of the transaction.
Email correspondence between Sun and Waste Management during early legal skirmishing with Bergeron strongly suggests that lawyers for both were initially confident those contracts would never see the light of day.
‘From my cold, dead hand’
“Obviously we would oppose producing the APA as very little of it relates to the JV,” Waste Management senior legal counsel John Tsai wrote in a Nov. 6, 2015 email to his counterpart at Sun, attorney Amy Burbott.
“Bergeron will get the APA only from my cold, dead hand…,” Burbott replied less than an hour later.
Bergeron Environmental’s complaint asserts that after the current lawsuit was filed, Waste Management and Sun became concerned that the APA documents would be disclosed and their “true terms would be revealed.” As a result, their attorneys “doctored” the asset purchase schedules used at closing to hide the fact that the deal included Sun Bergeron’s customer contracts, the complaint alleges. The falsified document was then “purposefully swapped…with the intention to conceal their elimination of the (joint venture’s) ability to compete with (Waste Management) from the scrutiny of federal and state antitrust regulators, Bergeron and the JV’s customers.”
The newly released records make it appear that despite the assurances of their lawyers to state and federal regulators, Waste Management and Sun never planned to renew Sun
Bergeron’s municipal recycling contracts or perform on their 75 percent recycling obligations, an official state goal. Instead, the tons of trash controlled by Sun Bergeron would largely be diverted to Waste Management landfills – a less expensive method of disposal.
The Florida Attorney General’s chief of antitrust enforcement, Lizabeth Brady, articulated her office’s understanding of Waste Management’s “agreements or commitments” in a confidential two-page letter announcing it would not block the proposed SWS/Sun acquisition as anti-competitive. Chief among those assurances was the understanding that Sun Bergeron’s municipal customers would be allowed to renew their contracts in 2018 on the same terms, conditions and prices.
Oddly, the attorney general’s office never provided the Dec. 3, 2015 letter to the cities who were its intended beneficiaries. Nor has that office, or the Department of Justice, ever sought to enforce those terms.
Florida Bulldog obtained a copy of the letter last year due to a clerical error by the Broward court clerk’s office.