Bergeron v. Waste Management: Judge to decide if trash giant committed a crime or fraud

By Dan Christensen, FloridaBulldog.org

Six hours of tedious testimony and legal jargon spewed in court last week laid out the “sloppiness and mistakes” that Broward Chief Judge Jack Tuter said accompanied Waste Management’s $510-million takeover of Southern Waste Systems (SWS).

Now Tuter must decide: Was such careless legal work intended to mislead federal and state antitrust regulators about the terms and conditions of the deal? A boatload of money and possible additional legal troubles for Waste Management are on the line.

Not only the litigants, including principal defendant Waste Management and plaintiff Bergeron Environmental and Recycling Services, await Tuter’s answer. Interested spectators present in court were Deputy County Attorney Michael Kerr, Sunrise City Manager Richard Salamon and Weston and Miramar City Attorney Jamie Cole, who represented 18 municipalities when they recovered millions from the county in 2015 regarding the distribution of assets of the old regional Resource Recovery Board.

Also in attendance: Florida Deputy Commissioner of Consumer Affairs Mary Barzee Flores.

The hearing, over two days, was Waste Management’s chance to rebut Tuter’s prior finding that Bergeron had established by evidence what’s known as a prima facie showing of crime-fraud. That is, that it’s more likely than not that Waste Management committed a crime or fraud while attempting to influence state and federal antitrust regulators to allow the Houston-based trash giant’s January 2016 acquisition of assets of competitor SWS and its Sun Recycling component.

Bergeron v Waste Managment

Bergeron Environmental, owned by Davie businessman Ron Bergeron, is suing Waste Management, Sun’s successor company LGL Recycling and several LGL executives and an affiliated person, for breach of contract and conspiracy. The complaint alleges they wrongfully “destroyed” his economic interest and multi-million-dollar equity in Sun Bergeron, a 50-50 joint venture with Sun that in 2012 broke Waste Management’s monopolistic control of trash disposal in Broward when it won competitive municipal recycling and disposal contracts.

Ron Bergeron’s partner in Sun Bergeron was SWS/Sun’s principal owner, Anthony Lomangino. Soon after Sun Bergeron was up and running, however, Lomangino, began secretly negotiating to sell out to Waste Management, according to court filings.

The deal was complicated. Waste Management didn’t simply purchase SWS/Sun outright. Instead, In June 2015 an “Asset Purchase Agreement” (APA) was used to buy many of SWS’s assets, including Sun’s economic interests in the Sun Bergeron joint venture and its municipal contracts. A month later, the APA was superseded by an “Amended and Restated” APA. To complicate things further, at closing in January 2016 an “Amendment to the Amended and Restated” APA was signed.

So, too, were other legal documents, including a subcontract in which Sun/LGL gave Waste Management control over Sun Bergeron’s performance of its municipal customer contracts. The subcontract, however, didn’t require Waste Management to perform all of the services at the same level of service as Sun Bergeron.

Further, through another legal twist, Sun/LGL later became a consultant for Waste Management – meaning that the same entity that regulators were assured would supervise Waste Management under the subcontract to keep Sun Bergeron independent and competitive was now duty-bound to Waste Management.

A murky legal swamp

Making that legal swamp even murkier were accusations that shortly after closing, lawyers for Waste Management and Sun “purposefully swapped the transaction’s closing documents,” including schedules of assets purchased which included Sun’s interest in the joint venture’s customer contracts. The documents show how, despite assurances to the contrary, Sun Bergeron’s ability to compete with Waste Management was eliminated, court papers say.

“The schedules were intentionally swapped, not amended, purposely to deceive regulators, this court, Bergeron and the joint venture’s” municipal customers in case it had to be produced to regulators or anyone else, the documents allege.

In an attempt to rebut that notion, Waste Management’s attorneys called a pair of witnesses who asserted that Sun Bergeron was not adversely impacted by the deal and denied that it was structured in a way to mislead regulators.

Thomas Crummy, Waste Management’s director of market planning and development, acknowledged that the asset schedules were changed out about two weeks after closing in order to make them correct. There was concern, he said, that regulators would see they were “inconsistent” with the deal that was agreed to.

“We don’t take these transactions lightly. They’re not stupid people,” Waste Management Vice President for Legal Affairs Sang-Chu “John” Tsai said of the antitrust regulators at the Department of Justice and the Florida Attorney General’s Office.

Judge Tuter gave both sides 30 days to provide him with proposed orders for his consideration.