Rizzo family takes plea deal in corruption case
This material belongs to: ClickOnDetroit.
Garbage collection tycoons have plea hearing.
They once owned the Rizzo Environmental Services company. The red garbage trucks could be spotted across the region. However, as quickly as their trash collection empire rose, it has fallen.
The original indictment was 43 complicated pages laying out the case against the Rizzos. The very end came with more more simplicity: A single page with the Rizzos agreeing to appear in federal court Nov. 9 in Port Huron for a plea hearing.
Chuck Rizzo, who is the son of Charles, started out helping federal investigators in their attempts to ferret out the widespread corruption they found in Macomb County. Chuck wore a wire and helped expose the payoffs of government officials in order to gain trash hauling contracts. Overall, 17 people were arrested as a result of Chuck Rizzo’s cooperation.
However, somewhere along the line Chuck Rizzo decided to stop helping with the investigation. That led the feds to point much of the investigation toward him and his father.
Dean Reynolds, a Clinton Township trustee closest to Rizzo, was named in the federal indictment. The feds said Rizzo served as a bagman in paying bribe money to Reynolds from Boulevard and Trumbull Towing magnate Gasper Fiore in order for Fiore to get a township towing contract.
The even bigger problem for Rizzo stems from the construction of his Bloomfield Hills mansion. He, along with his father Charles, allegedly used friends to steal money from Rizzo Environmental Services — the other owner was a New York hedge fund. The feds said the Rizzos were using the stolen money to finance the mansion construction.
Chuck Rizzo faces eight conspiracy and bribery counts and roughly half a dozen wire fraud charges.
Meanwhile, it appears the heat is on Fiore. With the Rizzos striking a plea deal, they likely will testify at a trial. That trial may be Fiore’s.
How Rizzo Services built a garbage empire in metro Detroit
This material belongs to: Detroit Free Press.
Trash hauler Rizzo Environmental Services now is at the center of a major federal corruption probe in Macomb County, sources say.
Fifteen years ago, Rizzo Environmental Services was plowing snow for the City of Hamtramck, its first and only major customer.
Then came the garbage.
Hauling trash, the company would discover, was a lucrative business in the municipal world, where multimillion-dollar contracts were up for grabs to the lowest bidder. Rizzo Services rolled in with its rock-bottom prices. And before long, the Sterling Heights company was king of trash, running a garbage empire that today includes 55 municipalities across metro Detroit, where Rizzo’s signature red trucks have popped up in record numbers, replacing the green, blue and yellow trucks that had serviced towns for decades.
This meteoric growth spurt happened in the last five years as Rizzo more than doubled in size. In 2011, it served 20 communities; now it has 55, including Detroit.
But amid this explosion in growth, the FBI was watching.
In U.S. District Court last week, a sensational criminal case surfaced that placed Rizzo at the center of a federal public corruption investigation that is expected to expose numerous pay-to-play schemes in Macomb County and charge the politicians behind them, according to multiple sources familiar with the investigation. The sources told the Free Press that Rizzo is cooperating with the government after getting caught allegedly paying bribes to a Clinton Township official who was charged Thursday with selling his vote in exchange for pushing through an $18 million deal for the trash hauler. Federal prosecutors allege township Trustee Dean Reynolds was paid up to $75,000 in cash and was provided a free lawyer in his divorce.
Plenty more politicians can expect to be charged, if the FBI’s own words in the charging document are any indication.
“This is an extensive investigation into systemic corruption in multiple municipalities in southeastern Michigan, primarily Macomb County,” the FBI wrote.
Since the corruption probe surfaced, a team of Free Press reporters has interviewed multiple public officials, businessmen and lawyers and reviewed hundreds of court documents, contracts and government meeting minutes to help explain how the family-owned Rizzo Environmental Services exploded and dominated the garbage market in 15 years before landing on the FBI’s radar.
Among those who offered insight were Rizzo’s competitors, including longtime trash hauler Dominic Tringali, who has lost several contracts to Rizzo over the years and believes that Rizzo grew too big and too fast.
“I couldn’t believe it. It was unreal,” Tringali said of Rizzo’s growth, noting his half-century-old Tringali Sanitation has never had more than 10 municipal contracts. “I’ve been doing this for 50 years and I got to 10.”
Tringali’s current customers are Troy, Oak Park, Berkley, Clawson, Lathrup Village, Pleasant Ridge, Huntington Woods and Hazel Park, which he’s about to lose to Rizzo after decades of working there. Tringali’s contract was up this year and Rizzo Environmental Services won it in a no-bid deal. This past year, Rizzo also picked up Livonia, Southfield and Sterling Heights — Michigan’s fourth largest city.
“How does that happen? They’re batting 1,000. They’re getting every job they come across. They go in real cheap. And once they get it, it never goes out for bids again,” Tringali said: “A guy that plays fair and square doesn’t have a chance.”
Waste Management has taken the biggest hit, said Tringali, arguing “they’ve been getting clobbered.”
According to Waste Management, the company has lost almost half of its customers to Rizzo Environmental Services over the last decade. Ten years ago, Waste Management serviced about 45 communities across metro Detroit; 21 of them have switched to Rizzo.
“In some instances, bid processes we’ve certainly not seen before — like allowing bids to be revised and resubmitted — were observed,” Waste Management spokesman Tom Horton told the Free Press in a statement. “We will continue to watch as the recently announced investigation unfolds.”
Winning on price
Rizzo has not been charged with any criminal wrongdoing.
Joseph A. Munem, director of government affairs and public relations for Rizzo Environmental Services, has said the company is cooperating, but declined to elaborate any further.
“In this, as in all matters, we’re cooperating with the legal authorities. We will follow their guidance so long as it may be required in the coming weeks,” Rizzo said in a statement. “We will continue to focus on delivery of our services, and to demonstrate to our employees, partners and customers that we remain the premier provider of environmental services in our community.”
Munem did, however, offer an explanation for the company’s growth:
“We’ve grown on a reputation of excellent service at a competitive price,” Munem said.
Numerous public officials across metro Detroit agreed that that philosophy has won them over. It’s hard to turn down Rizzo Environmental Services’ super low bids, they said, especially when the company comes highly recommended from neighboring communities that also switched to Rizzo and were satisfied with its services. Rizzo’s bids, they said, come in as low as 20% cheaper than competitors. And recycling is often lumped in.
The company’s website also boasts of such claims, listing letters of support from municipalities, including Hamtramck, New Haven and Fraser and Chesterfield Township — all of which picked Rizzo because it was cheaper than everyone else.
“For me, it’s real simple … when you hear positive feedback from other municipalities, and when that quote comes in 20% lower than anyone else, it’s really difficult to tell your residents, ‘Well, I really don’t like it. I’m going to go with the guy who’s 20% higher,” Harrison Township Supervisor Ken Verkest said in explaining why his community switched to Rizzo last year.
In 2015, Harrison Township awarded a five-year contract for $1.18 million a year to Rizzo, which beat out Tringali and Waste Management in a bidding war. Verkest noted that Rizzo Environmental Services came to town five years ago but didn’t have the lowest bid and lost to Tringali. Five years later, Rizzo came back with the lowest price: $140 per house for a year: Tringali was $175; Waste Management $173.
“It wasn’t close whatsoever,” Verkest said. “In the end, if they’re providing the service and holding the price they’re quoted, how do you walk away from that?”
Shelby Township has a similar story. After 15 years of using Republic Services for trash hauling, it switched to Rizzo in 2012 because it had the lowest bid for garbage, yard waste and recycling. The initial Rizzo contract was for three years. It was extended for another 10 years last year.
Supervisor Richard Stathakis said the township previously had Republic Services for about 15 years and went with Rizzo because: Rizzo had the lowest bid, offered a recycling program with separate wheeled bins, versus a small box for recycling with Republic and offered a 10% senior discount.
“They didn’t do anything wrong,” Stahakis said of Republic. “It’s very competitive. It was bid out. It just came down to the prices … . We found a company that could do it for more service and at a better price.”
Plus, Stathakis added: “The service they have been providing to the residents has been impeccable.”
Rizzo employee ‘I feared for my well-being’
A 2008 lawsuit in U.S. District Court paints a harrowing picture of one employee’s experience while working for Rizzo Environmental Services for more than six years.
Migena Gjonaj, a former Rizzo billing department manager, sued the company as well as Charles Rizzo Sr. and Charles Rizzo Jr., alleging she was discriminated against, harassed and eventually fired in 2007 after she reported what she believed were illegal activities to the Sterling Heights police.
In the lawsuit, which was settled before it reached trial, Gjonaj claimed that she frequently was asked to create fraudulent bills for work never performed. In addition, she claimed, some employees boasted of illegal campaign contributions to local politicians.
According to the woman’s lawsuit, Rizzo Environmental Services was investigated long before the current revelations. The Detroit Gaming Commission interviewed her about billings from Rizzo to Detroit’s Motor City Casino for work that wasn’t done, the suit stated. Federal agents also questioned her on several occasions about the company’s activities, she alleged.
In a deposition taken as part of her lawsuit, Gjonaj under oath told an attorney for the company that she once asked company officials how to handle a business customer that was complaining of a $15,000 overcharge. She said a Rizzo official told her to “fake bill this customer” and called it a “Christmas bonus” for Rizzo Environmental Services.
Also in that April 2008 deposition, Gjonaj was asked for names of people who received illegal campaign contributions from company employees.
“Mayor Kwame,” she answered, referring to former Detroit Mayor Kwame Kilpatrick, who was still in office in 2008 but is now serving prison time for corruption.
Gjonaj said an intermediary told her a company executive wanted to pay her $50,000 to not go to the police about what she saw at the company.
She went to the Sterling Heights police in October 2007 anyway and was fired days later. The lawsuit does not indicate what, if anything, came of her informing the police — except for a mention that Sterling Heights police in turn informed the FBI.
“I feared for my well-being,” she said in her deposition. “I did not want to be persecuted. I did not want no investigation done on me since I was the manager of the billing department. I had seen fraud. I had seen illegal activities … committed there and I didn’t want to be a part of it. I wanted to report it. … I did not want to go down for these people.”
She also accused Rizzo Environmental Services of doing nothing to stop employees who heckled her over her Albanian heritage, referred to her with slurs and called her names and posted notes around the office banning “Albanians” from the office coffee pot and the kitchen.
Messages and e-mails left for the company’s attorneys were not returned to the Free Press.
In court documents, lawyers for the company argued that Gjonaj’s suit was “frivolous and without merit” and was intended to harass the defendants and extort money from them.
The suit was settled in 2009.
Gjonaj’s lawyer, Robert Fetter, said Friday that he couldn’t comment on the terms of the settlement because of a nondisclosure agreement, but he said his client stood by her allegations.
“She believed them to be true,” Fetter said. “We wouldn’t have put them in the complaint unless we did.”
The telltale deal
Clinton Township was looking to save money when it awarded Rizzo Environmental Services a three-year contract in 2010. The Waste Management contract had expired. It went out to bid, and Rizzo came in $1 million cheaper than Waste Management and won. The Rizzo contract costs Clinton Township $3.5 million to $3.6 million per year, Supervisor Robert Cannon said.
It was that deal that eventually landed Rizzo under federal scrutiny..
According to court records and interviews with numerous sources, here’s what happened:
When Clinton Township’s three-year contract expired, Rizzo wanted the township to extend it for another 18 years but without putting it out to bid. To make that happen, the FBI said in court filings, Rizzo paid between $50,000 and $70,000 in cash bribes to Reynolds, who also got a free divorce lawyer, to help the company win the extension without a bid process.
Reynolds talked about the bribes in telephone conversations, the FBI said in court documents. Agents had tapped his phone, and the phone of an unnamed company “principal” who had paid the bribes, the FBI said. When confronted by authorities, the alleged bribe-giver admitted responsibility and agreed to cooperate, the FBI said.
The allegations, meanwhile, have troubled some Clinton Township officials who voted against extending the Rizzo contract. It was Reynolds, they recalled, who made the motion to extend the contract without seeking bids from other haulers — and it worked. The township voted 4-3 to extend the contract.
Among those who voted no was Trustee Paul Gieleghem.
“Competitive bidding, in my opinion, is the way that we ensure the public that they’re getting the best possible services at the best possible price,” said Gieleghem, who noted that he is satisfied with Rizzo’s service but concerned about the bidding process.
“I was upset when they voted to approve the contract without a bid, and that’s why I voted ‘no’,” Gieleghem said, adding “The allegations are very troubling.”
Township Treasurer Bill Sowerby also voted against the no-bid extension.
“This is why the public expects open, good government and bidding on contracts — so that there is fairness in the entire government process,” Sowerby said, declining to elaborate further.
Supervisor Cannon said the township’s contract with Rizzo Environmental Services has been added to the agenda for discussion at Monday night’s Board of Trustees meeting. He said there also is an item for the board’s approval to remove Reynolds from all committees and assignments until further notice. The trustees cannot remove him from the board, but Cannon said he and the other five board members signed a letter to Reynolds asking him to resign.
The U.S. Attorney’s Office has declined comment on reports that Rizzo is the company referenced by the FBI in the court documents filed in the case. It also declined to comment on whether any bribery charges would be brought against the company. It would neither confirm nor deny Rizzo Environmental Services’ involvement.
Federal authorities have said only that the Clinton Township bribery case is part of a broader federal investigation and that numerous communities are involved. The probe — like the Detroit City Hall corruption case that brought down Kilpatrick and dozens of others — also involves wiretaps, informants, and secret videotaped recordings.
“Corruption undermines the very nature of representative government,” U.S. Attorney Barbara McQuade said, noting the federal government “is committed to seeking out and prosecuting corrupt public officials in all areas … including suburban communities.”
McQuade declined further comment.
Since the allegations involving Rizzo Environmental Services surfaced, several communities have expressed concern, though most have said they are satisfied with the trash hauler’s services.
Rizzo’s largest customer is the City of Detroit, which privatized its garbage pickup in 2014 under then Emergency Manager Kevyn Orr, who said privatizing garbage collection would save Detroit about $15 million. Out of 10 bidders, Detroit picked two garbage haulers: Rizzo signed a $49.1 million contract for five years to pick up trash for 90,000 households; Advanced Disposal signed a five-year deal for $73.5 million to pick up trash for the other 125,000 households.
The Free Press asked Mayor Mike Duggan’s office whether it had any concerns about the new allegations. This is how the mayor’s office responded:
“The City of Detroit’s contract with Rizzo Environmental Services was negotiated and entered into by the emergency manager. The city’s role today is to manage and enforce the terms of the EM contract.”
Nearly two weeks before news of the alleged pay-to-play scheme broke, Kinderhook Industries LLC, a private investment firm, announced the sale of its equity interest in Rizzo Environmental Services to Toronto-headquartered GFL Environmental Inc.
In an Oct. 3 news release, Kinderhook’s managing director, Rob Michalik, said the company has enjoyed working with Rizzo over the past four years, stating: “The combination of Rizzo and GFL creates one of the industry’s largest private environmental services providers and we expect Rizzo to continue to flourish under GFL’s ownership.”
In the same news release, Rizzo CEO Chuck Rizzo said the company is excited about its partnership with GFL.
Fallout from the investigation remains to be seen. But on its website, the company appears optimistic if its mantra is any indication: “We roll on our integrity .. we lead with our character.”