Contractor Comes Forward in Probe

ORANGE —  An Orange County paving contractor has told police he helped cash up to $1 million in third-party checks for a member of the family that runs the city’s recycling center, his lawyer and an official familiar with the investigation disclosed Wednesday.

Word of the unusual check-cashing arrangement comes after the city voiced suspicions in court papers that “salvage revenues belonging to the city may have been misappropriated for personal use by one or more members of the Hambarian family.”

The Hambarians have had an exclusive contract to collect garbage in Orange for more than 40 years, and the city effectively gave them a $6.5-million recycling facility in 1994 so that salvageable materials--aluminum cans, plastic, paper and glass--could be separated from the garbage and sold.

It is money from those sales that the city believes has been misappropriated.

The contractor, whose identity was not revealed, came forward voluntarily, his attorney said, in exchange for immunity from prosecution on any charges that might have been lodged against him for participating in a suspected scheme to misappropriate city money.

The man’s attorney, Villa Park criminal lawyer William Dougherty, approached the Orange County district attorney’s office last Friday and then, accompanied by his client, met with police investigating the matter for several hours Tuesday afternoon.

“He wanted to be the first one to come forward,” Dougherty said. “You usually get treated better when you do.”

Until recently, the Orange-based recycling company, Orange Resource Recovery Systems Inc., was run by Jeffery Hambarian, one of the sons of Sam and Alyce Hambarian, the founders of Orange Disposal Inc., the recycling firm’s corporate parent.

The Hambarian family, through attorney Z. Harry Astor, has declined to comment on developments, except to say that the city would not suffer financially from whatever happened. “Sam and Alyce Hambarian will see to it that the city will not lose one cent,” Astor said.

Astor said Jeffery Hambarian had been removed as president of the recycling company, which is the focal point of the city’s ongoing criminal investigation.

Dougherty said his client’s brother was a friend of Jeffery Hambarian and introduced the two men. Hambarian allegedly asked Dougherty’s client to cash checks from firms that apparently bought recyclables from Orange.

Police have been told that Jeffery Hambarian allegedly gave checks he’d gotten from these firms to the contractor, who would cash them and keep a portion of the proceeds for his services.

It was unclear how the man could cash checks payable to the Hambarian firm, but police believe that he and four other acquaintances of Jeffery Hambarian cashed them at a well-known restaurant and cocktail lounge in Signal Hill, as well as at check-cashing businesses in Inglewood, Signal Hill and Torrance.

Dougherty said his client told him he was not the only person who cashed checks for Jeffery Hambarian, but he said he did not know how many other people might have been involved, or how they were recruited.

Orange police are believed to have executed search warrants last week at several establishments where some of the checks were cashed. They have examined thousands of checks secured from firms doing business with the Hambarians, and have also noted irregularities in the handling of checks channeled through corporate entities other than Orange Resource Recovery.

After the meeting with police Tuesday, Dougherty said, the investigators “seemed very happy” with his client’s information.

Dougherty would not reveal his client’s name but said he is 34, grew up in Orange County and is a paving contractor who has worked in the county. He said the contractor no longer lives in the county but would not say where he now lives.

Although some Orange officials were put on notice almost 20 months ago that something was wrong with its recycling partner’s financial records, the city didn’t swing into action until early this year.

City officials hired the national Big Six accounting firm of Arthur Andersen in March to conduct a “fraud audit” of the recycling company after its independent auditor, Steven V. Nakada, resigned.

Citing the pending investigation, City Atty. David A. De Berry has refused to make the Arthur Andersen audit public.

Nakada first alerted city officials to problems with recycling revenue in October 1995 when he wrote: “Because of the inadequacies in the company’s records for salvage revenues, we were unable to obtain sufficient evidential matter to form an opinion regarding the amount of salvage revenues on the income statement.”

Without access to records showing how much the company had received from the sale of aluminum, paper, plastic and other salvaged material, the city could not be sure it was receiving all of the millions of dollars in salvage revenue it was due under its contract with the recycling company.

It is unclear why the city failed to act on Nakada’s strongly worded 1995 warning or another he gave the city in April 1996, when he informed officials in writing that he had discovered that city money had been deposited into the bank accounts of “affiliated companies” as well as “unknown bank accounts.”

Police Chief John R. Robertson has said his department was only informed of the suspected misappropriations in late April of this year. And several City Council members have said they were briefed for the first time only two weeks ago.

City Manager David L. Rudat would not elaborate on the city’s reaction time, saying: “There are a lot of reasons for what went down, but a comment would be inappropriate. To make a comment on partial information would be inappropriate.”

But Rudat vehemently denied that a business transaction between his wife, Carol, and Jeffery and Virginia Hambarian colored the investigation in any way.

In November 1995, Carol Rudat, a real estate broker, sold a home for the Hambarians on Orange’s upscale Crest de Ville Avenue for $580,000. It was the only time she has ever represented the Hambarians in a transaction, David Rudat said.

“It’s ridiculous to suggest there was a conflict. I didn’t even find out about this until after the fact,” he said, adding that Jeffery Hambarian hired Carol Rudat after seeing some of her advertising.

To improve oversight of the city’s dealings with the Hambarians, David Rudat said, he plans to ask the City Council to approve the hiring of a consultant to monitor the city’s trash and recycling contracts.

In meetings with the council, both Rudat and De Berry initially characterized the problem identified by Nakada as one of “poor bookkeeping,” Councilman Dan Slater said.

“I still have a lot of questions of who knew what, when and why we weren’t brought into the loop sooner,” Slater said. “I’m still waiting for an explanation as to what their understanding was at the time.”

Slater continued, “All we can do is make sure our funds are secure and wait for the investigation to proceed.”