To Bfi Or Not To Bfi Should City Do Business With Waste Giant?

Editor's Note: In May of this year, the city of Ann Arbor began a ten-year contract to dump its garbage at a landfill owned by Browning-Ferris Industries (BFI). Now the city is considering a multi-million dollar, long term contract to use a BFI recycling facilty. The following article on BFI is not intended to be a comprehensive examination of the decision making process now before city council. It is a start, we believe, toward a healthy and appropriate scrutiny of a company doing business with the city, and bidding for more.

Ann Arbor City Council, followlng a 1990 voter mandate, is about to purchase a materials recovery facility (MRF). A MRF is a facility where recyclables are sorted from garbage and bundled for sale to recycling plants. Building an MRF is Ann Arbor's next step (the flrst step being citywide recycling) toward dealing with a trash problem that won't go away. Three bids on the MRF are now before City Council. One of the bidders, Brown-Ferris Inc. (BFI) has been cited for a history of environmental violations, bid-rigging, pricefixing, and an admitted inability to control its worldwide operations.

Seventy-three percent of the voters passed a $28.2 million environmental bond in April 1990, which included $5.5 million to finance the MRF. The bond called for a tax increase to cover (among other thlngs) the cost of "acquirlng, constructing and equipping of... a material recovery facility..." City Council, however, stands ready to alter the proposal's intent by considering a bid by Browning-Ferris Industries (BFI) to use their already-existing MRF in Salem Township. Two companies - Resource Recovery Systems (RRS) of Essex, Conn. and Container Recovery Inc. (CRINC) of Chelmsford, Mass.- have bid to build and operate a city-owned MRF, which some say the language of the bond dictates.

Many Ann Arborites are also concerned about Recycle Ann Arbor's (RAA) future in any MRF plan. RAA wlll continue curbside collection of recyclables, but the function of processing those recyclables will be transferred to the MRF. According to RAA staff, both RRS and CRINC (but not BFI) have tentative plans to incorporate RAA staff into the operation of the facility, should they be awarded the contract.

The matter thus far has been presented to Ann Arbor residents as mainly an economic question. In that light, some assert that there is not much discrepancy between the options. "No matter who you choose, you can't go wrong," Assistant City Administrator Rob Baumann told The Ann Arbor News last month. The question of economics may be misleading though, given BFI's history of questionable business practices, such as bidding low and then raising prices after securing a contract.
 

The Hard Questions

Parochial questions aside, research into BFI's record of criminal convictions raises a host of other questions about the company regarding environmental regulation violations, anti-trust law violations, bid-rigging, bribery, and ties to organized crime.

The Chicago Board of Aldermen examined these questions in 1989 and passed an ordinance prohibiting the city "from doing business with companies whose officials have been convicted of bribery or bid-rigging." This ordinance prohiblted the city, for three years, from sendlng garbage to sites run by BFI or Waste Management, Inc. (the largest waste handler in the natlon).

BFI is no stranger to the local waste collection scene. In 1980 BFI won the bid for Ypsilanti's waste hauling contract. The three waste giants - top-ranked Waste Management, Inc., number two BFI, and the Canadlan-based Laidlaw - had long before eliminated local garbage companies from the market.

Ypsilanti recently refused to extend BFI's garbage collection contract, hiring Laidlaw instead. The Ypsilanti City Council's rejection of BFI stems in part from the company's bid last year for Ypsilanti's recycling contract. BFI underbid the non-profit Ypsilantl Recycling Project (YRP), the city's long-time recycler. YRP researchers exposed BFI's nationwide pattern of abuses. Close scrutiny of BFI's proposal by Ypsilanti's city council showed that BFI had bid to take a loss and put YRP out of business. After an acrimonious council battle, YRP got the job. BFI also placed an unsuccessful bid for recycling collections in Ann Arbor (Recycle Ann Arbor won with a lower bid). BFI did, however, get the Ypsilanti Township recycling contract without any competitive bidding process.

The Waste Giant

BFI was established by Thomas Fatjo in 1969 in Houston. It has since grown to become the second largest waste disposal firm in the U.S. In 1984 sales approached $1 billion, double that of six years prior. In April 1991, Business Week reported that BFI "collects garbage from 5.8 million homes and operates 1 05 landfills, giving it almost 1 1% of the $28 billion waste market." In addition, BFI collects garbage from half a million businesses (Forbes, Nov. 28, 1988).

BFI is a sprawling conglomeration of waste companies, with branches all across the U.S., Puerto Rico, Canada, Venezuela, the Middle East, Australia, the Far East and Europe. BFI subsidiarles span the spectrum of waste handling: hazardous waste (CECOS); incineration (American Ref-Fuel); and medical waste (BFI Medical Waste Systems). BFI also purchased 49% of the nuclear waste company, American Ecology.

For two decades BFI grew by leaps and bounds. However, in Oct. 1991, Business Week wrote that "BFI's earnings appear to be in a free-fall." Business Week blamed the fall on mismanagement, rising environmental costs, and BFI 's inability to overcome its image as an "environmental bad guy."

A History of Environmental Violations

BFI has an extensive history of environmental violations. In 1990, the state of New York denied BFI (see BFI, page 8)

BFI (from page one] an expansion permit for its landfill in Niagara and fined it $350,000 for violations there. At the same time, a CECOS landfill in Willow Springs, Louisiana was found to have 1 ,400 violations and fined $1.55 million. The Multinational Monitor (June 1990) reported that in 1988, BFI's landfill in Eden Prairie, Minn. caused pollution of the groundwater and Minnesota River, and created explosive conditions with a methane gas leak.

According to a 1987 report by Citizens' Clearinghouse for Hazardous Waste (CCHW), "Browning Ferris Industries: A Corporate Profile," concerns about BFI's compliance with environmental regulations were raised as early as 1978. In that year, a disgruntled BFI employee disclosed that BFI was applying a mixture of waste oil, nitrobenzene and cyanide to roads in Texas. (Up to 900,000 gallons of contaminated waste oil were sprayed on the roads from 1976 to 1979.) Also in 1978, BFI was alleged to have polluted well water in Windsor, Ontario.

In 1979, according to the CCHW report, BFI was cited in 33 cases of "alleged violations of water, air and land protection laws." And in 1985, citizens in Anne Arundel County, Maryland sued BFI, alleging its landfill had contaminated their property.

In May 1985, BFI-subsidiary CECOS was brought before a grand Jury and charged with illegally dumping toxic waste into a drinking water supply in Williamsburg, Ohio. Five years later BFI admitted its guilt and paid a total of $3. 5 million in fines. BFI then announced it was selling CECOS and paid $295 million to close its Ohio landfill. In 1990, due to difflculties complying with environmental regulations, BFI decided to sell CECOS and its share of American Ecology. It was at that time that BFI started looking to recycling as its growth division of the future.

In July 1988, Boston's Patriot Ledger reported that BFI had been slapped with a $150,000 fine for dumping more trash than permitted at its landfill in nearby Randolph. The next month BFI was cited and flned $2.5 million for 1,700 violations of waste disposal laws over seven years, at its Livingston, Louisiana hazardous waste landflll. CCHWs 1987 report also discusses cases in which BFI's environmental sponsibility has resulted in deaths. For example, a teenager died when he was sprayed by con ten ts of a crushed barrel while cleaning up a hazardous waste dump in North Carolina; and a 19-yearold was killed by a hydrogen sulfide gas cloud at BFI's Bayou Sorrel pits waste lagoon in Louisiana.

In 1988 BFI brought in William D. Ruckleshaus, two-time director of the Environmental Protection Agency (EPA), at a starting yearly salary of $ 1 million to clean up the company's tarnished environmental image. By that time BFI had amassed a dossier of environmental violations surpassed by few corporations. And Ruckleshaus' presence has not prevented further environmental violations.

Community Opposition

Over the years, as BFI's criminal record has grown, so has community opposition to BFI. BFI displays a "total disregard for humanity, when they lócate a hazardous waste dump 50 feet from someone's house," claimed Peggy Franklin, a Louisiana grassroots leader in the fight against BFI pollution. "They told us they would build a resort and it would be beautiful. Then they took in an alphabet soup of chemicals and left it unfenced," ("BFI: The Sludge of the Waste Industry," Multinational Monitor, June 1990).

Michael Lawlor, BFI's vice-president of landfill operations, estimated in 1988 "that Browning-Ferris is backing away from proposed sites twice as often as in the 1970s because of community opposition," (Forbes, Nov. 23, 1988). In New York state in 1990, BFI faced local opposition to their proposed landfill. To overcome this and similar opposition, BFI "offered a package of negotiable benefits - including payments to the community for each ton of garbage - to towns that volunteer to take one [landfill]." (Forbes, Nov. 26, 1990)

Uncaring and Incompotent

BFI claims they try their best to play wlthin the rules, but are unable to keep track of all their operations and employees. In response to the methane gas leak in Minnesota, Ruckleshaus told Forbes in Nov. 1 990, "We destroyed our relationship of trust. I don't know what to do to eliminate human culpability, but we certainly have to try." Ruckleshaus was less apologetic when interviewed by the Multinational Monitor in June, 1990: "Whether it's a wildlife preserve or burial grounds for minority citizens [referring to a proposed landfill on the Quindaro archeological site in Kansas where escaped slaves built a community], there is always something about a particular landfill that makes it objectionable to someone." BFI General Counsel Howard Hoover told the Monitor, "it Is impossible for the company to keep constant watch on the actions of employees in each of its worldwide operations."

Business Practices

The CCHW report of July 1987 claims the BFI empire has been built on a strategy of "predatory competition and acquisition." The same report outlines the BFI system for takeovers as such: "The acquisition team from BFI files in from Houston. In lengthy meetings they detail to the prospective target company's officers a lucrative stock plan. The local company's executives are offered big salaries under the BFI flag. The local company's executives are offered stock in BFI. This deal seems to have enticed a number of companies."

BFI's size and geographic range has enabled it to hold down costs and consistently outbid local operators and municipal services. "BFI uses robber-baron tactics. They'll go to a plant after our people have just left, ask what we're charging, and offer to cut the price as much as 50%," charged Hymari Budoff, the owner of Hybud Equipment Corp. of Akron, Ohio (Business Week, April 23, 1984). On Nov. 28, 1988, Forbes reported that half of BFI's annual growth was due to the acquisition of hundreds of small waste haulers. In 1984 BFI had $75 million allocated for expansion. "In the fragmented waste collection market, that gives him [BFI's then-CEO Harry Phillips] the strength to keep devouring local trash haulers and to invade new areas," (Business Week, March 23, 1984).

While some of BFI's lowballing tactics are legal, many others are not. BFI has a criminal record of anti-trust activities dating back to 1971. In that year in Illinois, BFI and 200 other garbage firms in the area conspired to fix prices and divide up customers (CCHW, July 1987). Business Week reported on May 23 , 1 984 , that in 1983 BFI was convicted of price fixing in Atlanta, Georgia and fined $350,000; in February, 1984 BFI settled a bribery charge out of court; and by 1 984 BFI's marketing practices had come under investigation in seven states.

In 1987 BFI plead guilty to price fixing charges in Ohio and paid $1.35 million in fines. In that case, Ohio Attorney General Anthony Celebrezze demonstrated that BFI was involved in "secret meetings, planned allocations of customers, marketing agents selling only to preselected accounts and unnecessary price increases" in Northwestern Ohio and two counties in Southern Michigan.

Also in 1987, BFI was convicted of illegally undercutting prices in Burlington, Vermont, in an attempt to drive out a local waste disposal company and was fined $6. 1 million. The Multinational Monitor also reported that BFI was the subject of ongoing investigations by grand juries for antitrust practices (including price flxing, customer allocation and curtailing competition) in several U.S. cities.

Mob Ties & Price-Fixing

BFI has also been widely accused of having links with organized crime. These allegations are based on BFI's practices of dictating prices that waste companies will receive for services and claiming customer "turf. "In 1984, former mobster Harold Kaufman turned states evidence and revealed BFI's links to organized crime. Kaufman testified before the New York State Assembly's investigation on "The Unlawful Disposal of Solid and Hazardous Wastes."

Kaufman explained that price fixing in the garbage industry is based on "property rights." (Organized crime is known to dominate this system, as substantiated in a report by the New York State Assembly Environmental Conservation Committee entitled "Organized Crime's Involvement in the Waste Hauling Industry.") Under the property rights system, customers are considered company property. It is considered "stealing" if a competing waste company offers a customer a lower price. According to the N.Y. State Assembly's report, companies use "the property rights principle to prevent the customers from switching to another hauler to obtain better terms. The haulers are assured a given territory in which to operate and are able to obtain higher prices for their services through bid ligging."

Final Analysis

Antl-trust violations, pollution, alleged links to organized crime, and BFI's admitted inability to control these problems should all be reasons for Ann Arbor City Council to reconsider its current business relationship with BFI, and question any further contracts with the company. It appears that BFI did not enter the field of recycling as an environmental priority. Rather, In recycling, as in any other area of waste management, profit it their bottom line. A bibliography of sources used in this article is available upon request.