Last year, the Oakland Public Ethics Commission, the city’s independent watchdog agency, quietly launched a major investigation into allegations that the owners of California Waste Solutions, Oakland’s curbside recycling provider, illegally laundered campaign contributions to multiple members of the City Council.
The alleged scheme hasn’t been proven, but according to court records reviewed by The Oaklandside, Public Ethics Commission investigators believe the owners of California Waste Solutions, including David Duong and his son, Andy Duong, funneled money over several election cycles through “straw donors” to multiple councilmembers’ campaign committees. A straw donor is someone who makes a campaign contribution and secretly gets reimbursed by someone else who is barred from making the same contribution. This money allegedly went to councilmembers running for reelection at the time, and to one councilmember, Lynette Gibson McElhaney, to pay for an attorney who defended her in a separate ethics case.
The commission’s staff and Oakland City Attorney Barbara Parker outlined the alleged money laundering in documents filed in Alameda Superior Court earlier this year, and the investigation has not been reported on publicly before now.
In court records, city investigators identified $51,000 in “suspicious” political contributions made by 13 individuals and several businesses to City Council candidates. The earliest contribution was made in 2013, and most were made between 2016 and 2018. The Public Ethics Commission named five current councilmembers who accepted some of the allegedly laundered money: Lynette Gibson McElhaney, Sheng Thao, Rebecca Kaplan, Larry Reid, and Dan Kalb.
According to public records, the City Council has met numerous times over the past several years to discuss in closed session meetings whether or not to settle a lawsuit the city brought against California Waste Solutions in 2017. According to the city’s lawsuit, CWS has been taking advantage of a mistake in the recycling services contract it signed with the city by overcharging customers, collecting millions of dollars in additional profit. CWS has filed a counter lawsuit against the city in the case.
The City Council has also recently discussed selling 12 acres and leasing 2.3 acres of public land to California Waste Solutions, again behind closed doors.
The Oaklandside contacted all five current city councilmembers who received some of the allegedly illegal campaign contributions. District 3 Councilmember McElhaney, who is running for reelection this year, did not respond. District 7 Councilmember Larry Reid, who is not seeking reelection this year, and District 4 Councilmember Sheng Thao, whose district is not up for election this year, also did not respond.
District 1 Councilmember Dan Kalb, who represents North Oakland and is currently running for reelection, responded and said in an interview that he was unaware of the existence of the investigation and hasn’t had a reason to suspect any campaign money he accepted was linked to a city contractor. He said he has “made it a point not to ask for campaign contributions from the Duong family for years,” because he’s aware of the potential conflict of interest given the contract CWS has with the city.
At-large Councilmember Rebecca Kaplan, who is also running for reelection this year, told The Oaklandside that she was unaware of the investigation until we contacted her and that she would not have accepted any money for her campaigns if she suspected it might be linked to a city contractor. “I would certainly find improper contributions to be unacceptable, and would not keep such funds,” Kaplan wrote in an email. “I did not have, and do not have any information about or see any evidence of misconduct.”
A secret investigation
The Public Ethics Commission, which was created by voters in 1996 to enforce city campaign laws, and has the legal authority to investigate possible violations of city elections rules, declined to comment about the specifics of the case.
“I can confirm that we have an investigation,” PEC executive director Whitney Barazoto wrote in an email to The Oaklandside on Sept. 3, “but I cannot comment further on this matter as the investigation is pending.”
According to court records, the probe began in 2019. Investigators identified at least 13 people who they accused of working as straw donors to allegedly channel money from California Waste Solutions’ owners David Duong and his son Andy Duong into the campaign funds of city councilmembers.
PEC investigators subpoenaed the 13 alleged straw donors, seeking financial and communications records related to the political contributions they made, and seeking interviews with some of them. Although the PEC has the legal authority to issue subpoenas, according to court records, most of the 13 individuals refused to cooperate.
The probe first became a matter of public record in November 2019 when the city attorney began to file petitions with the superior court to enforce the subpoenas.
The owner of California Waste Solutions, David Duong, told The Oaklandside in an email that he was unaware of being investigated for anything until we contacted him on September 3.
We shared court records with Duong, which named him, his son Andy, and their company as targets of the investigation. Duong said he has not done anything wrong and tried to dissuade us from reporting the allegations, which have not been proven.
“If you report that I am the target here, it will be libel or slander,” Duong wrote.
Duong added, however, that he is aware the Public Ethics Commission served subpoenas against multiple people regarding political fundraising.
“I have heard that the Public Ethics Commission has subpoenaed some people—all of them in the Vietnamese American and Asian American community—who made donations to candidates in Oakland,” he wrote. “Those subpoenas have nothing to do with me. But it does bother me and others that our community is being targeted—right at election time.”
In court records, the Public Ethics Commission and the city attorney spelled out the allegations against Duong and others: “The investigation concerns suspected campaign money laundering activity (i.e. illegal reimbursement of ‘straw donors’) by agents of a major City contractor (California Waste Solutions, owned and managed by members of the Duong family, including David Duong and Andy Duong) and their associates.”
David Duong immigrated from Vietnam to California in 1979 with his parents and siblings. They established a small paper recycling company in 1983 and bought a warehouse in West Oakland the same year. In 1992, Duong founded California Waste Solutions and won recycling contracts in San Jose and Oakland. Eventually, CWS expanded overseas and built a new recycling facility in Vietnam.
The Oaklandside added up the contributions identified in court records filed by the Public Ethics Commission and found that Councilmember McElhaney, who represents West Oakland and downtown, received more of the allegedly laundered campaign money than any other city official. The District 3 councilmember set up a legal defense fund in 2018 to pay an attorney to help her respond to charges that she illegally interfered with the development of a residential building next to her home.
Public records show that in 2018, Phuc Tran, a local insurance broker and the president of the Oakland Vietnamese Chamber of Commerce, made a $5,000 contribution to Councilmember McElhaney’s legal defense fund. PEC investigators claim that contribution was illegal because Tran was allegedly coordinating with David and Andy Duong of California Waste Solutions.
According to a sworn statement by PEC investigator Simon Russell, “Tran wrote a check for $5,000 to a committee that we have confirmed through witness admission and document analysis received laundered checks from other contributors using cash provided by Andy Duong.” The PEC’s investigators also alleged in court filings that Tran made potentially improper contributions to the 2018 campaign committees of councilmembers Thao and Kalb. Tran did not respond to a telephone call seeking comment for this story.
In total, McElhaney’s legal defense fund received at least $12,000 from people who are currently under investigation by the PEC, according to court documents.
In court filings, PEC investigators described Andy Duong as a “facilitator” of the alleged money laundering operation who reimbursed straw donors with cash after they gave money to councilmembers’ campaign committees: “Multiple participants in the scheme have admitted to the PEC that one of the people soliciting cash for campaign checks was Andy Duong, that they personally received cash from Duong in exchange for their check(s), that they personally gave their check(s) to Duong, and that this activity was not an isolated incident but occurred over a period of time and for the purposes of contributing to multiple campaigns.”
Andy Duong did not respond to a request for comment.
Thomas Stout, an attorney representing Tran, is asking a superior court judge to toss out the city’s subpoena. In a court document filed on September 2, Stout called the allegations against Tran false and wrote that the city’s effort to obtain Tran’s records amounts to a violation of his Fourth Amendment rights against unreasonable search and seizure.
“Through this series of allegations that are, in turn, innocuous, conclusory, or vague to the point of meaningless, the commission casts nebulous aspersions on Mr. Tran and his legitimate and valuable political activity,” Stout wrote. He also argued that the city subpoena would violate Tran’s Fifth Amendment right against self-incrimination.
Asked about the investigation, Stout wrote in an email to The Oaklandside, “I can’t begin to speak for the PEC or why it believes what it believes, so I’m unable to comment on their reasons for pursuing this.”
Anna Wong, an Oakland print shop owner, was also served with a subpoena by the PEC and has declined to hand over records. PEC investigators allege Wong made suspicious campaign contributions to councilmembers McElhaney and Kalb. Investigators claim in a court filing that some of her checks were actually filled out by Tran.
Stout, who also represents Wong and several of the other alleged straw donors, wrote in a court filing last week that the PEC has wrongly accused Wong of campaign money laundering “based on nothing more than conclusory assertions and misguided suppositions.” According to Stout, Wong and Tran have been romantic partners for over a decade, and “it is unremarkable—and far from incriminating—that he would assist her in writing a check.”
In a different court filing seeking to quash a subpoena for records from another of the 13 people accused of serving as straw donors for the Duong family, Stout wrote that the PEC has “publicly maligned an innocent man” with a “half-baked investigation.”
But PEC investigators claim that some straw donors have already admitted to wrongdoing and that they have evidence in hand, including financial records and communications. “We have identified straw donors through the admissions of participants in the scheme,” the PEC’s Simon Russel said in a sworn declaration filed in court last week. For example, according to bank records the PEC has already obtained, investigators allege that the day after Wong wrote a total of $3,050 in checks to several political campaign committees, she deposited $3,400 in cash in her account.
Recycling lawsuit and land deal
The City Council has been locked in negotiations and litigation with California Waste Solutions for nearly a decade.
The council picked California Waste Solutions to handle all of the city’s residential recycling services in 2014 after a contentious bidding war between the company and its much larger rival, Waste Management.
Soon after CWS began work under the new recycling contract, apartment building owners started complaining about big increases in their recycling bills. According to Oakland’s city attorney, CWS took advantage of “a mere draftsman’s error” in the contract to overcharge building owners: the city’s negotiators mistakenly neglected to specify the maximum amount CWS can charge landlords for moving plastic recycling bins to the street to unload in trucks. (It’s supposed to be $27.85.) CWS allegedly began charging up to 25 times that amount in some cases, according to a recent court filing by the city. Oakland’s city attorney has called the company’s billing practices “outrageous gouging.” According to the city, CWS has already “wrongfully taken” more than $5 million in wrongful charges related to this error.
Amid public outcry, Oakland filed a lawsuit against CWS in 2017 seeking a court order that would force the company to use the lower rate. The city alleges that without this amendment, the company will ultimately collect tens of millions more from property owners and tenants than was originally intended.
CWS filed a counter-lawsuit in 2018, claiming that the rates were clearly spelled out in the contract and that Oakland is trying to unfairly alter its terms. According to the company, its rates are fair and reasonable.
Hearings in the case were recently delayed because of the coronavirus pandemic forced courts to shut down. But since filing the 2017 lawsuit, the City Council has met multiple times in a closed session to discuss the litigation and possible terms of a settlement. The Oakland City Council has the power to bring the lawsuit to an end if a majority of the councilmembers vote to do so. The council’s most recent closed-door meeting to discuss the court battle was May 21.
The proposal to sell city-owned land to CWS goes as far back as 2011, when CWS and another recycling company made a joint pitch to the city to buy 22 acres of real estate at the old Oakland Army Base in West Oakland. Councilmember Larry Reid recused himself from the 2011 negotiations with CWS because his daughter, Treva Reid, who is currently running for City Council to represent District 7, worked for CWS at the time.
Negotiations have shifted over the years as the city has built out the old Army Base site with various tenants. In 2018, the council voted to enter into an exclusive negotiating agreement with CWS to sell the company up to 14 acres where it wants to build a new recycling center. Since then, the council has been meeting in closed sessions to discuss the terms of the deal, including the price of the land.
Money laundering investigation reaches beyond Oakland
On Tuesday, Alameda Superior Court Judge Patrick McKinney held a hearing on the city’s attempts to force several of the alleged straw donors to comply with subpoenas, sit for interviews, and hand over records.
“This investigation is ongoing, and it’s been stymied and stalled at every turn by these respondents,” said assistant city attorney Tricia Shafie during the hearing.
Stout, the attorney defending several of the alleged straw donors, argued that the subpoenas are unlawful and will be too burdensome for his clients to fulfill because city investigators are asking for communications records going back several years.
McKinney said he’ll issue a ruling later this week, or next week.
But Shafie also made it known that the investigation reaches beyond Oakland, and that state investigators with the California Fair Political Practices Commission are also on the case.
“This is a joint investigation,” she said.