At the heart of the corruption scandal surrounding San Jose Mayor Ron Gonzales is a well-connected but little-known Oakland businessman. Recycler David Duong is central to the case against Gonzales, who is charged with illegally manipulating that city's lucrative garbage and recycling contract. But Duong may be a bad witness for the prosecution. He has a conflict of interest, and already has benefited handsomely from the mayor's troubles.
Duong's rise to prominence in Oakland has been both quick and remarkable. Fourteen years ago, his company needed a large loan from the City of Oakland just to get started. Today, California Waste Solutions and its ubiquitous gray recycling bins haul in nearly $30 million in annual revenues, thanks in part to Duong's close relationships with several city council members, and his no-bid recycling contract to collect Oakland's bottles, cans, and paper.
Court documents reveal that Duong, owner of Oakland's largest recycling business, is a star prosecution witness against Gonzales, the first major Bay Area political figure to be indicted in decades. Gonzales has publicly apologized for his actions, but maintains that he is innocent of any criminal wrongdoing and has refused to leave office. He also has promised to vigorously defend himself. His attorney, Allan Ruby, said late last month that he soon plans to file motions to have the charges dropped.
Duong did not return phone calls seeking comment for this story, but according to court documents, the tale of how he rose to power in Oakland and then became a central figure in the Bay Area's biggest public corruption scandal had its origins at the end of the Vietnam War.
Before the communists took over Duong's native Saigon, his family owned South Vietnam's largest paper mill. But by 1976, they were forced to flee their homeland. All 23 family members crowded into a small boat, just six feet wide and sixteen feet long, and spent five days at sea before being rescued and taken to the Philippines.
By the late 1970s, the Duongs had made their way to San Francisco, where they struggled to eke out a living. Each night they fanned out across the city, sifting through apartment-building dumpsters and fishing out paper and cans to be sold to recyclers. After five years, the family had cobbled together enough money to start its own paper company. But the fledgling business foundered, and by the early 1990s, it was $1 million in debt. So the Duongs sold the company to Norcal Waste Systems, one of the nation's largest trash haulers and the company at the center of the current scandal in San Jose. Norcal and the Duongs fought over the financial terms, and the deal ultimately landed in court. It would not be the last time Norcal would face off with David Duong.
In 1992, the Duong family caught a break when the City of Oakland launched its new curbside recycling program. Back then, curbside recycling was still so new that when the city solicited bids, only three small companies responded including David Duong's newly formed recycling business, California Waste Solutions. None of the bidders had the financial wherewithal to handle the entire city, so the council awarded one-third of the recycling contract to each. California Waste Solutions was so cash-poor, according to city records, that it needed a $350,000 loan from the city just to buy trucks.
Duong returned the favor over the next several years by becoming one of Oakland's best campaign contributors. It was a lesson he learned back home. "As we live in Vietnam through the war, we always have to work with politico [sic] to get the country going in the right way," he explained to the grand jury.
By 1998, the Duong family, California Waste Solutions, its employees, and other businesses associated with them had donated more than $25,000 to various Oakland City Council campaigns. Among the most prominent recipients were Councilmembers Larry Reid, Ignacio De La Fuente, Jane Brunner, and Henry Chang, along with then-Mayor Elihu Harris and current City Attorney John Russo. A year earlier, Harris and the council had rewarded Duong by increasing his recycling contract to half of the city and extending his deal for eight more years.
In the late 1990s, Harris and Reid also assisted Duong in brokering a deal with the longshoremen's union, which had mounted a strike against California Waste Solutions. Reid told the Oakland Tribune at the time that he had intervened in the dispute to help his close friend. "I'm the godfather of David Duong's three children," explained Reid, who received $5,250 in campaign donations from Duong by 1998 and had voted to extend his city contract. "He's like my brother. If you have friends that you believe in, you support them, and David is like my family."
Because of the Oakland contract, and subsequent deals Duong signed in Sacramento County, California Waste Solutions grew rapidly. By 2000, Duong considered expanding into San Jose by bidding on part of that city's garbage and recycling pact. One of his main competitors was to be Norcal Waste. But Norcal made a shrewd move; it hired Oakland powerhouse lobbyist Lily Hu, who persuaded Duong to meet with Norcal officials even though he was wary of them.
At the meeting, Norcal offered Duong a piece of the contracts it had with other South Bay cities, Duong told the grand jury. In exchange, he said, he agreed to not bid against Norcal in San Jose and to become one of its subcontractors. According to his testimony, Duong didn't realize that he was about to step into a scandal.
By the fall of 2000, Duong had ironed out his problems with the longshoremen's union and had planned to use its workers in San Jose. But one day before the San Jose City Council was to vote on the garbage and recycling contract on October 10, Norcal officials told Duong that Mayor Gonzales wanted California Waste Solutions to become a Teamsters' union shop, according to Duong's testimony. Duong said he resisted because he knew the Teamsters would demand much higher pay. But he later relented after Norcal assured him in writing that the City of San Jose would pay the wage difference.
In the indictment against him, Gonzales is accused of hiding the fact that he knew his request for Teamsters would end up costing ratepayers an extra $11.25 million, and thus is accused of cheating and defrauding the public. The Santa Clara County Grand Jury also indicted Norcal and one of the mayor's aides.
Duong, however, was not charged as part of the conspiracy, and instead is expected to testify against Gonzales and Norcal. But if the grand jury transcripts are any indication, the prosecution faces a tough battle, in part because Duong was not the best witness. His memory was fuzzy; for example, he had trouble recalling when some of the meetings with Norcal took place or when he had met personally with the mayor.
Attorneys for Gonzales and Norcal would not comment for this story, but they will surely point out at trial that Duong had an ax to grind against Norcal. By the time he testified in front of the grand jury in March, Duong was embroiled in another legal fight with the waste giant. He claimed Norcal owed him $14.2 million for delivering recyclables mixed with too much trash in San Jose and for allegedly failing to meet the terms of the separate contract for the other South Bay cities. The battle spilled over this summer when Duong submitted a bid against Norcal for a piece of the new San Jose garbage and recycling pact.
In the end, Duong's testimony and the resulting indictments against Gonzales and Norcal appear to have reaped big profits for California Waste Solutions. Last month, the council voted unanimously with Gonzales abstaining to award parts of the new city contract to Duong's firm and another company, even though their bids were higher than Norcal's. "I certainly did not want to deal with Norcal because of the fact that they were involved with the mayor in that scheme," Councilman Chuck Reed said, explaining his vote.
Meanwhile, back in Oakland, Duong continues to rake in the dough. In 2004, the council voted to extend his $2.57 million a year recycling contract for another eight years without putting it out to bid.
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