S.F. Lawyer Claims She Was Fired for Investigating Suspected Payment Scam

By Lance Williams, The Center for Investigative Reporting

San Francisco city officials steered millions in public funds to a handful of plumbing companies for unneeded repairs of private sewer lines, a former top lawyer in the city attorney’s office alleges.

When the lawyer began to investigate what she suspected was a long-running illegal payment scheme, she says she was demoted and later fired, according to a wrongful termination claim filed Tuesday with the city.

In the claim, former Chief Trial Deputy Joanne Hoeper contends that City Attorney Dennis Herrera suppressed her probe of a scheme that she estimates cost city taxpayers more than $10 million between 2002 and 2012.

According to the claim, the sewer repair payments were approved by two officials in Herrera’s office: Matthew Rothschild, head of the claims bureau and Herrera’s chief political aide, and Michael Haase, Rothschild’s assistant. Thousands of repair bills were paid even though they were meritless and based on “false statements, inflated bills … and other red flags,” Hoeper contends.

In 2012, while her probe was underway, Hoeper says in her claim that Herrera demoted her and shut down the investigation, and then fired her earlier this year. She contends that her demotion and firing were in retaliation for what she said were her efforts to expose financial improprieties — including her suspicion that someone was receiving kickbacks — in the city attorney’s office.

Herrera is out of town and unavailable for comment. In an email, his spokesman, Matt Dorsey, said the claim reflected "baseless allegations of wrongdoing from a disgruntled former employee."

"While we generally cannot discuss personnel issues, the circumstances of Ms. Hoeper's separation were thoroughly reviewed by outside counsel," he continued, "and we're confident that the San Francisco City Attorney's Office will be vindicated when the case is adjudicated."

Haase declined to comment, and Rothschild didn’t respond to a request for comment.

Tree Roots and Sewer Lines

Hoeper’s allegations concern several small plumbing companies whose activities have prompted a flurry of homeowners’ complaints to police, city officials and even the FBI, according to documents and interviews. For years, salesmen for the companies went door to door in residential districts, claiming the roots of city street trees were damaging homeowners’ sewer lines and offering to replace them for free.

To get the work done, homeowners were told to file legal claims for as much as $10,000 with the city attorney’s office. After the claims were paid, the homeowners were supposed to pay the money to the plumbing contractors, who replaced the sewer lines.

Some people who encountered the salesmen suspected a scam.

Michael Zack and Odilon Vasconcelos, former operators of a hair salon on Guerrero Street, said in interviews that in 2011, a salesman for a plumbing company called Drainbusters Plumbing had obtained their signatures under false pretenses and used them to file a $10,000 claim for a new sewer line for their salon.

The claim was “ridiculous,” Zack said, because nothing was wrong with the salon’s plumbing, and the nearest street tree was a sapling so far down the block that its roots couldn’t possibly have extended to the salon. Besides, the men didn’t own the building and thus legally couldn’t file a claim for the repair, he said. Nevertheless, the city attorney’s office approved the claim, court records show.

Suspicious, Zack emailed Mayor Ed Lee and other officials and ultimately called Haase in the city attorney’s claims bureau. Zack said the official told him that the salesman’s conduct was “unethical but not illegal” and told Zack to turn over to the plumbing salesman the $10,000 claim settlement the city had issued to him and Vasconcelos.

At first, Zack and Vasconcelos balked, but ultimately they paid the claim money to the plumbing company after being ordered to do so by a judge in small claims court, records show.

In another case, the owner of a Mission District restaurant called police on a Drainbusters salesman in 2012, after he allegedly pried open a sewer cleanout without permission, according to a police report. The salesman apparently was hoping to convince property owners that tree roots were damaging their sewers.

Riad Khano, owner of Drainbusters, said his company did only necessary, city-authorized sewer line repairs. The city saved significant money by paying private plumbing companies for the work, he claimed, calling Department of Public Works crews notoriously inefficient. The city stopped paying for repairs to private sewer lines because of budget problems, he said.

A few people had complained about his salesmen, Khano said, but the complaints were unfounded.

Claim That FBI Tipped Her Off

In her claim, Hoeper says the FBI tipped her to the suspected billing scam in 2011, after agents received a series of complaints from homeowners. Hoeper assigned two investigators to the probe.

She concluded that the city had no legal responsibility to pay any of the claims. No city in California routinely pays for tree root damage to private sewer lines, she said in her claim, and for most of its history, San Francisco didn’t either. But starting in 2002, the city attorney’s office began approving those claims, sometimes within days after they were submitted.

She contended that her probe found case after case in which sewer lines were being replaced, even though there was no evidence of damage or bills obviously were padded.

In 2012, six months after it began, Hoeper said she told Herrera of her investigation. Herrera asked her for a written report, she said. Soon after reviewing it, by her account, he removed her as chief trial deputy and transferred her to the district attorney’s office. She said she was fired last January, on the day Herrera was sworn in for his fourth term.

A review of public records shows that from 2009 to 2011, San Francisco paid $8.9 million on about 1,100 claims for what the city described as sewer property damage or tree maintenance issues, categories that could include root damage to private sewer lines. The average payout was about $8,000. About 140 claims were rejected. In a handful of cases, payments went to plumbing companies. Usually, payment went to property owners.

Public records also show the city stopped paying for private sewer repairs soon after Hoeper says she made her report to Herrera.

On June 20, 2012, city records show that Edward Harrington, then the general manager of the San Francisco Public Utilities Commission, issued a memo saying no claims for “tree root intrusion” should be paid unless he or the city’s public works director personally approved them in advance.

Since then, court records show the city attorney’s office has successfully defended several small claims lawsuits brought by homeowners seeking compensation for tree root damage to their sewer lines. In court, the city’s lawyers contend that the city never has been responsible for paying for such repairs.

Herrera, the city’s top legal officer since 2001, has cultivated an image as a champion of good government and consumer protection. For years, Hoeper was one of Herrera’s closest aides.

In 2003, when a legal newspaper named Hoeper one of the “top 50 women litigators”in California, Herrera issued a news release praising Hoeper for her efforts to stamp out public corruption.

Hoeper’s claim says Rothschild, the claims bureau chief, was outraged by her investigation of his unit.

By her account, Rothschild confronted her, angrily declaring, “I will not stand for this.” In another encounter before she was demoted, Hoeper asserted that Rothschild accused her of “picking on” his assistant and threatened a “hunger strike if she persisted with the investigation.”

In her claim, Hoeper asks to be reinstated and awarded back pay and other damages.

This story was edited by Amy Pyle and copy edited by Christine Lee and Nikki Frick.

This story was produced by The Center for Investigative Reporting, an independent, nonprofit newsroom based in the San Francisco Bay Area. For more, visit cironline.org. Williams can be reached at lwilliams@cironline.org. Follow him on Twitter: @LanceWCIR.