Beverage container recycling fraud: US State to receive $1.8 million settlement

Source: California Department of Resources Recycling and Recovery (CalRecycle)

Sacramento, USA — A Los Angeles-area recycling business will pay $1.8 million in restitution to the state’s Beverage Container Recycling Program as part of a settlement agreement resulting from illegal claims for refunds on out-of-state bottles and cans. As part of the agreement with the Department of Resources Recycling and Recovery (CalRecycle), Action Sales and Metal, Inc. and owner Bruce Falk will be barred from future participation in the program.

CalRecycle received $845,000 of the settlement last week, when the agreement was signed; the outstanding $955,000, seized from the business by law enforcement during two separate investigations, will be released to CalRecycle within 30 days. The settlement comes on the heels of an investigation by CalRecycle, the California Department of Justice, and the Los Angeles County Sheriff’s Department.

„CalRecycle is dedicated to protecting the Beverage Container Recycling Fund and going after people who steal from the program,” CalRecycle Director Caroll Mortensen said. “These are public funds – they are owed to consumers who pay CRV when they buy beverages and then return the containers for recycling. We will vigorously pursue these investigations, and we won’t back down until perpetrators are held accountable for their actions.“

Imports from Arizona

In 2012 the Los Angeles County Sheriff’s Department’s Metals Theft Unit began investigating a group that was suspected of importing used beverage containers from Arizona and redeeming them at Action Sales and Metal, in the Wilmington area of Los Angeles, for California Redemption Value refunds. During a search of an area storage facility on June 22, 2012, LACSD officers found receipts indicating Action Sales and Metal had paid more than $700,000 in CRV to the suspects for ineligible material. The group’s leader, Marcos Vega, was arrested and ultimately pleaded guilty to illegal refund claims and sentenced to 90 days custody, three years’ probation, and $15,000 in restitution.

While the LACSD was investigating Vega and his connection with Action Sales and Metal, the California Department of Justice was conducting a parallel investigation, based on a referral from CalRecycle, on another group of people suspected of transporting loads of aluminum and plastic beverage containers to Action Sales and Metal for illegal CRV claims.

Action Sales and Metal found guilty

On June 21, 2012, DOJ agents followed a rental truck carrying several thousand pounds of used beverage containers from Mesa, Ariz., to a residence in Wilmington. The next day, agents observed as the load was divided into smaller quantities and taken to Action Sales and Metal, where the material was redeemed for CRV. Four people later were arrested, including recycling center owner Bruce Falk, who was held on $1 million bail.

Falk was charged with recycling fraud, conspiracy, and grand theft, and indicted by a grand jury at the Los Angeles Criminal Court. In May 2014, the jury deadlocked on the charges against Falk but found Action Sales and Metal, Inc. guilty of conspiracy to commit a crime, grand theft of personal property, and recycling fraud.

On Wednesday, Action Sales and Metal, Falk, and CalRecycle agreed to a settlement requiring Action Sales to pay CalRecycle $1.8 million in restitution and to be removed from the Beverage Container Recycling Program. As part of the negotiated settlement, the charges against Falk were dismissed.

New approaches to curb fraud

California’s bottle bill provides an incentive for beverage container recycling by establishing a CRV of 5 cents for containers less than 24 ounces and 10 cents for containers 24 ounces or larger. However, CRV only applies to beverages in qualifying containers that were purchased within California, since the recycling fee is added to the price of the beverages sold in the state. Out-of-state containers are not eligible for CRV.

CalRecycle is undertaking a major and multipronged effort to protect the recycling fund, including new approaches to curb fraud. Much of the emphasis is on preventing fraud before it occurs, such as enhanced training of recycling center owners, increased scrutiny of payment claims, and regulations that reduce the number of containers an individual can bring to a recycling center in a single day. New regulations also now require importers of out-of-state containers to enter California through California Department of Food and Agriculture agricultural inspection stations, declare they are importing empty beverage container materials, complete an Imported Material Report form and submit to an inspection by CDFA agents.

Source: California Department of Resources Recycling and Recovery (CalRecycle)