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Rampant recycling fraud is draining California cash

Fraud rings bring cans and bottles from other states and illicitly 'redeem' deposits that were never paid. And some private recycling centers might claim bigger reimbursements than they deserve.

October 07, 2012|By Jessica Garrison, Los Angeles Times

But fraud rings find ways around the law — hiring people to return the cans in small bundles at numerous centers, for example. Investigating such cases is time consuming and expensive: It's not illegal per se to drive cans across the border, so officers must follow the cans into the state, stake out the locations where the cans are broken down into smaller loads, and then follow the smaller loads to recycling centers.

To help identify people bringing cans into California, Gov. Jerry Brown signed a law last month that will require those importing more than 25 pounds of aluminum or plastic or 250 pounds of glass to declare at the border what their purpose is and the source and destination of the material.

Importers aren't the only problem. Recycling centers themselves may actively engage in fraud by seeking reimbursement for more than they are entitled to. A recent court case alleges that employees at one of the state's largest trash companies did just that.

In a lawsuit and whistle-blower complaint, Brian McVeigh, a former supervisor at Recology in San Francisco, said workers made more than $1 million in fraudulent claims a year. One part of the alleged scheme, he said, was pretending that cans it had picked up from commercial and residential customers had actually been turned in to its recycling center; the state often provides bigger reimbursements when materials are acquired that way. McVeigh claims he was fired when he tried to get the company to investigate.

A judge dismissed the wrongful-termination suit, and McVeigh has appealed. His state whistle-blower suit is ongoing.

Recology spokesman Adam Alberti denied McVeigh's allegations and said he was terminated for cause before he ever raised whistle-blower complaints.

CalRecycle — the state's Department of Resources Recycling and Recovery, which does administrative reviews, not criminal investigations — looked into the matter and found "multiple violations" of state recycling laws, according to a letter it wrote to Recology in 2010. Among them: that Recology failed to keep adequate records, failed to properly inspect loads of recycled materials and did not always follow a requirement to take down the names of people it claimed had brought in large quantities of recyclable material.

CalRecycle itself has come under scrutiny. A 2010 report from the California state auditor found that the agency did not ensure fraud tips were followed up on. From 2005 to 2010, the report found, CalRecycle logged 295 calls to its fraud tip line. Only 17 of those resulted in an investigation; officials could not say what happened with the other 278.

The state review also found that the agency did not always follow up on audits of beverage distributors that were supposed to be paying deposits into the state's recycling fund.

In 2010, the agency had a backlog of reports from beverage distributors and manufacturers so severe, it was owed $10 million, a CalRecycle spokesman said. Since then, the backlog has been reduced and it is owed an estimated $3 million.

John Halligan, CalRecycle's head of recycling enforcement, said his agency now analyzes data from recycling centers' claims in order to detect fraud. This year, CalRecycle has removed 19 recycling centers from the program and launched reviews of 256 others.

Some centers complain that they too are victims of fraud, and that the state should not lump them in with the rings that illegally import containers.

But Halligan said spotting fraud should not be that difficult for the centers. The vast majority of people turning in cans bring in less than 10 pounds at a time.

"When someone comes in two times a week with 480 pounds, you should know" that something is not right, he said.

jessica.garrison@latimes.com

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