Two men arrested in California CRV fraud scheme

CalRecycle cracks down on containers brought in from outside the state.

July 8, 2014
Recycling Today Staff
Legislation & Regulations Municipal / IC&I Nonferrous

The California Department of Resources Recycling and Recovery (CalReycle) says two men have been arrested in a recycling fraud scheme involving the transport of used beverage containers (UBCs) from Phoenix to a recycling company in Bakersfield, California, to seek illegal California Refund Value (CRV) claims.

“Beverage containers purchased outside California are not eligible for CRV redemption,” says Caroll Mortensen, director of CalRecycle. “If you didn’t pay a CRV deposit when you bought it, you can’t get CRV back. People who bring containers in from other states with the intention of defrauding the state of California will be apprehended and prosecuted.”

According to CalRecycle, California Department of Justice (DOJ) special agents went to Phoenix to conduct an investigation associated with a referral from CalRecycle and observed a truck being loaded with UBCs in April 2014. The agents conducted surveillance of the truck as it entered California through a California Department of Food and Agriculture (CDFA) inspection station. The driver proceeded to Bakersfield, where he stopped and unloaded the containers from the semitruck and reloaded them into a U-Haul and a 53-foot trailer.

Agents say they observed as Mario Mendoza drove the truck and delivered two subsequent loads at Sequoia Resources Inc. in Bakersfield. The loads were redeemed in the names of S&S Recycling and Gonzalez Recycling. Agents ultimately arrested Mendoza.

After Mendoza’s arrest, DOJ agents obtained search warrants for multiple locations and executed a search warrant at Sequoia Resources. The agents determined that James Gonzalez is the owner of S&S Recycling and Gonzalez Recycling as well as Ignacio Recycling. They also determined that Sequoia Resources, owned by Jeffrey Kent Chen, was loaning more than $20,000 per week to Gonzalez Recycling.

The investigation determined that Gonzalez would bring in enough CRV material to pay back the weekly advances within three days. From November 2013 through April 15, 2014, about $1 million was lent by Sequoia Resources and paid back with ineligible UBCs that were fraudulently redeemed for CRV.

With the additional information garnered from their investigation, DOJ agents filed an arrest warrant for Gonzalez on charges of grand theft and recycling fraud. A preliminary hearing for Mendoza and Gonzalez is scheduled for July 23, 2014.

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 the state.

CalRecycle says it is undertaking a major and multipronged effort that includes 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 CDFA agricultural inspection stations, declare they are importing empty beverage containers, complete an Imported Material Report form and submit to an inspection by CDFA agents.