Two men have been arrested in a recycling fraud scheme involving the transport of used beverage containers from Phoenix, Ariz., to a recycling company in Bakersfield and illegal claims for California Refund Value.
“Beverage containers purchased outside California are not eligible for CRV redemption,” said Caroll Mortensen, director of the Department of Resources Recycling and Recovery (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.”
The California Department of Justice investigates and prosecutes criminal cases on behalf of CalRecycle, which has administrative authority over the state’s beverage container recycling program.
In April, DOJ special agents went to Phoenix to conduct an investigation associated with a referral from CalRecycle and observed as a semi-truck was loaded with used beverage containers. The agents conducted surveillance of the truck as it entered California through the agricultural checkpoint in Blythe. The driver then proceeded to Bakersfield, where it stopped at a dirt lot. There, the containers were unloaded from the semi-truck and re-loaded into a U-Haul and a 53-foot trailer.
Agents observed as Mario Mendoza drove the U-Haul truck and delivered two subsequent loads at Sequoia Resources Inc. in Bakersfield, returning after the first to re-load the U-Haul from the containers that had been left in the trailer on the dirt lot. The loads were redeemed in the names of S&S Recycling and Gonzalez Recycling. Agents ultimately pulled Mendoza over on a traffic stop, arrested him and booked him into custody at Kern County Jail.
After Mendoza’s arrest, the agents obtained search warrants for multiple locations, and with the assistance of CalRecycle staff, 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 fronting, or 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, approximately $1 million was lent by Sequoia Resources and paid back with ineligible used beverage containers that were fraudulently redeemed for CRV.
With the additional information garnered from their investigation, DOJ agents filed an arrest warrant for Gonzalez on March 30 on charges of grand theft and recycling fraud. On June 9, Gonzalez was arrested in Whittier without incident; he was transported and booked into Kern County Jail. A preliminary hearing for both Mendoza and Gonzalez is scheduled for July 23.
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.
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