Carson Firm Subject of State Fraud Inquiry Over Recycling Rebates

The state attorney general is conducting a criminal investigation into Southern California’s largest aluminum recycling center, a Carson firm that received penny rebates on more than half a billion cans and accounted for 10% of all recycling rebates in the state in the last 12 months.

The criminal investigation into State Salvage Inc. follows an audit by the state Department of Conservation, which found that 77% of State Salvage’s cans--about 480 million--did not have documentation showing that they had been bought in California. The audit covered October, 1988, through August, 1989.

The state only pays the penny rebate to companies having adequate documentation that the cans they turn in were sold in California. Consumers in California pay an extra penny to finance the rebate program.

After the audit, state conservation officials demanded that State Salvage Inc. repay nearly $4.8 million in rebates--the largest repayment required since the recycling rebate program was established in October, 1987--and sent the case to the attorney general’s office.

Hillard Lewinson, State Salvage president, said he received the demand letter Thursday and needed more time before making a comment.

“It was a shock to us,” he said.

Howard Sarasohn, deputy director of the state Department of Conservation, said “there are two possibilities” to explain the undocumented cans.

“Little old ladies in tennis shoes brought them in, or they could have been brought in by the truckload from out of state. That is what we want the attorney general to sort out. It is a lot of cans.”

State recycling officials estimate that the penny rebate adds $25,000 to the value of a 40-foot-truckload of flattened aluminum cans.

Paul Agbonkpolo, the state’s chief recycling official in Los Angeles, said State Salvage records show that the firm, whose noisy, dusty three-acre yard is on South Alameda Street in Carson, receives many cans from Arizona, Nevada and Mexico. All the cans are reprocessed for aluminum, but only those originally sold in California earn State Salvage penny rebates.

He said state officials, noting the large number of cans claimed by State Salvage, decided to audit the firm in March.

Over a period of months, the auditors, working in a cramped office at the yard, discovered that State Salvage records of cans turned in for rebate did not match the documentation of cans sold in California, the official said.

Despite Lewinson’s statement that the demand letter came as a shock, Agbonkpolo said Lewinson did not react when auditors told him recently about discrepancies. “He was just cool. He didn’t appear to be really shook by the news,” Agbonkpolo said.

Some 12 billion aluminum, glass and plastic beverage containers are produced each year for sale in California, with rebates currently running at about $70 million a year. About 2,500 recyclers, including State Salvage, are certified by the state to participate in the rebate program.

Randall Ward, director of the state Department of Conservation, said: “By and large, the majority of these recyclers . . . have been operating consistent with the state law. We want to send a message to all the recyclers participating in this program that, if they are caught, their economic well-being will be jeopardized.”