Recycling Program Investigation Is Urged - Politics: Two feuding state officials have asked a top law enforcement agency to check into possible fraud in the return of beverage containers.

CARL INGRAM, TIMES STAFF WRITER

A top-level law enforcement official disclosed Friday that two feuding state officials have separately asked for investigations of payments made to businesses they suspect of defrauding the California beverage container recycling program.

Whitt Murray, acting chief of the Department of Justice's bureau of investigations, said the investigations of suspected fraud by recyclers were requested by state Controller Gray Davis and Director of Conservation Randall M. Ward.

"I'm looking at all the materials gathered by both the agencies and trying to determine what the focus of my investigation will be," Murray said in an interview.

He refused to identify the "targets" named by Davis and Ward, and he would not estimate how much time the investigations would take to complete. He said, however, there was "some overlap" of the cases submitted to him.

Likewise, he refused to say whether the cases involved businesses that Davis charged in an audit report had improperly received more than $12 million in state funds from the recycling program over the last year. Ward maintains that Davis provided no evidence for the allegation.

Murray indicated that while he knew both the state controller and the Department of Conservation have been looking into potentially improper payments to some recyclers in the redeemable beer and soft drink container program, Davis' request for an investigation came "most recently."

The disclosure that the state Justice Department, headed by Atty. Gen. John K. Van de Kamp, has received requests for criminal investigations seemed to indicate an intensified resolve to root out recyclers suspected of cheating the 22-month-old program.

Virtually from the outset, the penny-per-container program has been the target of some recyclers who seek to collect the penny on beverage containers smuggled from out of state that are not redeemable in California. In addition to the penny from a special $120-million state fund, they are paid by processors for the scrap value of reusable glass, aluminum and plastic.

Under the self-financing program, distributors of beer and soda pop pay a penny into the fund for each redeemable container. That penny is, in effect, added to the cost of the beverage at the checkout stand. Consumers, in turn, can return the container to the recycler and be paid a penny for each.

Davis, a politically ambitious Democrat who is a potential gubernatorial candidate, called a press conference Friday to formally release the previously leaked audit report that accused the Department of Conservation of mismanaging fiscal controls and paying out funds without proper documentation.

Davis, while insisting that "I don't want any credit" for exposing the alleged abuses, demanded that Ward immediately "tighten" fiscal controls before actual payment to recyclers is made. The department now relies heavily on post-payment audits to discover wrongdoing, much as the Internal Revenue Service does with income tax returns.

Davis charged that unless the Deukmejian Administration's department takes remedial action, such as beefed-up prepayment controls, the agency "will turn this important effort into an industrial welfare program for unscrupulous recyclers."

"We do have fairly serious prepayment controls," Ward retorted at a separate press conference later.

He conceded that there are "fraudulent claims, absolutely. We recognize there is a problem." But he insisted that his agency is vigilant in guarding against payment of such claims and if the controller "has information regarding fraudulent activity, give it to us."

Ward said he did not understand Davis' motivations for holding a press conference to announce the audit report before Ward had an opportunity to prepare a response, but rhetorically asked, "I'm not sure, but is there an election year coming up here?"

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