Making Donated Rags Into Riches

By JANET WILSON

July 28, 1997 12 AM PT

TIMES STAFF WRITER

Meet Vahan Chamlian, the world’s largest dealer in secondhand clothes.

If you have ever donated your used duds to charity for a tax deduction, there’s a chance you helped pay for his million-dollar Fresno home, his wife’s Rolls-Royce or the corporate jet he uses for client calls worldwide.

“The American public is very generous,” the 71-year-old Chamlian said with a chuckle, an imported cigar clamped in his teeth and a diamond pinky ring sparkling on his left hand.

According to Dun & Bradstreet, which collects financial data on companies nationwide, Chamlian’s five firms grossed $78.6 million last year from the recycling and sale of used clothing.

His suppliers? The Salvation Army, Goodwill Industries and a multitude of other charities.

The Salvation Army and Goodwill reportedly take in 75% of the used clothing donated nationwide. Chamlian buys 8 million pounds a month, nearly two-thirds of it from them. The goods shipped to his three California factories come from all over the country.

From America’s castoffs, Chamlian and his competitors--roughly 100 used-clothing dealers based in port cities from Brooklyn to Houston to Los Angeles--have created a multimillion-dollar export industry. The clothing is baled up and shipped overseas, where it fetches prices far higher than those charged in American thrift stores.

“Our members call it turning garbage into gold,” said Bernie Brill, president of Secondary Materials and Recyclable Textiles, or SMART, a trade association based in Maryland.

Although some donors think they are giving their used clothing to the local poor or homeless, very little is ever given to anyone.

Instead, the charities that collect tattered jeans, outgrown dresses and worn-out athletic shoes sell the best of the lot at thrift shops, auction some of what remains to swap meet vendors, and market the rest--for as little as 13 cents a pound--to business people like Chamlian, whose biggest buyers are in Third World countries.

Last year, the United States exported 218,334 metric tons (481 million pounds) of used clothing--with a declared value of $249 million--to 139 countries. Ships loaded with 40,000-pound containers of clothing leave Long Beach, Oakland and Los Angeles several times a week. The most frequent destinations are the poorest countries in the world.

After six weeks at sea, the container ships with Chamlian’s goods often make port in West Africa. From the coast, 500-pound bales of clothing are moved inland by truck or train.

On one such route, the last stop is Niger, the world’s most impoverished nation, according to the United Nations. It has an average per capita income of $275 a year.

There, in dusty street markets, a shirt donated to an American charity and sold to a used-clothing dealer for perhaps 10 cents commands a price of $5 to $15, the equivalent of one to three weeks’ wages. El Haji Hamadou Ali, a distributor in Niamey, the nation’s capital, says that a pair of trousers goes for about $10--half a month’s pay.

Although expensive by local standards, clothing from the United States, say dealers and diplomats, is immensely popular even secondhand because of its quality and the cachet of owning something American. The costs are often driven up by a maze of corrupt customs officials, bribe-seeking border guards and a network of local wholesalers and vendors.

“It’s disgusting,” Barbara Austin, a private customs broker at the Port of Long Beach, said of the markups. She compared the used-clothing trade to “those people who make rubbings of gravestones and earn money off them.”

According to Chamlian’s figures, however, his markup isn’t driving up retail prices in Niamey. He says he buys at 13 cents a pound on average and sells at 65 cents. He makes no apologies for what he does, noting that he employs more than 800 people in his Los Angeles, Fresno and San Lorenzo operations.

Chamlian, an exuberant Armenian immigrant who came to California from Lebanon 40 years ago, takes pride in having personally paid to have a private elementary school built in Glendale, where many of the schoolchildren are of Armenian descent.

“We contribute to local taxes. We employ local people,” he said. “Besides, these charities do good work.”

Indeed, charity executives in the Southland say they use the revenue from used-clothing sales to support a variety of worthy programs--from Goodwill’s job training for the disabled, to the Salvation Army’s shelter and treatment programs for homeless alcoholics and drug abusers.

Also, their thrift stores provide affordable clothing for Americans who otherwise couldn’t hope to purchase an almost new jacket or a barely worn pair of shoes.

But up to 60% of donated clothing never sees the inside of a thrift shop.

“We go through 25,000 pieces of clothing to find 10,000 we can sell in the thrift stores,” said Major Oliver Stenvick, who oversees the Salvation Army’s massive processing warehouse in Anaheim.

Even those who frequent charity stores are “very fussy,” said Major Daniel Starrett, who oversees the Salvation Army’s $105-million-a-year thrift and salvage operations in eight Western states, including California. “You’d think if you put a blouse out there for 25 cents with no buttons, people would buy it. But they won’t.”

Not all of the thrift store rejects are sold to big dealers like Chamlian. Goodwill branches in Santa Ana and Long Beach, for instance, hold daily “as is” auctions that usually are attended by swap meet or street vendors.

Julie Dover, the director of production, distribution and wholesale operations for Goodwill in Orange County, said the auctions are “a real great avenue for us to give everything a second chance, because it starts at $1.85 a pound.” In contrast, the major used clothing dealers pay at most 22 cents a pound.

Every weekday, about two dozen vendors bid in Spanish and English on large metal cages full of clothing and household goods. Victor Meza, a buyer for an Ensenada-based business named Los Lobos (the wolves), recently paid $200 for a cage full of soiled, ripped, but still colorful clothing. Meza planned to drive it south of the border in his rusty van and sell the 1,000 garments. Other buyers repair items and sell them at California swap meets.

What’s left after these auctions is sold in bulk to dealers such as Chamlian.

At his State Center Waste Materials Corp. facility north of downtown Los Angeles, 200 workers sort, fold and pack mountains of used clothing.

To get to the factory, Chamlian jets into Van Nuys airport, where a red carpet awaits him on the tarmac. There, he steps into the back of a Cadillac with vanity plates that read “LA RAGS.”

He avoids the factory floor and refuses to have his picture taken there. Despite his financial success, he said, “I’m not happy this is what I do. I would rather be an investment banker.”

He prefers to receive visitors in an air-conditioned office where a large portrait of himself at a younger age faces the door. On other walls are photos of Chamlian with the president of newly independent Armenia, Levon A. Ter-Petrosyan, and one of him with His Holiness Karekin Sarkissin, the spiritual leader of the Armenian Apostolic Church.

On a recent 93-degree day, the mammoth factory was filled with the pungent odor of a million pounds of mostly dirty laundry. Outside, a tractor-trailer had just disgorged 20,000 pounds of clothing from the Salvation Army’s Anaheim warehouse.

A forklift took a huge bite from the pile and, holding its load aloft, drove into the factory. A woman surrounded by 11 piles of clothing--men’s pants, women’s pants, ladies’ cotton, children’s cotton--grimaced as the forklift dumped the clothing near her feet. All but a few of the workers are immigrants from Mexico. One woman said she has worked there for 14 years, earning $189 a week.

Once the clothing is sorted, it is weighed and re-sorted into 100- or 500-pound bales to fill orders from around the world. None of the clothing is washed, but a line of women neatly fold it.

“We’re the only ones in the business who do that,” said Chamlian’s nephew John, who manages the seemingly chaotic floor operations. “That attention to detail, it’s what makes us the best.”

The elder Chamlian boasts that he got to be bigger than all of the other used-clothing dealers in America, because “I am smarter than any of them.”

Some of the garments heaped on the factory floor are so tattered that they can’t be resold as clothing, even in the poorest nations. They will be carted into an adjoining warehouse, where garments from one pile are washed and bleached, cut into squares and sold as industrial wiping rags. What can’t be used for rags is broken down into fiber and thread for paper products.

“We throw nothing out,” said Chamlian’s nephew, who literally runs the factory floor, overseeing operations at a constant, fast-paced clip.

The collection of used clothing has gone on for centuries. In 14th century Europe, peddlers went door to door during the plague to beg for the clothing of the dead. The first paper used on the Gutenberg press was supposedly made of recycled rag fibers.

At the outset of the Industrial Revolution in the 1800s, “rag men” walked the streets of New York and Chicago, collecting used clothing to be recycled as rags for cleaning factory machinery.

Even today, Chamlian says, a third of his business involves supplying good-quality cleaning rags to the U.S. military, car manufacturers and gas station chains.

According to the Salvation Army’s Starrett, the resale of used garments took off in the wake of World War II, when “the rest of the world just blew up, giving the U.S. a great market opportunity for everything, including used clothes.”

Bombed cities in Europe, Asia and Africa had lost vital textile production centers, while the United States emerged from the war relatively unscathed and so prosperous that Americans could give away usable clothing.

Today, both private dealers and charities are striving to meet exploding demand in Eastern Europe and the former Soviet republics, where the Cold War bans on Western goods have toppled and the fascination with things American is at an all-time high.

Chamlian has opened a factory in Germany, where secondhand U.S. clothing is re-sorted to fill orders from across the region.

But the charities and dealers alike are powerless to control supply, which depends entirely on donations.

Goodwill and other large thrift operations, like Children’s Hospital of Orange County, use sophisticated solicitation techniques to flush out repeat business. And the familiar Goodwill and Salvation Army boxes in parking lots now have attendants to make sure the charities hold on to what’s been donated.

“Too many needy people were getting into the boxes and cleaning us out,” said Art Mattson, finance director for Goodwill in Orange County. “They’d slide their 8- or 10-year-old in and take whatever they needed.”

Goodwill also buys new merchandise rejected by chain stores such as Target and Nordstrom.

Many donations now are collected through house calls.

California, the nation’s most populous state, is loaded with affluent suburbs, which are prime giving areas. Salvation Army and Goodwill operations here are among the largest in the nation. Dozens of other charities and thrift businesses flourish as well.

Many charities are working aggressively to increase their profits, which has some of the private dealers chafing under the collar.

Goodwill and the Salvation Army are exploring the possibility of avoiding middlemen with direct overseas marketing. Both also are using brokers to stimulate competitive bidding by the dealers, which drives up the price per pound the dealers pay.

“The charity institutions will lose their shirts if they get rid of us,” Chamlian said. He noted the difficulties of dealing with corrupt foreign officials, unstable governments and perplexing currency regulations.

Not surprisingly, the charities show little sympathy. “We don’t exist to keep the middleman in business,” Starrett said.

There is also a vast supply of used clothing that neither dealers nor charities has tapped thus far. The Environmental Protection Agency reports that of 5.1 million tons of clothing and footwear thrown away with household garbage in 1995, only 660,000 tons, or 13%, was recycled.

Chamlian talks of going door to door to buy used clothing.

“What do you think? Three dollars a bag? People would go for it,” he said.

The Salvation Army and the city of Los Angeles conducted one curbside collection experiment in Canoga Park, but found that scavengers stole the specially marked clothing bags before city trucks could get to them.

Even if collection problems can be solved, it’s an open question whether the public will cooperate.

“I already pay City Hall to sort my plastics, my newspapers. Now clothes? I don’t think so,” said one Costa Mesa resident.

And some donors have mixed feelings when they learn what happens to their secondhand clothes.

A few said that they preferred to give to charity rather than throw it in a landfill.

“As long as they use it to pay for programs that help people, that’s fine by me,” said Steven Spielberger of Costa Mesa.

Others were not happy.

“Charity begins at home. Those things should be staying here, to be given away locally,” said Marilou Komatz of Huntington Beach.

That’s exactly what Chamlian does.

When asked what he does with his own used clothing, he replied: “I give it to my maids.”

Times librarian Lois Hooker contributed to this story.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Togs Gone

Since 1993, the value of worn clothing exported from the U.S. has steadily risen:

*--*

Year Value* Tonnage** 1993 $178.0 179.2 1994 $197.4 195.2 1995 $233.3 228.8 1996 $249.2 218.3

*--*

* In U.S. millions

** In thousands of metric tons.

Note: A metric ton equals 2,204 pounds

****

Top American Markets

Spending for U.S. used clothes in the top 10 markets more than doubled in 1996, increasing from $10.8 million to more than $27.8 million. But the top 10 in thousands of metric tons imported increased from 21.1 to about 26.3--or just 24%. Top markets in millions of U.S. dollars and thousands of metric tons:

Market: Amount spent

1. Tanzania: $4.08

2. Kenya: $4.07

3. Japan: $3.86

4. Singapore: $3.30

5. Ghana: $2.80

6. Pakistan: $2.36

7. Benin: $2.36

8. Niger: $1.88

9. India: $1.62

10. Guatemala: $1.53

****