Texan Seized in Smuggling of 37 Tons of Illegal Freon

Washington--U.S. Custom Service agents arrested a Texas man late Wednesday on charges he illegally imported about 37.5 tons of Freon, an ozone-depleting chemical.

Richard Schmolke, president of Mag-Well Associated in Texas, was accused of using his company to hide a sophisticated smuggling ring that imported $3.2 million worth of Freon, the trade name for CFC-12, a refrigerant used in automobile air-conditioning systems.

The U.S. banned the import and manufacture of CFCs in 1996 as part of an international treaty aimed at ending the use of ozone-threatening chemicals.

Owners of old automobiles in the U.S. can still legally buy Freon in a recycled form, but the product’s low supply has driven prices up to approximately $42 per pound, said Charles Harrison, Customs special agent in charge in San Antonio. Harrison said the excessive costs helped create the black market.

“We consider this a significant [smuggling] organization, mainly because of the quantities it was capable of importing into the United States,” said Harrison.

Efforts to reach Schmolke’s attorney were unsuccessful.

Customs said it began the investigation two years ago after three Texas-based companies were suspected of smuggling Freon from Mexico, employing a firm there to build six special refrigeration units that could carry more than 2,500 pounds of CFC-12 across the border.

Once the units returned to the U.S., Schmolke and his partner, Edwin Reilly, president of Post Manufacturing Co., removed the chemicals and put them into smaller containers to be sold to legitimate CFC reclaiming companies, the Customs Service said. As the pair continued returning the empty tanks to be refilled, the Mexican firm grew suspicious and Schmolke and Reilly felt compelled to move their operation to Venezuela, where CFC-12 is legal for another decade, the Customs Service said.

The Customs Service office in San Antonio, assisted by the Internal Revenue Service, said it seized about 20,000 pounds of Freon illegally imported into the U.S.

Reilly, arrested in February, pleaded guilty to smuggling 37.5 tons of CFC-12 and to tax charges for his role in the scheme, the Customs Service said. He is awaiting sentencing and could face up to five years in prison or a $250,000 fine for each violation of the Clean Air Act.

The arrests are part of a cooperative effort by the Justice Department, Customs, the Environmental Protection Agency, the FBI and the IRS. It is designed to crack down on the smuggling of CFCs since the Clear Air Act went into effect. Customs enforces the statute along U.S. borders and recently arrested a New York man for illegally importing 36,000 pounds of Freon from Russia.

“We certainly do not believe we’ve shut down the problem,” Harrison said. “We intend to attack this problem as long as the problem exists.”