Recycling Firm Is Accused of Fraud

In a crackdown on fraud in the state’s recycling program, state officials moved Tuesday to shut down one of the largest processors of aluminum, glass and plastic containers, accusing Los Angeles-based Active Recycling Co. of falsifying receipts to collect redemption money.

A 17-page accusation against the company filed by state Department of Conservation Director Darryl Young seeks $1.6 million in restitution and penalties, and revocation of Active’s certificate to operate five recycling centers and one processing plant at locations in Los Angeles, North Hollywood and Van Nuys.

The accusation says Active Recycling “engaged in dishonesty, incompetence, negligence or fraud in performing the functions and duties of a certificate holder.”

It says the company is under investigation by the FBI, which seized 74 boxes of business records from Active’s headquarters in October 1999. FBI officials declined to comment.

“We take recycling fraud very seriously,” said Carol Dahmen, the department’s communications director. “We all pay into the CRV [California Redemption Value] system. The money is used to ensure beverage containers are recycled and kept out of landfills. So this is not only a crime against the recycling system, it’s a crime against the environment.”

Hal E. Wright, an attorney for Active’s president, Errol Segal, said he will challenge the department’s accusation in an administrative hearing. By seeking a hearing, Active will be allowed to continue operating at least until the matter is resolved.

“We’re going to defend this vigorously, and we believe there is a defense to every allegation,” he said.

Active Recycling was one of the first companies to become part of California’s recycling program after a 1986 law required consumers to pay a deposit on beer and soft drinks sold in aluminum, plastic and glass containers. For small containers, the deposit is 2.5 cents, and for larger ones 5 cents.

The program was expanded last year to include water, fruit juices, iced tea and sports drinks sold in recyclable containers.

California’s program, unique in the nation, requires shoppers who want to recoup deposits to take them to recycling centers, where they are weighed and a redemption value is paid.

State officials said they began investigating Active Recycling in March 1999, when they noticed a dramatic increase in the volume of cans and bottles recycled at two of the company’s facilities. In November 1998, Active handled 667 pounds. By February 1999, records showed it processed 4,021 pounds.

Officials said they became suspicious when they examined receipts for redemptions paid by the company and discovered too many similarities among the purported consumers listed. All their addresses had four digits, all streets were listed as avenues and all were in Los Angeles.

A check with the Department of Motor Vehicles, the accusation said, showed that many of the addresses did not match the names on the receipts.

When customers were sent questionnaires, officials said, dozens reported “that the addresses posted on the receipts were incorrect and that their signatures were forged.”

Six months later, officials said, additional records were seized by the FBI and the California Department of Justice. The accusation said they “identified 16,570 receipts that appeared to have been generated outside the normal course of legitimate business” and included “inaccurate, altered, falsified or fraudulent information.”

Dahmen said the accusation against Active demonstrates the department’s desire to increase its prosecution of fraud. She said the department has reached an agreement with the state attorney general’s office to establish a special unit to focus on recycling fraud.

“With all the new bottles and cans in the system . . . we recognized there was a possibility for increased fraud,” she said. “This case is large and is a representation of our commitment to enforce the law.”

The accusation states that the investigation of Active Recycling is continuing.

Segal declined to comment, referring all questions to his attorneys.