Five Arrested in $80.3M Recycling Fraud Conspiracy in California

The California Department of Resources Recycling and Recovery (CalRecycle) is announcing Grand Jury indictments and subsequent arrests of five people charged with operating a multiyear recycling fraud scheme from the Recycling Services Alliance (RSA) Corporation in Sacramento County, Calif. The owner of RSA and four employees are accused of fraudulently processing out-of-state empty beverage containers for California Redemption Value (CRV) refunds and conspiring to manufacture fraudulent weight tickets to justify state payments and reimbursement claims.

“CalRecycle took decisive action to suspend RSA from the Beverage Container Recycling Program in 2016 as our internal audit and the California Department of Justice’s criminal investigation progressed,” said CalRecycle Director Scott Smithline in a statement. “Recycling fraud is a serious crime, and CalRecycle will continue to work alongside our law enforcement partners to disrupt these schemes and protect public funds.” 

Investigation Background

On May 15, 2015, the California Department of Justice’s (CDOJ) Recycling Fraud Team launched an investigation into RSA after receiving information the Sacramento facility was illegally receiving out-of-state material from various recycling centers and conspiring to defraud the Beverage Container Recycling Fund. As CDOJ pursued its criminal inquiry, CalRecycle staff worked alongside the California Department of Food and Agriculture’s Division of Measurement Standards and the Sacramento County Agricultural Commissioner’s Weights and Measures Division to investigate the CRV reimbursement claims submitted by RSA and the weight tickets used to support those claims.

On May 11, 2016, while CDOJ Recycling Fraud Team agents continued the criminal investigation, CalRecycle’s legal staff initiated the informal hearing process to suspend RSA’s participation in the CRV program. On May 13, 2016, CalRecycle issued a Notice of Suspension to RSA.

As a result of the investigation, which included search warrants and employee interviews, CDOJ agents and CalRecycle staff uncovered an organized effort to generate inaccurate, altered or falsified weight tickets to increase CRV reimbursement claims from the fund. CalRecycle concluded that RSA’s CRV claims submitted from January 2012 to December 2015, which totaled $80,331,217.19, were based on fraudulent weight tickets.

Criminal Indictments

Grand Jury proceedings from December 4 through December 7, 2017, resulted in the criminal indictments of five suspects on a total of 166 counts, including grand theft, recycling fraud, perjury and conspiracy. RSA owner Shengchien Tseng, weighmaster Maximina Perez, assistant weighmaster Alejandra Lazaro Martinez, assistant weighmaster Veronica Castillo and assistant weighmaster Marlene Davalos-Mendez were arrested and booked into the Sacramento County Jail.

The next hearing is scheduled for June 5 in Sacramento County. The California Attorney General’s Office is prosecuting these cases.