Five Arrested in $80.3 Million Recycling Fraud Conspiracy
Processor Accused of Adjusting Weight Tickets to Defraud CRV Fund
Media Contact: Lance Klug
(916) 341-6293 | Lance.Klug@calrecycle.ca.gov
SACRAMENTO – The California Department of Resources Recycling and Recovery is announcing Grand Jury indictments and subsequent arrests of five people charged with operating a multi-year recycling fraud scheme from the Recycling Services Alliance (RSA) Corporation in Sacramento County. The owner of RSA and four employees are accused of fraudulently processing out-of-state empty beverage containers for California Redemption Value 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,” CalRecycle Director Scott Smithline said. “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.”
On May 15, 2015, the California Department of Justice’s 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.
Grand Jury proceedings from Dec. 4 through Dec. 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, 49, of Cupertino; weighmaster Maximina Perez, 50, of San Leandro; assistant weighmaster Alejandra Lazaro Martinez, 26, of Hayward; assistant weighmaster Veronica Castillo, 35, of Sacramento; and assistant weighmaster Marlene Davalos-Mendez, 28, of Rocklin, were arrested and booked into the Sacramento County Jail.
The next hearing is scheduled for June 5, 2018, in Sacramento County. The California Attorney General’s Office is prosecuting these cases.
At a Glance: CalRecycle’s Recycling Fraud Prevention Measures
California’s Beverage Container Recycling and Litter Reduction Act incentivizes recycling through a California Redemption Value (CRV) fee paid by California consumers at the time of purchase and refunded upon return of the empty beverage containers to CalRecycle-certified recycling centers. Because the fee is not paid on beverages purchased outside the state, those containers are not eligible for CRV redemption.
In addition to CalRecycle’s interagency agreements with CDOJ and CDFA, CalRecycle aggressively combats fraud and illicit payments through enhanced precertification training of recycling center owners; probationary reviews of recycling centers; oversight of certified processors; monitoring and tracking of imported materials; risk assessment of daily claims for reimbursement; daily load limits; application of prepayment controls; and post-payment reviews and investigations.