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NR 2002-Special
October 24, 2002

Contact: Ed Wilson
Mark Oldfield
Don Drysdale
(916) 323-1886

SOUTHLAND RAIDS CRUSH
MULTI-MILLION DOLLAR RECYCLING FRAUD RING

In the largest fraud case of its kind in California history, Attorney General Bill Lockyer announced today that Special Agents from the California Bureau of Investigation and other local, state and federal agencies arrested and charged 15 individuals for defrauding the state’s beverage container recycling program of more than $3 million.

This is the third major enforcement action related to recycling fraud in the last two years. Officers and investigators from the Department of Justice, along with the California Department of Conservation, Los Angeles Interagency Metropolitan Police Apprehension Crime Task Force (LA-IMPACT), the Los Angeles District Attorney's Office, the California Department of Motor Vehicle, the Los Angeles Sheriff's Department, the California Department of Insurance, the California Department of Corrections, the United States Secret Service, and the United States Immigration and Naturalization Service, assisted with this investigation.

Last week, agents served search warrants at 20 southern California locations, including a number of California Certified Recycling Centers where beverage containers are redeemed for cash. The ten-month investigation revealed that during the past two years, this organization redeemed thousands of pounds of ineligible aluminum, plastic, and glass beverage containers for more than $3 million under the Department of Conservation-run California Beverage Recycling Program.

Migran Changulyan, 35, of Glendale, considered the leader of the organization, and 13 of the others arrested were charged Monday in Los Angeles Superior Court with forgery, conspiracy, grand theft, perjury, recycling fraud, and welfare fraud. One of the defendants was charged with possession of narcotics. All defendants are being held at the Burbank City Jail on $2.5 million bail. Agents also seized three handguns, one assault weapon, and two vehicles.

“These were not families where the children were learning the value of recycling by redeeming their bottles and cans at the local center for a few dollars,” said Lockyer, “The people in this criminal organization were charged with grand theft and major fraud against the state, redeeming tons of ineligible material for millions of dollars.”

California consumers pay a fee, the California Redemption Value (CRV), for every beverage container purchased in the state. This money is refunded to the consumer when containers are redeemed at a recycling center certified by the Department of Conservation. Recycling centers then reclaim the CRV payments from the DOC. It is the responsibility of each Certified Recycling Center to ensure that they pay and reclaim CRV only for eligible bottles and cans that were sold in California. Recycling centers may purchase non-CRV bottles and cans for their scrap value, but may not claim CRV reimbursement from the Department of Conservation on those containers, since no CRV was ever paid on them in the first place.

“The Davis administration takes fraud very seriously and is committed to stamping it out,” said Darryl Young, Director of the California Department of Conservation . “These arrests should serve as a wake-up call for those who cheat the system. They will face the consequences of their actions .”

The Department of Conservation provides funding for this DOJ enforcement effort. DOC auditors and enforcement staff supply important technical assistance to law enforcement organizations in building criminal cases related to recycling fraud. The recycling act includes both civil and criminal violations, and the DOC discovered the underlying activities and brought in the criminal investigators and prosecutors to pursue criminal actions in this case.

Primarily dealing with aluminum and plastic materials, the organization targeted in these arrests brought ineligible containers from Arizona, Nevada, Oregon, Utah and Mexico, and also purchased already redeemed (scrap) material and resubmitted it for CRV. Some of the individuals arrested are recycling center operators who are charged with knowingly claiming reimbursement from the state for ineligible containers.

For additional information on California’s recycling programs, contact Mark Oldfield, Department of Conservation at (916) 445-0608. For additional information on the other individuals charged in this case, contact Mike Van Winkle, California Department of Justice at (916) 227-3882.

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