Attorney General Cuomo Issues First Round Of Subpoenas As Part Of Statewide Investigation Into Recycling Scheme That Could Cost New York Millions Of Dollars

NEW YORK, NY (August 25, 2009) - Attorney General Andrew M. Cuomo today announced that he is broadening an investigation started by Suffolk County District Attorney Thomas Spota into a recycling scheme that could cost New York State millions of dollars. The Attorney General is investigating middlemen in the bottle recycling industry that are potentially ripping off the state by illegally redeeming the same bottles and cans multiple times.

Cuomo expanded the investigation statewide and issued a first round of subpoenas to companies in the bottle recycling business. In addition, Spota and Cuomo today announced Spota’s arrest of seven individuals connected to this scheme in Suffolk County.

“This scam siphons money from our State’s already overburdened budget while undermining the environmental protection fostered by the Bigger, Better Bottle Bill,” said Attorney General Cuomo. “By all indications the alleged corruption being announced today is not limited to Suffolk County, and we will continue this investigation throughout all of New York State. Today’s announcement is just the beginning. I want to commend District Attorney Spota and his entire team on the excellent work they have done.”

The bottle and can recycling system is arranged so that beverage distributors (“distributors”) pay beverage retailers (“retailers”) for every empty bottle or can (“bottle”) that the retailers return to the distributors. The distributors, in turn, send the empty bottles to be recycled. Some distributors hire a middleman recycling company to physically collect and transport the empty bottles to recycling centers. Each redeemed bottle is worth five cents - which comes from a deposit that the retailers pay when purchasing the bottle (and then collect from consumers) - plus an additional handling fee. Under the new “Bigger, Better Bottle Bill,” eighty percent of the unclaimed deposits that distributors garner are now turned over to the New York State budget.

In August 2008, Suffolk County District Attorney Spota initiated an investigation to determine whether local retailers were illegally redeeming the same bottles multiple times. The investigation revealed an arrangement between multiple retailers and a middleman recycling company called Boro Recycling (“Boro”). Boro was paid by distributors to collect and transport empty bottles for recycling. However, instead of recycling the bottles, Boro would actually bring the empty bottles back to retailers, who would again redeem them to the distributors for payment. Thus, the same empty bottles were repeatedly cashed in by the retailers, turned over to Boro by the distributor, sent back to retailers, and cashed in again.

Suffolk County District Attorney Thomas Spota said, “The investigation found that, instead of recycling the bottles and cans, Boro Recycling would send them back out onto Long Island to certain soda and beer retailers - their partners in the scheme - who would redeem the cans and bottles again, collecting hundreds of thousands of dollars for another trip through the system. It’s a profitable perversion of New York’s beverage container recycling law and we suspect it’s been going on for years.”

As of the passage of the new “Bigger, Better Bottle Bill” in April 2009, which mandates that eighty percent of unclaimed bottle deposits are turned over to New York State, this scheme is now potentially stealing funds that rightfully should go to the state budget. On a statewide scale, this kind of scheme could be costing the budget millions of dollars. On August 13, 2009, Attorney General Cuomo secured a major victory for New York’s environment and budget by winning a federal district court decision to ensure the implementation of the Bottle Bill.

Cuomo continued, “The passage of the Bigger, Better Bottle Bill was a landmark environmental victory. I will ensure that it is fully enforced and will take action against those who don’t play by the rules.”

Today, Attorney General Cuomo is expanding the investigation to determine if similar recycling schemes are occurring statewide and depriving funds from the state budget. As part of this investigation, Attorney General Cuomo issued a first round of subpoenas to four beverage retailers in New York State: DRC Group Inc.; S.K.I. Beer Corp.; Flair Beverage Corp.; and Parallel Products.

Attorney General and District Attorney Spota also announced that Spota has arrested seven individuals who were allegedly involved in this scheme. Five individuals worked for retailers; the other two individuals worked for Boro Recycling.

The investigation is ongoing.

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