A.G. Underwood And Rockland County DA Zugibe Announce Record $4.3 Million Settlement And Felony Charges In Bottle Bill Case

News from the New York Attorney General's Office

May 24, 2018

Attorney General’s Press Office / 212-416-8060


Oak Beverages Inc. Defrauded New York State of $1.85 Million in Bottle Deposits

General Manager Charged with Grand Larceny and Tax Fraud Felonies 

$4.3 Million Civil Settlement Is Largest-Ever In Connection with State Bottle Bill Violations

NEW YORK—Attorney General Barbara D. Underwood and Rockland County District Attorney Thomas Zugibe today announced a $4.3 million settlement with Oak Beverages Inc. for falsely inflating the number of empty bottle returns it received, resulting in a failure to turn over approximately $1,859,000 in unpaid deposits to New York State – a violation of New York’s Bottle Bill. Additionally, the Rockland County District Attorney’s Office charged the company’s General Manager, Manuel Busto Sr., with Grand Larceny in the First Degree, a class “B” felony, and Criminal Tax Fraud in the Second Degree, a class “C” felony. Mr. Busto surrendered himself earlier today.  

“New York’s Bottle Bill is an important green initiative that reduces litter, promotes recycling, and generates millions of dollars to benefit New Yorkers’ health and environment,” said Attorney General Underwood. “My office will continue to hold businesses accountable that knowingly break environmental law and cheat the system to line their own pockets at taxpayers’ expense.” 

Rockland County District Attorney Thomas Zugibe said, “In carrying out this elaborate scheme, the defendant cheated the state by falsely inflating the number of bottle returns received. When cheaters scam the government, law-abiding citizens end up footing the bill. Defrauding New York's Returnable Container Act is not a way to make easy money. This case makes clear that law enforcement’s fight against public fraud is ongoing and those who fleece the system will be held accountable. I thank the New York State Attorney General's Office and the New York State Department of Taxation and Finance for partnering with us on this case.”

Acting Commissioner of Taxation and Finance Nonie Manion said, “The brazen theft of money owed to New York State not only deprives communities of funding for vital programs and services, but it puts honest businesses at a competitive disadvantage. We’ll continue to work with our law enforcement partners to expose fraud in all its variations and ensure that those responsible face justice.”

Oak Beverages has admitted to the conduct and has agreed to pay damages and penalties pursuant to the New York State False Claims Act. New York’s Bottle Bill (otherwise known as the Returnable Container Act), administered by the Department of Taxation and Finance, encourages recycling by imposing a deposit system on the sale of beverage containers. Beverage distributors such as Oak Beverages must collect a $.05 deposit per container sold and keep the deposit proceeds in trust for the State. Distributors pay out deposits upon the return of empty containers and, on a quarterly basis, must turn over to the State 80% of any deposits collected but not paid out for returned containers together with a report of the amounts at issue. Distributors keep the remaining 20% of unpaid deposits.

The Attorney General and District Attorney’s parallel investigations revealed that, in order to keep more of the deposit funds it was holding in trust for the State, Oak Beverages systematically and falsely inflated the amount of empty containers it received and reported those falsely inflated numbers in quarterly reports to New York State. Oak Beverages’ General Manager, Manuel Busto Sr., who initiated and directed the scheme, would modify customer invoices from several driver’s daily route records to exaggerate the number of empty containers collected. According to the settlement, in one instance, Mr. Busto indicated on an invoice that a store in Queens returned 80 bags of assorted empty cans and bottles – although no empty containers had actually been picked up. This resulted in a $1,264.80 adjustment to the invoice that allowed Oak Beverages to retain the money for its own use. Mr. Busto also instructed lower-level employees to modify the company’s electronic sales to reflect these alterations and not inform anyone else at the company about the adjustments. As a result of these inflations, Oak Beverages failed to turn over approximately $1,859,000 in unpaid deposits to the State in the years 2013 to 2016.

The civil settlement – the largest yet obtained in connection with Bottle Bill violations – can be found here.

The investigation arose from a whistleblower lawsuit filed under the qui tam provisions of the New York False Claims Act. The Act allows private persons (known as “relators”) to file civil actions on behalf of the government, and to share in any recovery. The relator here, a former Oak Beverages employee, will receive over $948,000 for bringing this misconduct to light.

The criminal charges against Mr. Busto are merely accusations and the defendant is presumed innocent unless and until proven guilty in a court of law.

Attorney General Underwood and District Attorney Zugibe express their thanks to the whistleblower, the whistleblower’s attorney, and to the New York State Department of Taxation and Finance for their assistance in bringing this case to resolution.    

Assistant Attorney General Justin Wagner of the Taxpayer Protection Bureau led the investigation for the Attorney General’s Office, with assistance from Legal Support Analyst Bianca M. LaVeglia and investigators Ramon Almodovar, Ismael Hernandez, Frank Tirri, and Sal Ventola. The Taxpayer Protection Bureau is led by Bureau Chief Thomas Teige Carroll and Deputy Bureau Chief Scott J. Spiegelman. The Bureau is part of the Economic Justice Division, which is led by Executive Deputy Attorney General for Economic Justice Manisha M. Sheth.