News Release

Office of Public Affairs

For Immediate Release: May 23, 2016
Release #2016-10
For more information contact:
Lance Klug

SACRAMENTO--Two men from the Los Angeles area will spend time behind bars and pay $1.02 million in restitution to the California Department of Resources Recycling and Recovery (CalRecycle) for operating multi-state recycling fraud rings from two public storage facilities in South Gate. A five-month investigation revealed the men used the storage facilities as hubs to smuggle out-of-state used beverage containers into California for the purpose of defrauding the California Redemption Value Fund.

“Californians expect and deserve vigorous fraud-prevention efforts to ensure the nickel or dime they pay at the cash register for CRV doesn’t wind up in the hands of criminal organizations,” CalRecycle Director Scott Smithline said. “CalRecycle and its enforcement partners won’t stop until we put these smugglers out of business for good.”


California Department of Justice photos of evidence from May 4, 2016, raid at South Gate storage facilities

Acting on a tip from CalRecycle, the California Department of Justice’s Recycling Fraud Team launched an investigation into Nova Storage and South Gate Public Self Storage in December 2015. During the investigation, agents observed used beverage containers from Phoenix, Ariz., being illegally transported to the South Gate storage facilities, then taken to local recycling centers and fraudulently redeemed for California Redemption Value.

On May 4, 2016, agents, with the assistance of CalRecycle staff, executed search warrants at the locations listed below and made the following discoveries:

Nova Storage - 5951 Firestone Blvd., South Gate

  • Agents witnessed four people unloading used beverage containers from a J&A Trucking trailer; four people, including the truck driver, were detained.
  • The truck driver told agents he had picked up the material in Albuquerque, N.M., on May 3, 2016.
  • Agents arrested Francisco Flores, 59, of Los Angeles after determining he was the head of the organization and had hired the others to work for him.

South Gate Public Self Storage - 5911 Firestone Boulevard, South Gate

  • Agents witnessed seven people unloading used beverage containers from a Bustillos Express trailer; eight people, including the truck driver, were detained.
  • The truck driver told agents he had picked up the material in Phoenix, Ariz., on May 3, 2016.
  • Agents determined four of the people were being paid by Francisco Flores to unload the materials and deliver them to local recycling centers.
  • Agents arrested Guillermo Chavez, 62, of Anaheim after determining he was the leader of a second smuggling ring who hired others to unload and redeem out-of-state material.

Agents searched a total of 18 storage units at the two locations and seized 35,479 pounds of aluminum used beverage containers worth an estimated $70,958 in potential CRV. They also seized 9,125 pounds of plastic used beverage containers worth an estimated $11,406 in potential CRV.

At a hearing on May 11, 2016, Flores pleaded guilty to charges of felony recycling fraud and was sentenced to one year in jail and ordered to pay $800,000 in restitution. Chavez pleaded guilty to grand theft and was sentenced to four months in jail and $225,000 in restitution.

At a Glance: CalRecycle’s Fraud Prevention Efforts

California’s Beverage Container Recycling and Litter Reduction Act incentivizes recycling through a CRV fee paid by California consumers at the time of purchase and refunded upon return of the empty beverage containers to recycling centers certified by CalRecycle to refund CRV. Since 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; application of prepayment controls; and post-payment reviews and investigations.

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CalRecycle provides oversight of California solid waste handling and recycling programs to protect human health, develop sustainable solutions that conserve resources, and reduce greenhouse gases that contribute to climate change.