An American Dream Shattered

It was October and I was in Atlanta for the e-waste conference when I received a call from an old friend. He was a Peruvian man who had been a customer of mine when I ran the largest recycling facility in the San Fernando Valley years earlier. He was upset because he had received a letter from the state Division of Recycling which gave him 6 days to close his two recycling businesses. He called me because he knew I was an authority on the law and needed help. When I returned I met with him and his family in his modest suburban home in the Santa Clarita Valley. The letter he received made him look like the second coming of Al Capone. I immediately called an attorney friend, a former attorney for the Division, who was his best chance to fight this. He turned us down because his experience told him that it would only be worse if he represented them. Although he was the best and only attorney who really understood this law he knew that the Division would punish any of his clients. So I agreed to represent him. I submitted the appeal to the Director of the Department of Conservation. This person is a political appointee who has no background in the law governing the program. In requesting the appeal I also asked that my client be permitted to continue operating. In that way he could continue to pay his bills and support his family of 5 to include an autistic son. For this man had achieved the American dream. He had two small businesses which allowed him to buy his own home and purchase a truck to use in his business. The director probably did what all political appointees do; she turned it over to the attorneys. I was told by the attorney that the law did not permit him to stay open. I knew that was untrue so I used an old trick and I asked could you please tell me where that's stated in the law. She came back and said it was policy. I knew if it was policy I could request the director to change the policy. I explained that to her in a letter but the request was denied.

After being forced to close in late October the hearing occurred on December 6. These hearings tend to be a kangaroo court. The defendant never has a chance. That's because the hearing officer is not a judge. He's a fellow employee of the accusers but in this case it was the best I could hope for. Although an employee of the Department of Conservation, he was from oil and gas and not recycling; a civil engineer who had come to Sacramento after working in Bakersfield. He was assisted by an attorney also from oil and gas.

When the hearing started we heard from the state as to why this man should be deprived of his livelihood. The state attorney opened with what seemed like a vicious attack. She introduced a three ring binder with over 110 pages of evidence. Then came the witnesses. The first witness was the lead auditor who had prepared the investigation report. In the summary he would identify records as having been altered. This was determined by a Technical support staff which subjected them to a computerized evaluation. Then they said that the recycling center failed a test sale and had changed the weight on a purchase from a state auditor. The implication here was that the recycler was engaged in fraud by adding weight to legitimate purchases. The report stated that my client had purchased 2 pounds of aluminum cans and then changed the number to 20. In testimony from another witness she said no aluminum was sold and 20 pounds was added. Next they indicated that the recycler had fraudulently purchased and sold previously baled containers. This implies fraud because these containers would have come from out of state and therefore been disqualified by the California program. And finally the report referred to 4 repeat violations and 5 and new violations. It then went on to supply background which included a recycling center that my client had closed. I objected to this because regulation only allows the division to go back three years. But I soon found it was to my benefit because they accused my client code and not documenting a purchase in July when he closed the location in early May of 2004. Since this was not an issue that should not have been included. It even referred to a location that the recycler had never opened because the city would not give him approval. Here the accusation simply said it "never became operational due to unknown reasons". If they'd asked they would've been told. But they made it sound like some shady deal. The report went on to include several pages identified as overview and referencing specifics when it came to the recommendations it said that this husband and wife demonstrated to be this honest, incompetent, negligent, fraudulent behavior and unable or on an unwilling to comply with program requirements. He described him as being a threat to the Fund.

The second witness was a Chinese-American who analyzed the logs. These are the documents that the customers sign when they bring their bottles and cans. Anything he thought suspicious was called an alteration and treated not as suspicious but fraud. When I asked him had he ever read the law he said no. But In 60 pages of testimony he admitted that all he was able to determine with the machine was that more than one pen was used. I told him the law did not require one pen. He also made a big thing out of a correction. A correction was actually a reduction and if somebody's going to defraud the system they increase purchases not decrease them. He made a big deal of the stating that the number had been changed by overwriting. He also testified that this was not permitted. Corrections had to be made by crossing the number out and then re-writing it. Section 2525 of the regulations covers record-keeping by recyclers. This is not stated and is therefore "underground regulation". Simply stated, that's when the government makes up laws and that's not legal.

And then there was the aforementioned test sale. The investigation report stated that 2 pounds was changed to 20 pounds therefore proving fraud. But in testimony a witness stated that only glass and plastic was sold and 20 pounds was added to the records. Were they confused or just willing to go to any length to put this good man out of business? I was an accountant for major corporations and changing this one weight would have also changed the amount paid. That may not have been too hard but three separate materials were sold so 3 different amounts had to be added together to get a total payment. There was no indication that the total had been changed nor did they testify to that. The employee who made the sale was not there to testify how much he was paid. If they're so good why didn't they check that? This would have proved the point. If they truly knew how to audit they would have presented the payment as proof. Why was this omitted?

The state's third witness was a woman who in her testimony could not even paraphrase the law she was supposed to uphold. She was the one who had identified previously baled material in 2 loads from this recycler. She didn't know the law or demonstrate adequate knowledge of the equipment used. She said her training was OJT. But she was an expert. Next her supervisor testified and he claimed that he concurred with her determination. After the second accusation the recycler had a customer return who presented the same type of containers in question. He said he smashed them in his trash compactor. When the supervisor discussed this with the customer he failed to verify that the customer had a trash compactor which he said was the policy. He didn't do his job, instead he focused on whether the customer drank beer or soda. Why can't these people tell the difference between cans crushed from a half million dollar baler versus a home trash compactor?

In another area of state testimony the recycler was accused of the heinous crime of buying wet cans. The hearing officer was told this was a violation because he did not reduce the payment. The law says he may, not must, change it. Then there was a petty charge of not including 22 pounds of scrap glass. This witness was from the training and review section, but instead she operated as enforcement.

In summary I found dealing with the witnesses quite frustrating. My experience and review of the 277 pages of court recorder testimony clearly shows that they were not responsive to my questions. I believe they were coached to not answering questions. I want to know if this was true.

But now let's move on to an analysis of the hearing and the decision from it. The first thing the hearing officer believed was that the test sale and the changing of the weight was true even though there was no witness and the payment was not produced. Next he found that the records were in violation because they were incomplete. The only reason they were incomplete is because they were confiscated. The issue is not always getting printed name and signature from customers. The law requires that you get this or simply write a reason why it was not obtained. If the records were returned they could be completed and be in compliance. There is no harm here. He agreed with testimony that stated that the recycler had not properly classified purchases on the logs. By simply putting a weight anywhere on the log classification is provided. He indicated that because the recycler had paid $300 in fines that it meant the other allegations were true. The recycler simply treated as like somebody dealing with a traffic ticket. It was easier to pay it then take the time to fight it. It was a simple business decision and never did he think it would lead to losing his business. Next he agreed with the division that they had rounded off weights. This should be the jurisdiction of the state Department of weights and measures and not the division of recycling. But they obviously went out of their way to find anything and everything they could to accuse him of. Next he was found guilty of not properly documenting a purchase for approximately $150. He simply used the wrong form. He did not conceal the purchase. He also agreed that the recycler did not properly inspect. No one in this program inspects perfectly, but some are held to higher standards than others. The overwritten correction was determined to be in violation when the law makes no such determination. Four paragraphs of the decision were dedicated to the ink analysis and the testimony of the expert witness who had never read the law. So the hearing officer found the recycler guilty of inconsistent ink and unusual business practices. You won't find that in the law either. He even admitted that the law does not require the use of the same pens. He found the recycler in violation of not providing specific records. Recycler did provide the logs but stated he was never requested to provide additional receipts. Those receipts were provided at the hearing once it was known that he was being accused of not having them. I believe he was never asked for them at the time. Amazingly, the hearing officer agreed that the charge previously baled cans was not proven. Finally he stated my claim that there was no material damage to the fund was not relevant. This should be the primary issue when destroying a man's livelihood. His conclusion showed his confusion. He stated that there was a cumulative impact and that damage to the fund was not necessary to be proven. I disagree. Damage to the fund is the only reason to put people out of business.

The real issue here are that this type of hearing should never be allowed when the outcome of people's lives are at stake. The informal hearing was never intended for this type of situation. This hearing officer had no understanding of the 100 pages of statute, the 140 pages of regulation and the Administrative Procedures Act which governs it. This man who had no qualifications to determine my clients' right to be in business focused on the wrong things. He stated in his decision that "mis-statements resulted in mis-payments". What about the mis-statements of the states witnesses that demonstrated a complete misunderstanding and possible abuse of their own laws? I know of one state employee who has told several people he believes they target Hispanic recyclers. So do I. dear Sir, dear Sir,

What wasn't said in this hearing was that the big companies who have been found guilty of serious violations that have damaged the fund have been allowed to stay in business. Do the rich get richer?