On July 8th, 2014

Two Arrested in Million Dollar Recycling Fraud Scheme Used beverage containers transported from Phoenix to Bakersfield

ASA-DOJTwo men have been arrested in a recycling fraud scheme following an investigation by California Department of Justice special agents.  Agents uncovered a scam in which  used beverage containers were being transported from Phoenix, Arizona  to a recycling company in Bakersfield  where the containers were fraudulently redeemed for approximately $1 million dollars over a five month period.

DOJ special agents uncovered the scheme after travelling  to Phoenix to conduct an investigation on behalf of CalRecycle.   During their investigation they watched a semi-truck,  loaded with used beverage containers, enter California through the agricultural checkpoint in Blythe and continue on to a dirt lot in Bakersfield.   At the dirt lot, the used beverage containers were unloaded from the semi-truck and re-loaded into a U-Haul and a 53-foot trailer.

Agents watched  as suspect Mario Mendoza made three trips with the U-Haul truck and delivered the containers to Sequoia Resources Inc. in Bakersfield.  The loads of used beverage containers  were redeemed in the names of S&S Recycling and Gonzalez Recycling.  Agents ultimately pulled Mendoza over on a traffic stop and  arrested him .

After Mendoza’s arrest, the agents obtained search warrants for multiple locations including Sequoia Resources. The agents identified  James Gonzalez as the owner of S&S Recycling and Gonzalez Recycling, as well as  a third company, Ignacio Recycling.  According to the investigation,  Sequoia Resources, owned by Jeffrey Kent Chen, was fronting or loaning  more than $20,000 per week to Gonzalez Recycling. Gonzalez is accused of bringing  in enough CRV material to pay back the weekly advances within three days. From November 2013 through April 15, 2014, approximately $1 million was lent by Sequoia Resources and paid back with ineligible used beverage containers that were fraudulently redeemed for CRV.

With the additional information, On May 30, DOJ agents filed an arrest warrant for Gonzalez on charges of grand theft and recycling fraud.  He was arrested on June 9 in Whittier and taken to the  Kern County jail.  A preliminary hearing for both Mendoza and Gonzalez is scheduled for July 23.

"Anyone redeeming money  at California recycling centers by turning in out-of-state containers is stealing from California," said California Statewide Law Enforcement Association (CSLEA) President Alan Barcelona.  CSLEA represents DOJ special agents along with nearly 7,000  law enforcement, public safety and consumer protection professionals who work for the State of California.  "Obviously there are big bucks involved and there have been numerous cases of late.  DOJ special agents are working to put a stop to this through enforcement efforts.  Considering these containers can be driven in from Oregon, Nevada and Arizona, there is a lot of ground to cover. "

California’s bottle bill provides an incentive for beverage container recycling by establishing a CRV of 5 cents for containers less than 24 ounces and 10 cents for containers 24 ounces or larger. However, CRV only applies to beverages in qualifying containers that were purchased within California, since the recycling fee is added to the price of the beverages sold in the state. Out-of-state containers are not eligible for CRV.

CalRecycle is undertaking a major and multipronged effort to protect the recycling fund, including new approaches to curb fraud. Much of the emphasis is on preventing fraud before it occurs, such as enhanced training of recycling center owners, increased scrutiny of payment claims, and regulations that reduce the number of containers an individual can bring to a recycling center in a single day.

New regulations also now require importers of out-of-state containers to enter California through California Department of Food and Agriculture (CDFA) agricultural inspection stations, declare they are importing empty beverage container materials, complete an Imported Material Report form and submit to an inspection by CDFA.

The California Department of Justice investigates and prosecutes criminal cases on behalf of CalRecycle, which has administrative authority over the state’s beverage container recycling program.

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