Bottleneck Ahead

Liz is reporting that AG Andrew Cuomo is launching a full scale investigation on the alleged perversion of the state's returnable container law-and provides the link to the AG's press release: "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."

The double redemption scheme takes on a more ominous meaning when the state is scheduled to keep 80% of the unredeemed nickels-money that is earmarked for New York's beleaguered budget gap. But, in his release, Cuomo appears to act a if the alleged scheme was already hurting the state's treasury: "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.”

Here's the money quote as far as the unredeemed nickels are concerned: "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."

The key word in the above quote is, "potentially." And we can't see any shennigans by the accused while the state is examining them with a proctoscope. But going forward, what makes this especially challenging is that the company in the center of the investigation, Boro Recycling, is one of the largest-if not the largest-third party recyclers in New York: "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."

If true-and if Boro is somehow sidelined by this-it creates a significant problem for all of those water companies that really have few options when it comes to arranging for the pick ups of their empty containers. Most of these water distributors do not store door deliver; and therefore can't simply back haul empties like so many beer and soda wholesalers do.

Clearly, with the state having a vested monetary interest in the redemption system, a methodology for insuring that collectors have a fiduciary responsibility-perhaps bonding is merited-becomes essential. But the AG's investigation, has the potential for creating short term chaos; and we imagine that the scrambling for collection agents has already begun.