Beveridge & Diamond
 

First-Ever Criminal Charges Filed Against Exporter of Electronic Waste

Beveridge & Diamond, P.C., October 14, 2011

On September 15, 2011, a federal grand jury in the District of Colorado indicted an environmental waste recycling company, its chief executive officer, and its former vice president of operations on charges of wire and mail fraud and various environmental crimes for the company’s improper handling of electronic waste (“e-waste”).  This marks the first time that criminal charges have been brought against an e-waste exporter in the United States.  

The indictments against Colorado-based Executive Recycling Inc. and two of its executives were announced by EPA’s Criminal Investigation Division and the Homeland Security Investigations unit of U.S. Immigration and Customs Enforcement.  Executive Recycling, an e-waste recycling business located in Englewood, Colo. with affiliated locations in Utah and Nebraska, collects e-waste from private households, businesses, and government entities and was registered with the Colorado Department of Public Health and Environment as a "Large Quantity Handler of Universal Waste."  The company was featured in an e-waste exposé on CBS’s 60 Minutes. 

Summary of the Indictment

The indictment includes charges for wire and mail fraud, failure to file a Notice of Intent to Export with EPA in violation of the Resource Conservation and Recovery Act (“RCRA”), smuggling of goods from the United States, and destruction of records.  Executive Recycling was the exporter of record in more than 300 exports from the United States between 2005 and 2008, including the export of over 100,000 cathode ray tubes (“CRTs”).  CRTs are glass video display components of an electronic device – usually a computer monitor or a television – and contain a large amount of lead. 

The company and its officers are charged with defrauding business and government entities that sought to properly dispose of their e-waste.  The defendants allegedly represented falsely to customers that they would dispose of e-waste in an environmentally friendly manner, in the United States rather than overseas, and in compliance with all local, state and federal laws and regulations.  Contrary to such representations, the company allegedly sold e-waste to brokers for export overseas to China and other countries.  The ongoing 30-month investigation included cooperation from law enforcement agencies in the United States, Hong-Kong and Canada.

Penalties for a violation of the RCRA charge alone include imprisonment for up to two years and fines of up to $500,000, or $50,000 per day of the offense.  A conviction for destruction of records during the course of EPA's administrative process carries a penalty of up to 20 years in prison and a fine of up to $250,000.

Significance

The federal government’s willingness to bring criminal charges against an e-waste processor signals an escalation in the government’s environmental enforcement activities in the area of e-waste management and this change may be indicative of future criminal enforcement actions.  The case certainly indicates that e-waste exports is an area receiving increasing national  attention, consistent with EPA’s stated policy priorities.  States have also begun to step-up enforcement of improper disposal of e-waste.  This past March, the Target Corporation agreed to pay $22.5 million in penalties to settle a case brought against the company by several California law enforcement agencies alleging that for years the company improperly disposed of hazardous waste, including electronics and batteries.  On the international front, Canada, several EU member states and other countries have also intensified enforcement of laws governing the export of e-waste in recent months.

The most significant e-waste litigation to date involved a challenge to a sweeping New York City product take back law passed in 2008, over the objection of Mayor Michael Bloomberg, which required manufacturers of consumer electronics to directly manage and pay for the collection and recycling of certain types of e-waste throughout the city, including pickup of e-waste at consumers’ homes.  Beveridge & Diamond, P.C. filed suit on behalf of a number of affected parties, including the Consumer Electronics Association and the Information Technology Industry Council.  Drawing significantly on industry expertise, the lawsuit demonstrated the burdensome nature of the new law and highlighted its constitutional, statutory and administrative defects.  The City’s law was ultimately preempted by a state law before arguments could be heard.

The New York City law is one particularly onerous example of a growing class of product take back laws across the country focused on end-of-life electronic products, batteries, used carpet, paint and other consumer products. The Obama Administration formed the “Interagency Task Force on Electronics Stewardship” in November 2010, and the task force released its 35-page “National Strategy for Electronics Stewardship” in July 2011.   Legislation is also pending in Congress to further restrict the export of e-waste from the U.S. to developing countries.  See The Responsible Electronic Recycling Act of 2011 (HR 2284 / S1270).

In light of the heightened concern about e-waste issues, companies managing used and end-of-life consumer electronics and IT equipment would be wise to review their disposal practices, including the practices of any entities retained to handle  the recycling of e-waste.  In the Executive Recycling case, there is evidence that the recycler’s clients were affirmatively misled.  Under different circumstances, companies doing business with an errant disposal contractor could potentially face civil or criminal liability for conspiracy to engage in unlawful disposal practices.  Electronics recyclers should be careful to identify and comply with applicable federal waste exports laws, similar requirements in several states as well as the requirements of importing countries, many of which impose more stringent regulation on transboundary movements of e-waste for recycling than the United States.

For more information about Beveridge & Diamond’s e-waste related litigation and compliance practice, contact the co-chairs of Beveridge & Diamond’s White Collar Practice Group, Nadira Clarke at (202) 789-6069 and Lily Chinn at (415) 262-4012 or Paul Hagen who leads the firm's work with clients in the electronics sector at (202) 789-6022. 

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