EPA violations by Executive Recyling unclear

Posted on December 12, 2008

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The Government Accountability Office (GAO) has accused Executive Recycling (ER) of Englewood, Colorado of violations of Environmental Protection Agency (EPA) regulations regarding electronics waste (e-waste). As a result of the GAO report, the EPA is now investigating ER. But an S&R investigation into the findings of the GAO report, the EPA regulations and ER’s actions has discovered that ER’s guilt of CRT rule violations may depend greatly on how the EPA classifies the “waste” shipped overseas. The investigation also discovered evidence of possible conflicts of interest on the part of the non-profit environmental advocacy group Basel Action Network (BAN) and one of BAN’s affiliates with respect to the investigation.

Executive Recycling and the GAO report

In August, the GAO released a report titled Electronic Waste: EPA Needs to Better Control Harmful U.S. Exports through Stronger Enforcement and More Comprehensive Regulation. The 62 page report described how the EPA is failing to enforce its own regulations regarding e-waste, especially former cathode-ray tube (CRT) television screens and computer monitors. The GAO monitored e-commerce websites for 3 months and found that “significant demand exists for used electronics from the United States, particularly in developing countries.” And when the GAO investigators posed as foreign CRT buyers from developing countries, the GAO netted 43 e-waste recyclers willing to export CRTs in “apparent violation” of EPA regulations.

Executive Recycling of Englewood, Colorado was one of those 43 companies.

While the GAO report doesn’t name the 43 companies publicly – the company names were submitted to the EPA for further investigation – a quote in the GAO report reveals the connection to ER.

The left image below (click for larger version) shows the quote in the context of the GAO report, page 28, with the quote highlighted. The right image shows the identical quote (also highlighted) from ER’s alternate website, executiverecycling.com.

A “WHOIS” search on “executiverecycle.com” and “executiverecycling.com” finds that both domains were registered and are owned by Brandon Richter, CEO of Executive Recycling.

The GAO report says that they requested that U.S. Customs and Border Protection detain a container filled with “hundreds of CRT computer monitors.” According to the GAO report, Hong Kong had rejected the container because “under Hong Kong regulations, it is illegal to import CRTs from the United States.” Here’s what the GAO said about that container:

We received photographic evidence showing that this illegal shipment of CRT monitors originated from the Denver metropolitan area. According to a third-party source, these monitors came from an electronics recycler in Colorado, which claims to hold 20 to 30 community recycling events each year for homeowners’ associations, city governments, and property managers.

Figure 5 of the GAO report is reproduced below. The figure shows that the description of the contents as “stacked haphazardly, some with cracked plastic cases and broken glass tubes” is accurate.

This container was tracked back to Executive Recycling.

The GAO contends that exporting CRTs to Hong Kong is illegal. Beyond that, they contend that exporting to developing nations is illegal. And the GAO report outright states that Executive Recycling’s containers were illegal. An S&R review of the EPA regulations that govern the processing and export of CRTs suggests that the EPA’s ongoing investigation, started in September, will find that the GAO is right.

The EPA CRT rule

The CRT rule describes how waste handlers and recyclers need to handle cathode-ray tubes. Until the CRT rule was produced, CRTs were treated as hazardous waste. The goal of the CRT rule was to change that:

The purpose of the proposed amendments was to encourage increased reuse, recycling, and better management of this growing wastestream, while maintaining necessary environmental protection. (pdf)

In order to accomplish this , the EPA started treating CRTs as valuable commodities instead of hazardous waste, but under strict storage, labeling, transportation, and export rules. However, the GAO found that the CRT rule was widely ignored since the EPA failed to enforce it.

The specific regulations ER is accused of violating are the export requirements for “used, broken CRTs and processed CRT glass undergoing recycling” (40 CFR Part 261.39). The basic export requirements are listed below:

  • The EPA must be notified at least 60 days in advance of each export to a particular port, and while the notification may cover up to 12 months of exports to that port, it must have all points of entry and departure from each foreign country the CRTs will pass through, the name and address of the importing recycler, a description of how the CRTs will be recycled, and the exporter’s identification information.
  • The export is held until after the EPA notifies the receiving country and all transit countries of the export. If the receiving country objects to the CRT shipment, it is illegal to export the CRTs to that country.

Another category of CRTs, “Used, intact CRTs exported for recycling” (40 CFR Part 261.40), have similar requirements to used, broken CRTs, specifically notification of the EPA and the consent of the receiving country. Only “Used, intact CRTs exported for reuse” (40 CFR Part 261.41) have less stringent requirements on transport, etc. But even CRTs for reuse require EPA notification.

The Denver Business Journal asked EPA investigator Eric Johnson of the Denver regional office if there were any reuse export notifications from Executive Recycling as required. According to the article, Johnson said that “no CRT re-use export notifications from Executive Recycling” have been found as of November 21, the date of the article.

Executive Recycling claims to be a victim of forged documentation

ER has been trying to build a case that they’re innocent because they didn’t know that their wholesaler was shipping CRTs overseas to Hong Kong. ER’s latest press release in response to the 60 Minutes story that sparked this particular firestorm says, in part:

ER has supplied sufficient documentation regarding the shipment published on 60 Minutes that was not aired during the segment.

  • ER published the forged packing list from wholesale buyer supplied by the port authorities
  • ER published the freight/shipping order that was ordered by the wholesale buyer and not ER

[Ed. Note: ER has removed two of their previous press releases on this subject. The complete press release is reproduced below in the Appendix in case ER removes this press release as well.]

ER CEO Brandon Richter said as much in an interview for the Denver Business Journal article mentioned above, and the local Denver CBS affiliate quotes ER as blaming this on a “Canadian-based wholesale buyer.”

However, Jim Puckett, founder of BAN and the source for much of the information in the GAO report, doesn’t believe Richter:

It is highly improbable that ER was not aware of either what was in the container, or that it was going offshore. The notion that an exporter or broker, broke the seal and reloaded the container with other equipment is highly improbable. A recycler that is legitimate will demand to know the final disposition of all of their wastes to make sure they do not face liabilities and legal actions. All generators of CRT waste are responsible for its final disposition. Seagoing containers normally are destined to go offshore otherwise they are not used but rather trucks are used.

According to the Denver Business Journal article, Richter believed that the Canadian company’s container was “going to Canada or just to be sold here in the United States.” And in a response to the 60 Minutes story that has been removed from the ER website, ER published a brief email exchange between Brandon Richter and Tere Blake of shipping company Overseas Container Forwarding, Inc. that suggested Karen Zhang and her employer, Electronics Recycling of Vancouver, British Columbia, Canada, were responsible. Another ER press release that has also been removed from the website (both are available here) claimed that:

These buyers apparently sought to hide their own misconduct by leaving the impression that their shipment was the responsibility of our company. We have discovered that forged documents (provided by the port authorities) were used to improperly shift blame to us when ER sold the tested working units to a Canadian wholesale buyer. We are currently seeking legal actions against this one wholesale buyer in regards to this report.

According to an investigation by the CBC that was similar to the 60 Minutes piece, Electronics Recycling of Vancouver ships significant amounts of e-waste to Hong Kong out of the port of Vancouver. For this reason, ER’s claim that Electronics Recycling was breaking the law is reasonable, but it’s unknown if ER knew that they were making a safe claim or not – ER didn’t respond to a request for comment on ER’s relationship to Electronics Recycling. However, the CBC report ran on October 22 while the 60 Minutes piece ran on November 9, two and a half weeks later.

Electronics Recycling has partners in the United States, including one in Colorado: Electronics Recycling of Denver, Colorado. However, Executive Recycling is not listed as one of Electronics Recycling’s U.S. partners.

The CRT rule is not entirely clear on the matter of export responsibility. The export rules apply specifically to “exporters of used, broken CRTs”, exporters of “used, intact CRTs exported for recycling”, and “persons who export used, intact CRTs for reuse” (40 CFR 261.39(a)(5), 261.40, and 261.41(a) respectively). So the question of whether ER has broken the CRT rules may be determined by how the EPA categorizes the exported CRTs.

When asked about the issue of responsibility, Jim Puckett of BAN said:

However, the EPA is adamant about the fact that the generator of the waste, and not the broker, is responsible for ensuring the material does not end up being exported against the CRT rule.”

And Bob Tonetti, an EPA official who helped write the CRT rule and who was interviewed for the Denver Business Journal, is quoted as saying “[e]xport requires notification. It’s not an excuse to say I didn’t make that decision.”

Further complicating the issue of liability is is the section of the Federal Register publication discussing interstate transport. According to Section V, subsection C, the “initiating facility” is responsible for writing completing a manifest if the CRTs are traveling through states that consider CRTs a solid or universal waste product. The EPA transportation regulations require that a waste “generator” create the manifest for transportation, with a generator defined as follows:

Generator means any person, by site, whose act or process produces hazardous waste identified or listed in part 261 of this chapter or whose act first causes a hazardous waste to become subject to regulation. (40 CFR 260.10)

In addition, international transporters are forbidden from accepting shipping containers containing hazardous waste for export if the transporter knows that the required EPA Acknowledgment of Consent (by the the importing country) is wrong or missing (40 CFR 263.20(a)(2)). Again, though, the question becomes whether this specific requirement applies in the case of the shipment that the GOA opened. Only the EPA knows for certain, and they’re not commenting on the investigation.

Executive Recycling connected to multiple e-waste exports

If the one container tied to ER that the GAO opened was the only container, that would be one level of violation. But it wasn’t. The GAO found that the Hong Kong port authorities have returned 26 containers of “waste” CRTs from the United States since the CRT rule went into effect in January, 2007. According to BAN, six or seven of those returned containers are known to be connected to ER in some way, and they were all returned over a four month period from November, 2007 to March, 2008. In the same time period, BAN claims to have tracked between 20 or 21 containers of unknown electronics “waste” from ER to other countries around the world, 19 or 20 of which were bound for developing nations. The exact numbers provided by BAN have varied slightly depending on when they were presented:

  • Denver Business Journal: 21 containers shipped overseas, eight that were deemed illegal by the receiving country – one to Peru, seven to Hong Kong
  • S&R’s initial interview with BAN’s Jim Puckett: 20 containers overseas, 19 to developing countries, eight that were deemed illegal by the receiving country
  • S&R’s followup with Puckett: seven containers that were deemed illegal by the receiving country, six to Hong Kong

While the discrepancy is curious, BAN’s information was accurate enough that the GAO used it as one basis of their investigation, and an EPA investigation into ER’s export practices is ongoing.

Even if the seven or eight returned containers are found by the EPA to be in violation of the CRT rule’s export provisions, the other containers may have been legal exports. And if the six or seven containers rejected by Hong Kong are all found to be illegal exports, then ER would be known to be responsible for between 23% and 27% of all the returned containers since the CRT rule went into effect. Over a four month period out of the 18 months between the start of the rule and the GAO report’s publication.

BAN and its affiliates figure prominently in the investigations

The Basel Action Network has played a prominent role in this entire process – Puckett traveled with 60 Minutes to China, he agreed to be interviewed for this post, he was interviewed for the Denver Business Journal story, and BAN provided much of the background information used in both the GAO report and the CBC news report. BAN also runs a program called the e-Steward program. According to the e-Steward website, e-Stewards have undergone certification as “upholding the highest standard of environmental and social responsibility.” In fact, one of ER’s competitors, Guaranteed Recycling Experts (GRX), is an e-Steward. GRX and ER compete in two markets – Denver and Salt Lake City – and ER had initially beat out GRX for the city of Denver e-waste recycling contract. According to a Rocky Mountain News article, ER lost the contract following a September audit by the city of Denver recycling organization, Denver Recycles – and GRX was awarded the contract for this year. In addition, the creation of the e-Steward program was announced on November 10, the day after the 60 Minutes program ran and three months after the GAO report was published.

According to the CBS affiliate article:

[Executive Recycling] called the negative publicity “a smear campaign led by competitors” like Denver-based Guaranteed Recycling Experts (GRX).

GRX denies it is involved.

In response to all of the negative publicity, ER claims on their website that “ER has requested to be audited by the BAN to become an E-Steward.” Jim Puckett of BAN confirmed that ER had requested e-Steward certification, but that ER’s application had been rejected for the time being:

[W]e have a prerequisite requirement of transparency and honesty with regard to current and past operations before we can enter into good-faith negotiations on qualifications of e-Stewards. We have told ER’s executive [Brandon Richter] that they currently fail to meet that standard and until they do we will not consider their application.

Executive Recycling did not respond to repeated requests for comment or an interview.

EPA penalties could put ER out of business

If ER is found in violation of the CRT rule, it could be devastating to the company. The financial penalties could be significant, although they’re difficult to estimate due to the significant discretion the EPA has when it comes to assigning penalties. The EPA may assign financial penalties ranging from as little as $129 for minor violations to as much as $32,500 for the most severe violations, plus up to $6,448 per day per violation for multiple severe violations, plus a variable amount based on the “economic benefit of non-compliance” (RCRA Civil Penalty Policy). Or the EPA may seek to suspend or revoke ER’s waste handling permit. It’s also unclear whether each shipment qualifies as a violation or whether each individual CRT in a shipment qualify. And would the per-day penalty be applied for the complete shipping cycle from ER in Denver to Hong Kong and back to the U.S. (20-30 days)? If so, the financial penalties alone could be more than enough to put ER out of business even without the EPA directly revoking ER’s waste handling permit.

S&R’s investigation into Executive Recycling’s allegedly illegal activities has uncovered a number of questions that remain unanswered. On one hand are a number of potential conflicts of interest. The Basel Action Network was the source for much of the GAO’s information, but BAN stood to benefit from the release of the GAO report and the subsequent 60 Minutes story. And one of BAN’s e-Stewards, Guaranteed Recycling Experts, stood to gain financially from the allegations against its competitor Executive Recycling. On the other hand, Executive Recycling’s claims of victimization by a wholesaler/broker and innocence of breaking the CRT rule ring hollow given the GAO sting operation and the rejected shipping container that the GAO seized and opened in the course of its investigation. However, the appearance of conflicts of interest by BAN and GRX does not automatically damn them any more than the alleged CRT rule violations automatically damn Executive Recycling.

The EPA will publish the results of its investigation, and ER’s fate may be decided, sometime in February, 2009.

Image Credits:
GAO website
GAO report, page 28
Executiverecycling.com website
Labelmaster website
National Geographic
AFP, via ABC.com.au website
EPA
Hong Kong customs
e-stewards.org website
executiverecycle.com website

Appendix: Executive Recycling’s third response to the 60 Minutes program on e-waste

Additional Follow Up to 60 Minutes Segment

ER has been working to provide our customers and the community updates on the segment completed by 60 Minutes regarding E-Waste and ER practices.

ER has supplied sufficient documentation regarding the shipment published on 60 Minutes that was not aired during the segment

  • ER published the forged packing list from wholesale buyer supplied by the port authorities
  • ER published the freight/shipping order that was ordered by the wholesale buyer and not ER

ER is working on our website to add a “Process” tab which will list in detail our process from inventory, sorting, decommission, testing and refurbishing of electronic materials

ER has stopped all orders from any buyer for scrap material or wholesale items until they can provide the following information:

  1. Vendor contacting EPA once a year for any tested working units any buyer plans to ship out of country
  2. Provide all necessary documentation of final destination of their facilities and processes
  3. Require downstream sites for scrap material to be ISO Certified and provide all licenses and certifications
  4. Vendor sign contract with ER that states completing all the necessary action items set by ER for the purchase of all materials

ER is using all US downstream vendors for our scrap material (metal, aluminum, wire, circuit boards, batteries, plastic, etc) until any international buyer can supply necessary documentation (certification and licenses) of end of life for all materials

ER has requested to be audited by the BAN to become an E-Steward

ER was audited in September 2008 by the Colorado Department of Public Health and Environment and received the audit results which indicate ER is in full compliance for all local and state regulations

For ER’s other two responses to the 60 Minute program, see this prior post at S&R.

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