Not Again. Recycle Fraud

Hey.

All right.

So this is episode number 39 39, but Friday from.

I feel like we haven't done one in awhile, but I still can't believe we're on 39.

Oh my gosh.

That's

crazy.

Yeah, it does feel like it's been a while.

Huh?

I'm sitting here.

What button do I push?

Well, welcome back.

Yeah.

Happy holidays.

And welcome back.

My man, Gabe is here.

Gay.

What's going on, man.

So.

Yeah, of course.

Do you recycle?

Yes, I do.

In fact, we just bought a fancy two-sided can for our kitchen, so we'd even be better about it.

So I even bought stickers to do trash on one side and recycling the other.

So guests don't get confused.

So yes, we are trying to be good recyclers, right?

Very good.

So, so how confident in you in the recycling efforts of your state?

Cause you're in Colorado and Colorado is usually a fairly green state.

So are you real confident that they're doing what they supposed to do with the recycled goods and with the money that you know, you're paying for?

Hmm, that's such an excellent question.

Rob, after reading about California and Colorado sometimes has been known as the next California.

I'm not sure.

Um, I'm not sure I'm not confident.

Maybe there'll be some of my California or Colorado folks jump on hopefully to, uh, see what they think.

But, um, I don't know if I'm confident in much about the.

Uh, these type of programs, now that I've read this,

so yeah.

So for you guys in the audience, if you recycle, how confident are you in your state's recycling program?

And tree is here in Theresa is, Hey Robin.

Joe said, Hey street, hell has made it today.

Happy new year, how we made it 20,

22 here.

And Heather says she's a crazy recycler.

Okay.

That's like, Joe is too.

He says he takes his daughter's bottles out of the garbage Joe.

Are those beer bottles that you're done old?

Your daughter is Joe.

So I apologize.

Yeah.

I think Joe has older girls, so I don't know.

Probably.

Yep.

I'm not confident any state is

doing a good job.

Yeah.

So Heather is in Florida and Heather says she's not confident that her state is doing a good job, but she did watch a show about how well Vegas recycles.

Oh.

But, uh, it wasn't Vegas, uh, noted in our article that we're going to go over today.

Rob, I think, uh, I don't know about Vegas either.

It was an Alicia says she's not very confident.

Alicia, where are you?

I think you're in Florida too with heaven.

I think so now how says I'm just crazy, but I do recycle too.

I love it.

And now Thomas is in Houston.

Thomas says his community forces recycling.

We get one trash pickup a week.

Wow.

The main trash can isn't big enough for a family of four, unless you recycle.

That is hilarious.

Okay.

There's a way to make people

recycle now, Joe, with the ISA as an 18 year old girl and a 14 year old boy.

So

yeah, I went to college, so she's not yet.

And Alicia said she is in Florida.

I thought so.

I thought I remembered that, uh, Alicia was in Florida.

I don't know how I can remember that, but I can't even remember what I ate for breakfast today.

I need to recycle some of those brain sales cause.

And then the David is here and David says the UK doing okay, but too much flat shipping.

Yep.

All right guys.

So today, On the Friday Froster episode 39, we are going to talk about recycling and what has happened.

So California's recycling system is apparently rampant with fraud, potentially costing consumers as much as 200 million.

Per year in stolen nickel and dime deposits.

This is a new study that came from a watchdog group.

They titled the report cash for trash.

What they did was they looked at the state auditor's office and well, the state auditors found that well there's fraud going on anywhere from 40 million in some locations to as high as 200 million and it's happening because, well, Hm.

How do I explain this list is get into it.

California's beverage container recycling program.

The fraud is happening through padded loads and falsified, weight tickets, and other tactics that these third party providers are using.

California offers a 5 cent refund for most glass bottles, plaques, plastic bottles, and aluminum cans that are less than 24 ounces and 10 cents per container.

For those that are more than 24 ounces.

So here's how it's, here's how it's happening.

Um,

oh, I lost my place.

Hold on one second.

You guys

want me to go through the four ways that's happening.

Number one.

Um, this one's really good importing non CRV.

So California redemption value containers from out of state.

So those of you in states surrounding California, um, the report actually alleges that empty containers are brought in from, uh, states, such as Arizona, Nevada, and Mexico for illegal redemption by organizers of.

So way, number one is other states are defrauding California out of that money, that payment, because they want it for themselves and they're bringing not California.

What, because all cans have that little thing on there, right.

That says this date on it.

Yep.

Okay.

It's been a while since I looked at it.

Coke can, but um, okay.

Number two, weighing the same truck repeated.

Okay, so Rob's going to get on a soap box on this one.

How is this possible?

Well, clearly nobody is paying attention.

Where are the controls?

Right Rob, um, this study claims that processors of the cans, the recycling, um, including waste hall.

Authorized to process deposit materials can actually claim the CRV that, that CRV on the same containers, more than once by running a loaded truck over a week scale a second time and giving each load a different serial number.

Okay.

Clearly nobody's paying attention.

All right.

That's the way number two way.

Number one.

Padding the load with non CRV containers.

So essentially they are actually taking other things that aren't recyclable, like wine bottles.

They are breaking it up and they are putting it in the containers to make it way more because they're getting paid by weight apparently.

And they're mixing in with.

Okay.

And then the last way is just simply fraud, doctoring the weight tickets, lying on them.

Right?

Recycling centers can doctor the weight tickets by claiming additional weight that does not exist on the reports a to Cal recycle is what the program is called in order to boost the amount of CRV reimbursement.

There you go.

So.

Each each, each week when we cover fraud, when we find it in news outlets, they talk about sophisticated fraud.

But when we break down the stories, they were not sophisticated at all.

So this, when people are bringing bottles across the state from other states into California and getting credit for them, okay.

Now you could say that it would take too much effort and energy to actually check each individual.

I get that, but you always have your habitual offenders.

Who are they?

How is this fraud continuing weighing the same truck twice?

How is that even allowed to happen?

Now I read another article where they said that one was allowed to happen because of antiquated paper pushing processes.

So they logged the trucks on paper.

And so they just use dummy truck number.

In order to allow weighing the same truck twice where you can prevent that.

If you, again, step into the 19th century, not even the 20th century, let's just step into the 19th century and you barcode and scan some of the items.

But your bigger issue here is from an auditor standard.

Who's controlling, managing and watching the third party providers, because this is where the state of California they're using third party providers in order to do all of the recycling.

And the third party providers are fleecing the state,

oh, this is sad.

This is sad.

And it isn't, it isn't sophisticated.

And it does make me wonder how many other states are facing these problems.

I mean, I hadn't thought about the.

Payment for recycling in a long time.

But.

Um, and it did cite in the article, which I can actually post on, uh, on, in the comments, uh, that one of there, of course, going forward, what they're going to do to prevent this is look into technology using technology.

So there you go, Rob they've already, they heard you like ESP.

They needed to get into today's world.

Well, and it's funny because Shree said it's sophisticated because it would be boring if you didn't say it, say it in the news, right?

They always say the sophisticated fraud scheme, no people were recycling goods from other states.

They were weighing the same truck twice and therefore billing the state twice.

Um, they were putting things into recycle bins that are not recyclable because no one really checks.

They just look at the weight instead of looking at the car.

Those three things alone, not sophisticated.

And those are EAs to describe the state and to the tune of almost $200 million a year at this point.

And can we just say like this, this report sites that Cal recycle, which is that state agency that oversees, this has 1 93 fraud convictions, convictions over 90.

Yep.

Right.

So a little bit longer period of time at that's against 15 companies.

Like Rob mentioned those third-party.

I believe, um, and that's for defrauding the program or incorrect record record keeping.

So they've gotten, they've got all these lawsuits out there, all of this stuff.

That's what I want to know.

And I think, you know, of all the things we've talked about on Friday fraudster and I teach about an ethics.

My biggest pet peeve is companies that just react.

After something happened.

And to me, this was like the worst case scenario, because they're reacting way late, right.

Way late.

You've let this go on for this long.

So, I mean, okay.

Hashtag proactive, not reactive people like

you know about, we're just now talking about this because a watchdog group took an audit report and then re made a news story out of it.

So this.

And this is the went in and audited this and found all of this stuff still didn't hit the news or watchdog group came in and simply read the auditive report and said, this is agregious.

So we'd be.

And isn't

it sad.

I mean, let's get on that soapbox for a minute.

Auditors.

We've got to speak up when you find something like this.

I mean, this is, this is huge dollar amounts that taxpayers and the state is losing.

Don't just put it in audit report, do something you know about it.

I, I think that's, you know, I think a lot of auditors just sit back and say, okay, it's in the report, I've done my job, but we got to take our job further than that.

I don't know, Robin.

Um, I think you're absolutely right.

And you know, we talk about this a lot though.

First of all, auditors have to stop being cowards and you have to be brave being brave means that you're going to be ridiculed talked about, you may even lose your job.

You may even lose your career.

Who cares because the first thing you lose when you are silent, Your pride, your morals, your ethics, your values, those things are, to me, the things that you should not compromise on, I've been in positions where I've had to speak up and say something and it's gotten me in trouble.

But as long as you hold onto the truth, then I'm okay with that.

The one thing that I dislike is a cowardly auditor.

And if you're a cowardly, I'm sorry.

Don't come.

Talk to me, asking me for sympathy for anything.

When you, and I'm not saying that these people were cowardly because they just put it in a report and Lyft, I'm not saying that about them.

I'm just saying, when you see something, you have to say something and you have to say it in truthfulness and you, you sometimes have to escalate certain things, but there's a consequence to that.

Escalation, every consequence has a consequence.

Now hell says that, um, the position was filled late last year.

Otherwise Carol recycled.

Uh, director role has been empty since the start of the year.

Scott Smith Klein.

And his resignation with the BC, his resignation was welcomed by the Los Angeles based consumer watchdog, which stated that his resignation was the first step in overhauling, a troubled agency in charge of the state's failing deposit bottle system.

There you go.

So that watchdog agency has said that there was something wrong with the director in that group.

Um, So now David David is saying, Joel, Robert, this is the second session he's attended with a great discussion.

Thank you.

And you are right.

We have to be brave.

Yes.

Um, I think that, uh, you know, how I would agree with this soap box that, you know, it starts with leadership.

So obviously leadership was poor, uh, within the agency and.

That just trickles down.

Nobody it's that nobody care mentality, the director didn't care knew it had been going on new.

We just filed lawsuits to, uh, to, uh, you know, correct the problem.

I mean, I think that's, that's the sad thing to me is that it's, it seems like they never wanted to get in front of the problem.

They just wanted to take people to court when they found them.

And you know, one of my favorite things to say, Rob, I know, you know, this is auditors.

We have to stop just finding the.

We have to fix the problem.

well.

And I think so, I think, I think we walk a fine line when we actually try to fix problems, but I think what happens is we keep it in the report and that's it.

And we say, oh, we wrote a report.

That's it.

We don't express it to executive management.

And again, Sometimes you have to go outside of your organization.

If your organization is ethically and morally compromised, why would you sit there in it and say the same problems to the same people who are ethically and morally compromised?

That doesn't make any sense.

So like Thomas.

You know, another part of being an audit of it was making sure the audit report addresses material and relevant items.

Right.

I talked about that in one episode of my podcast, audit bites, shameless plug, uh, uh, and I think it was titled why clients ignore your reports.

If you're putting bull crap in your audit.

Clients shouldn't read it.

But if you're putting in relevant items and something is not being addressed, you have a board of directors that you could go to.

Oftentimes you have outside agencies that oversee your activities that you may need to go to go to.

I know there's this thing where people say you need to stop snitching.

Don't snitch.

No, you do snitch.

If you see something, you say something otherwise, how do you make your collective community a better.

If everybody's sitting back, I'm not going to say anything because I might get fired or I'm not going to say anything because I don't want to rock the boat.

In the meantime, let's just take Boeing.

For example, that's the prime example where those airlines have crashed and people have died.

And now they're going back and they're looking at this case in the documentation.

And there was several people in that organization that knew that this part was faulty and that it could cause a plane to crash.

And those people did not say a word.

Those are despicable.

There's no other way to say it.

There there's some, uh, correspondence back and forth where a couple of people were joking about the part being faulty.

And now they're over what like 600 people dead.

Now.

You're terrible people.

There's no other way to say it.

You should have snitched.

You should.

There's no code of silence that you maintain here.

Say something.

No, I'm just kidding.

I, uh, I always read the Boeing emails during my ethics trainings because those ones get me too.

But, um, you know, I think this one is a case of probably 15 different third-party agencies.

Um, a lot of employees obviously bringing recycling to those Cal recycling centers.

There was a lot of people involved in this.

So, you know, let's just talk about the fact that.

During the pandemic during our COVID times, unfortunately we have to worry about stuff like this.

Even more, we have to pay attention to stuff because people are hurting, they do need money.

So I think, you know, to me, this one was eyeopening because for us as auditors, you know, where in our lives personally, professionally.

Could people be naked, nickeling and diming.

You know, if you're a state auditor, if you're a, uh, you know, government auditor, I think this is great.

A great time to look at these programs.

I mean, we've talked about unemployment fraud, obviously, you know, is huge still.

Um, and I still keep seeing reports on that, but, um, you know, this is, this one's really interesting.

I think specifically for the time we're in right now, because there was a lot of people that, you know, were involved in this.

Yeah.

So, so now let's take, let's talk about the watchdog group and some of the things that they recommended.

So I was looking through that list.

And so they said in, in the report, here's some things that were recommended.

Wait a minute, this is from the auditing office.

They said, switch to an extent.

Producer responsibility system via the passage of Senate bill 38 to Institute a modernized system at big supermarkets and recycling centers featuring reverse vending machines and bag drop machines that can screen containers for refund eligibility.

Okay, look, let me just, let me just say this.

What in the hell did they just say, look,

we're not addressing the controls that are lacking.

So now you're telling them to pass another Senate, bill, why to do something at the end of the day, you want to make sure that legitimate items are being sent or received, and that you're paying for the appropriate weight.

All of that.

At the Thomas' point, when you load audit reports with nonsense, you get out nonsense.

I just, I really, really like this idea of a vending machine, a reverse vending machine.

Sorry, because I just want to know how gigantic this vending machine has to be, because, you know, I'm, I'm envisioning.

Uh, Coke, vending machine, right?

Like, and putting the Coke can back in there.

Sorry, I just find this really humorous.

I mean, I hope to goodness, because it says this is used in like the UK.

Uh, Oregon's done a really good job.

So shout out to Kelly, Paxton, who we missed terribly.

And hopefully we see her soon, but it says Oregon's done this stuff really well.

Like I want to know if anybody knows what these vending machines look like.

These reverse vendor.

But wait, here's the thing though, a reverse vending machine alone, doesn't solve the problem.

There's a corrupt culture underneath all of this.

So you have this shiny new toy and you still have the same corrupt culture, but check this out.

Here's something else they said.

They said, and I'm not trying to bash this.

I'm really not, but it says require processors to pay recycling centers for scrap CRV processing and administrative payments by check or.

Uh, transfer no cash.

Okay.

While I do agree, cash is kind of crazy within this process, but how many shows have we done where everyone's committing wire fraud?

Again, if you're not addressing,

it's still fraud, it doesn't matter if it's cash or

the underlying culture is corrupt.

And so that's what you have to fix.

Um, what else would be.

Uh, another one was set up an electronic tracking system requiring processes to report to Cal recycle all CRV loads bought, sold, and shipped to end-users and to report inventory on a monthly basis.

Yeah, I get that.

That's important because what you can do is monitor trends and you can see if somebody's giving you exorbitant amounts, but this thing alone is not going to solve the problem.

There's an entire system that needs to be overhauled.

So, um, but it all starts with Joe, the ethics and culture in the organization.

And always, it always comes back to that.

It doesn't, it looks like they don't have, uh, too good of a leadership or even leadership positions, according to how he did some research for us.

Did you see that four out of the 12 executive positions are currently listed as vacant, which is obviously a problem.

They can't even get people to work there.

Um, it does say that.

Um, I, in the article that I posted calorie cycles, investigators and auditors use all of the tools currently available to aggressively root out fraud in all of California's recycling programs.

You know, I just, I guess that statement bothers me again because I'm on my soap box still about, you know, why do we want to root out?

Why don't we want to prevent the fraud.

Like there's, there's just so much wrong with that one statement.

I mean, I love writing investigators that find fraud.

That's great, but you know, rooting out fraud.

Isn't what we should be focusing on.

Now, the second sentence does say Cal recycle is working through pilot programs to pursue new technologies, to increase consumer access.

Cause I heard somebody screaming that in the comments that it's hard sometimes to get.

To figure out where to take your recycle.

Um, and then it says while reducing opportunities for fraud.

So they did mention, you know, they're exploring technologies to reduce it, but it just seems to me like everything I'm reading about this is, you know, the ways that they find the fraud and that just bothers me.

It's preventative, not detective.

Right.

So anyway,

yeah.

And again, not, not to dunk on government agencies.

When you have a lot of outsourcing with very little oversight, that's when it's this, this type of fraud happens.

And a lot of governmental agencies are outsourcing a lot of things.

Nowadays are a lot of people with government contracts, which are good in and of themselves, but you have to follow up and maintain good relationships.

Good reporting.

Governance, shall I say, like, for example, she even says here, when she worked at target, the biggest step is crushing the boxes.

You can get big money for that.

I'll tell you.

When I worked for, um, when Dixie many, many years ago, uh, back in the nineties, that was another thing you got paid for those boxes.

And that was one thing you wanted to make sure that they were strong controls over.

So it looks like nothing has changed.

And Heather says and Duvall county, they stopped picking up the recycling yet.

We're still paying for the service and we have to drive the drop.

Wow.

What you have to drive to drop it off at the location.

I

sort of recycling tends to be a frustration to most people I think.

Um, you know, so I find, I think that's interesting too.

Um, and by the way, I just, or do you guys, are you on next door?

Does anybody?

So I, I recently deleted next door because it's a lot of drama in your neighborhood and it's very.

Like it's very negative.

I found.

Um, but anyway, there was a somebody that said they tried to get boxes from a local store, like a target and the person wouldn't give them to them.

Cause they were.

And there was like all this conversation about it.

And I don't, I don't think people realize the back, you know, the backstory to some of this, like with

on the back end, they get paid for those boxes.

I remember the company back in the day used to be called Smurfit, I think.

And it was a recycling company that would have deals with a lot of these, uh, retail stores.

And they would provide you with a container.

You put your boxes in there, they would get it, weigh it.

So on the back end, you made revenue from recycling, those boxes.

So look you guys Friday for us.

Episode 39.

Oh no, not again.

Recycling fraud, fraud fraud.

So I guess I recycled the word fraud.

So we've been talking about California and the mishaps that they've had, and apparently it's not just this state, other states have had problems, but like Joe just said, Oregon apparently is doing it pretty well.

Um, how did it happen?

Well, Joe told us they were weighing things twice.

They were trying to get credit for things that can't be recycled and actually they get credit for things that couldn't be recycled.

And apparently there are a lot of open positions in the agency and well, those open positions mean.

There's probably something wrong in the culture there.

If you can't get people to come work for you or to stay the state auditors came in and found that there was some fraud that was happening.

It may have made some small news stories, but it got big when a watchdog agency took that audit report, dissected it and found well, this is a rampant problem to the tune of maybe up to $200 million per year in the state of California.

Hmm.

Good story.

Good.

Find Rob,

this is pretty sad.

So guys, here's what I'll say.

If you like this podcast, tell all of your friends, tell them to go to Friday froster.com and you can find all past episodes and you can even get CPE credit for many of the episodes, but also go to Stitcher, Spotify, apple, Google, wherever you listen to your favorite podcasts downloaded.

Give us a five-star review because, well, aren't, we worth it.

And here's the other thing I'll say, if you are looking for a kick-butt trainer, you've got Joe, you've got myself, you've got Kelly, we do training and we eat specialize in specific things.

And we are very good at what we do.

Joe is just good at everything.

I mean, she's Joe, but Joe, what do you specialize?

Well, I'm just going to give a plug for my, uh, audit program, total quality auditing only because it's starting soon.

So in 11 days, January 18th, we're starting our monthly webinars series.

You guys, this is the fourth year.

I will have been doing this.

I know.

I've just over the moon with how many people have signed up for this year.

Uh, I'm calling it re-imagine internal audit.

So if you're ready to do that, go to total quality auditing.com and join the series.

Um, but otherwise I am booked for ethics a ton in the spring already.

So audit or ethics either one reached out.

Yeah.

So Joe, how many credit hours do we get for the webinar series?

The

webinars series is once a month.

So over 12 months, if you come to all of them, you get 12 CPE for the year.

You also get to have your ethics for your IAA certifications.

If you attend, I think it's February and September.

So you get essentially two behavioral ethics and 10 auditing credits.

If you come the whole year, one every third, third, third, Tuesday, every month for that.

And it's super fun over lunch, most, most locations.

So,

so you guys head on over to her website, sign up for the webinar series.

Now here's what I want.

I chapters organizations, give me a call.

You need a trainer right now.

I'm really pushing the ask.

Better questions.

Get better answers, perform better audits.

If you guys don't know that is my book hit top 50 in the U S and number one in France.

Why France?

I don't know, but my goal is to teach auditors how to ask better questions while they are auditing.

And I have a.

Four hour, eight hour and a 16 hour program.

Based on that book, ask better questions.

Get better answers, perform better audits.

If you go to ask, get performed.com, you can find that information.

So, oh, thank you very much, Joe.

Now let's talk about Kelly.

Kelly has great great women in fraud podcasts.

If you've not listened to that bud cash, you need to listen to it.

And Joel, I was trying to remember which episode was the one where she interviewed, uh, oh, I can't say it on air.

The woman who pulled out something later on, that was a fascinating episode.

Um,

I don't know.

I don't know what episode

it was.

Oh, I'll have to remember it.

And now till you guys next week, Great women in fraud.

Go there.

Listen to that podcast.

It is a great podcast where we'll she spotlights great women in.

Oh, and

Kelly just texted me that she got a keynote speaking spot at a casino in may, and she'll be talking about pink collar crime.

And her message to me was in true Kelly fashion.

Uh, it's always ironic to train about embezzlement at a casino.

So I thought that was awesome.

So go Kelly.

Well, it really is because if you think about most of our stories, the people end up.

So this is awesome.

You know what, Joe, there is one last thing that you probably want to talk about.

Isn't there a fraud retreat that's coming up real soon.

Gosh, it's crazy to me.

Cause I've been talking about it.

Oh, it's been 20, 22.

Well, okay.

So yeah, August it's not till August, but if you guys want 16 hours of in-person, which I know we're all still looking forward to, we've kind of gone up and down with in-person.

But as far as we know, in person at the Gaylord Rockies resort in Denver, right by the airport, uh, two days, it's a Thursday and Friday, August 4th and fifth, you'll get.

Ethics you'll get, um, fraud, CPE.

So our, for our CFEs out there, it'll be some specialized knowledge.

It'll be some personal development.

It's going to be fantastic.

Kelly will be there.

Rob.

Hopefully we can talk into coming.

And I know a couple of you guys on here, uh, are coming as well already, so it's going to be fun.

Fraud retreat.com.

I will say I am 95.3% sure that I'm going to feed

5.3.

I love it.

All right, I'll take

it.

Well, you know, I'm a CPA, so I had to be precise with it, right.

Oh, I know it.

That's awesome.

Thanks for letting me selfishly, plug those two events.

Look, this is what we do here, because I think, I don't think anyone minds, because we give away information and entertaining.

Here.

And we do it for the purposes of connecting with you all because we love what we do and we're passionate about what we do, but we do this for a living.

So we should be able to talk about what it is that we do.

So fraud, retreat.com, the best doggone fraud conference around.

And I am 95.3% sure that I'm going to be there in.

So here's what I'll say.

Thank you guys for joining us.

If you came in late, go back to the replay, either on LinkedIn or on your favorite podcasting platform or on Friday or.com.

And we'll say if you run a business and you think that you want to advertise on this podcast, let us know because we've gotten some interest in that now.

And so we're going to have a few advertisers coming in to, uh, give us some showcase some of their products and or services.

All right, Joe, any last word?

Nope.

That's

it.