BILL ANALYSIS Ķ
AB 794
Page 1
`Date of Hearing: April 26, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 794 (Wieckowski) - As Amended: April 13, 2011
As Proposed to Be Amended
SUBJECT : SOLID WASTE: HAZARDOUS ELECTRONIC WASTE
KEY ISSUE: SHOULD COLLECTORS OR RECYCLERS OF ELECTRONIC WASTE
BE SUBJECT TO CIVIL LIABILITY, AS SPECIFIED, FOR MAKING A FALSE
STATEMENT OR REPRESENTATION IN ANY DOCUMENT USED TO COMPLY WITH
THE ELECTRONIC WASTE RECYCLING ACT, INCLUDING DOCUMENTS
IDENTIFYING THE SOURCE OF COVERED ELECTRONIC WASTE?
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
SYNOPSIS
This bill seeks to address the problem of fraudulent claims for
recycling or recovery payments within the electronic waste
recycling program operated by CalRecycle. According to the
author, this type of fraud was one of the key problems
identified during a joint oversight hearing in the Assembly
earlier this year. CalRecycle data show that between 2 and 12
percent of payment claims are denied each year, most often
because they contain fraudulent information with respect to the
true source of the e-waste, resulting in millions of dollars of
claims paid out that should not have been. To address the
problems of fraud, the bill would impose civil liability of up
to $25,000 per violation upon a person who makes a false
statement or representation on any document used for purposes of
compliance with the Electronic Waste Recycling Act, the statute
governing operation of the recycling program. The person would
not be liable for that statement or representation if he or she
has made verifiable and reasonable efforts to determine the
source of the covered electronic waste, consistent with existing
regulatory requirements to make reasonable efforts to do so.
The bill also seeks to codify various regulations authorizing
CalRecycle to conduct reviews of recycling payment claims and to
audit the operations of recyclers and collectors. The bill was
approved by the Assembly Natural Resources Committee by a 9-0
vote, and there is no known opposition.
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SUMMARY : Imposes civil liability upon a person who makes a
false statement or representation on any document used for
purposes of compliance with the Electronic Waste Recycling Act
(the "Act"), and codifies regulations authorizing the Department
of Resources Recycling and Recovery ("CalRecycle") to conduct
reviews of recycling payment claims and to audit the operations
of recyclers and collectors. Specifically, this bill :
1)Authorizes CalRecycle to administratively impose civil
liability in an amount of up to $25,000 per violation against
any person, including a covered electronic waste (CEW)
collector or recycler, who makes a false statement or
representation in any document used for purposes of compliance
with the Act.
2)Provides that a collector or recycler who makes a false
statement or representation regarding the source of CEW shall
not be liable for that statement or representation if the
collector or the recycler has made verifiable and reasonable
efforts to determine the source of the covered electronic
waste, such as, but not limited to, checking personal
identification or performing reasonable spot checks or audits
of the veracity of source documentation.
3)Permits CalRecycle to revoke the approval or deny the renewal
application of a CEW collector or recycler that makes a false
statement or representation in a document used for purposes of
compliance with the Act; or has a history demonstrating a
pattern of operation in conflict with the requirements of the
Act.
4)Prohibits CalRecycle from paying an electronic waste recycling
payment or recovery payment for CEW generated outside of the
state and subsequently brought into the state.
5)Requires CalRecycle to pay a CEW collector or recycler upon
completion of its review of a payment claim. Authorizes
CalRecycle to examine a payment claim to validate its
completeness, accuracy, truthfulness, and compliance with
applicable laws and regulations.
6)Permits CalRecycle to conduct a selective audit of authorized
collectors, covered CEW recyclers, or manufacturers to
determine whether recovery or recycling payments are being
paid by CalRecycle according to the requirements of the Act.
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7)Provides that a CEW recycler wishing to contest the denial or
adjustment of a payment claim by CalRecycle shall appeal that
action by filing a written appeal within 30 days of the notice
denying or adjusting the claim, and specifies the required
content of the appeal.
8)States that CalRecycle shall provide a hearing to consider the
appeal, the reasons for denial or adjustment of the payment
claim, and any additional relevant information presented by
the claimant or CalRecycle staff; and subsequently to issue a
written decision stating the factual and legal basis for the
decision.
EXISTING LAW :
1)Pursuant to the Hazardous Electronic Waste Recycling Act of
2003:
a) Requires a consumer to pay a CEW recycling fee upon the
purchase of a new or refurbished covered electronic device
(CED) and specifies the amount of the CEW recycling fee
ranging from $6 to $10 for each CED depending on the screen
size. (Public Resources Code Section 42464.)
b) Requires all fees collected pursuant to the Act to be
deposited in the Electronic Waste and Recovery and
Recycling Account, and authorizes those monies to be
appropriated for the following purposes:
i) To pay refunds of the CEW recycling fee.
ii) To make electronic waste recovery payments to an
authorized collector of CEW
iii) To make electronic waste recycling payments to CEW
recyclers.
iv) To make specified payments to manufacturers who take
back CEW from consumers for the purpose of recycling the
item. (Public Resources Code Section 42476.)
2)Pursuant to CalRecycle regulations (Chapter 8.2 of Division 7
of Title 14 of the California Code of Regulations, commencing
with Section 18660.5):
a) Provides that only CEW resulting from a California
source, and not CEW owned by a person in California but
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used entirely outside California, is eligible for recovery
or recycling payments, and correspondingly prohibits a CEW
collector or recycler from requesting payments for
non-California CEW. (Section 18660.6.)
b) Requires a CEW collector to make reasonable efforts to
determine if CEW it collects is from California or
non-California sources. These reasonable efforts include,
but are not limited to, conducting spot checks, checking
for a valid California identification, and requiring
additional documentation from collectors delivering large
numbers of CEW. (Section 18660.20(c).)
c) Requires CEW recyclers to ensure that recycling payments
are not claimed for non-California source materials.
(Section 18660.21(e).)
d) Requires CalRecycle to review payment claims made by CEW
collectors and recyclers and determine if a payment is due
under the Act. Authorizes CalRecycle to deny or adjust
payment for an incomplete or deficient payment claim.
(Section 18660.30.)
e) Allows CalRecycle to conduct an audit of CEW collectors
and recyclers to determine compliance with the Act.
Provides that if a CEW collector or recycler fails to
provide reasonable access for audits, CalRecycle may revoke
the collectors or recyclers approval to participate in the
payment program and deny current and future claims for
payment. (Section 18660.9.)
f) Allows a CEW recycler to file a formal appeal of a
denied or adjusted recycling payment claim within 30 days
of the notice of denial or adjustment, and specifies the
required content of the appeal. Provides for a hearing of
the appeal before CalRecycle's director or designee, who
shall issue a written decision stating the factual and
legal basis for the decision. (Section 18660.31)
COMMENTS : This bill seeks to address the problem of fraudulent
claims for recycling or recovery payments within the electronic
waste recycling program operated by CalRecycle. According to
the author, this type of fraud was one of the key problems
identified during a joint oversight hearing by the Natural
Resources and the Environmental Safety Committees earlier this
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year. To address the problems of fraud, the bill would impose
civil liability of up to $25,000 per violation upon a person who
makes a false statement or representation on any document used
for purposes of compliance with the Electronic Waste Recycling
Act, the statute governing operation of the recycling program.
The bill also seeks to codify numerous regulations authorizing
CalRecycle to conduct reviews of recycling payment claims and to
audit the operations of recyclers and collectors.
Background of the Electronic Waste Recycling Act: In 2003,
California adopted the Electronic Waste Recycling Act of 2003
(the "Act"), which established the nation's first electronic
waste recovery and recycling program on computer monitors,
laptop computers, televisions, and similar video display
devices. The Act established a funding mechanism to improve and
provide for the proper end-of-life management of certain
hazardous electronic products. The program is funded through a
fee paid by consumers of covered electronic devices at the time
of retail purchase. Collected fees are remitted by retailers to
the State and deposited in a special account. (Assembly ESTM
Committee & Natural Resources Committee, Memorandum dated
February 28, 2011.)
CEW collectors are those individuals who collect, consolidate,
and transport CEW generated in California, often with no direct
cost to the state. Collectors deliver the waste to CEW
recyclers who receive, process, and recycle the CEW. Both CEW
collectors and recyclers may submit payment claims to CalRecycle
for compensation. CalRecycle reviews the claims for compliance
with the Act and, if appropriate, makes payments to approved
collectors and recyclers that are intended to offset the net
cost of appropriate waste recovery, processing, and recycling
activities.
According to CalRecycle data, since January 2005 approximately
965 million pounds of claimed CEW have been recycled and over
$420 million in payments have been made to CEW collectors and
recyclers. There are approximately 600 approved CEW collectors
and 60 approved recyclers throughout the state. As a side
benefit, the state's CEW infrastructure also recovers
substantial quantities of miscellaneous electronic waste not
covered by the CEW payment system.
Fraudulent Claims and Noncompliance with the Act Cost the State
Millions . According to CalRecycle statistics reflecting claims
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submitted from 2005 through part of 2010, CalRecycle has
annually denied between 2 percent and 12 percent of payment
claims because of non-compliance or significantly inconsistent
(and possibly fraudulent) documentation. Since 2005,
approximately $20 million in payment claims have been denied-an
average of 5% of total payments claimed.
A major issue with fraud involves electronic waste that is
brought in from out of state. The Act only allows payment for
CEW generated in California. CalRecycle regulations prohibit
payment for CEW owned by a person in California but used
entirely outside of the state. However, some CEW collectors and
recyclers seek payment under the Act for out-of-state electronic
waste by submitting fraudulent documents claiming that the waste
was generated in California. Some believe that millions of
dollars have already been paid out in fraudulent claims where
the fraud unfortunately went undetected by the state. Last
year, a news article in the Sacramento Bee ("California's
Pioneering E-Waste Program A Model Gone Wrong"; July 18, 2010)
provided some examples of purported source information,
submitted to CalRecycle, that illustrate the nature of the fraud
problem:
To qualify for payment, recyclers must document that
monitors and TVs come from California. But the logbooks
they give the state, with names and addresses of the
original owners - provided by collectors and handlers
who gathered the waste - frequently read like works of
fiction. There are bogus names, made-up addresses, dead
people and Hollywood celebrities. And there is
brazenness by the truckload. "I would find Dustin
Hoffman's name, Robin Williams' name, Mike Tyson's
name. It's just incredible," Mahan said.
Here's what one state official wrote after
spot-checking a 2009 claim from SIMS Recycling
Solutions headquarters in Roseville seeking $482,000
for 1.2 million pounds of e-waste delivered to its
Southern California plant: "100% of the sources
contacted stated they DND (did not discard) ? The last
names appear to have been looked up in some sort of
alphabetical directory ? Patterns of falsehood are
obvious in these logs."
This Bill Increases Civil Liability To Deter Fraudulent Claims.
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The bill also provides CalRecycle with significant
administrative authority to punish and deter fraud by allowing
CalRecycle to impose up to $25,000 in fines per violation
against a CEW collector or recycler who makes a false statement
in a document submitted or used for the purpose of complying
with the Act. This includes, most notably, the paperwork
accompanying a payment claim that purports to document the
source of the CEW as being within the state. Additionally, the
bill authorizes CalRecycle to exclude a collector or recycler
from the CEW program who has committed fraud or has a history
demonstrating malfeasance under the Act.
Under this bill, a collector or recycler would not be liable for
making a statement regarding the source of the CEW if he or she
has made verifiable and reasonable efforts to determine the
source. The term "reasonable efforts" is guided by Section
18660.20(c) of the CalRecycle regulations, which already
requires collectors to make reasonable efforts to determine the
source of CEW, and specifies a number of actions which
constitute "reasonable efforts" (e.g. spot-checking, verifying
California identification, etc.) that are provided as examples
in the bill.
This Bill Codifies Regulations That Will Aid CalRecycle's
Ability To Combat Fraud. Under existing regulations, CalRecycle
is authorized to review payment claims to ensure compliance
under the Act and to prevent fraud. As part of this review,
CalRecycle conducts spot-checking, which involves contacting the
sources of the CEW listed on the payment claim. CalRecycle may
also conduct audits to detect fraud, including examining on-site
activities or reviewing the subject's books or accounts. The
bill codifies selected regulations regarding review of claims
(Sec. 18660.30), compliance audits (Sec. 18660.9), and the
administrative appeal process for denied or adjusted payment
claims (Sec. 18660.31). Codifying these regulations may help
prevent legal challenge against the validity of CalRecycle's
authority to conduct reviews of payment claims and to conduct
audits necessary to increase detection of fraudulent claims.
Author's Amendments: The bill as currently in print limits the
time that CalRecycle may examine a payment claim to 90 days, in
order to validate its accuracy and compliance with the Act.
According to the author, the 90-day period was thought necessary
to conform with the 90-day period that recyclers are required to
make recovery payments to collectors, pursuant to Section
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18660.21(b)(4) of existing CalRecycle regulations. Upon further
review, this limitation is not necessary to ensure that
collectors are paid within 90 days. Removal of this provision
will allow CalRecycle more flexibility to investigate claims
where fraudulent behavior is suspected, but will not prevent
collectors from receiving payment from recyclers within 90 days.
Therefore the author proposes to amend the bill to delete the
90-day limitation as follows:
On page 8, line 19, strike "for a period not to exceed 90
days to validate" and insert "to validate its"
In addition, the bill as currently in print codifies certain
CalRecycle regulations (See Section 18660.31) regarding the
administrative appeal process for denied or adjusted payment
claims. As proposed to be amended, the bill would clarify that:
(1) a CEW recycler wishing to contest the denial or adjustment
of a payment claim should first pursue the administrative
remedies available to him by filing a written appeal with
CalRecycle, rather than pursuing litigation on this issue; and
(2) these administrative remedies include an hearing, before the
executive director or his designee, to consider the claim,
pursuant to existing regulations. These amendments are:
On page 9 of the bill, lines 30-34, make the following
changes:
(d) (1) A covered e-waste recycler that is dissatisfied
with CalRecycle's wishing to contest the denial or
adjustment of a payment claim may shall appeal that action
by filing a written appeal at the offices of with
CalRecycle within 30 days of the date of the notice denying
or adjusting the claim.
On page 10 of the bill, strike lines 5 through 7 and
insert:
(4) CalRecycle shall provide a hearing before the
executive director, or his or her designee, who shall act
as a hearing officer. The hearing officer shall consider
the claim, the reasons for denial or adjustment of the
payment claim, and any additional relevant information
presented by the claimant or CalRecycle staff. The hearing
officer shall issue a written decision stating the factual
and legal basis for the decision.
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ARGUMENTS IN SUPPORT : Californians Against Waste supports the
bill, stating:
This bill would strengthen the successful Electronic
Waste Recycling Act of 2003 by clarifying that sources
of covered electronic devices must be generated or used
in California. It will also authorize CalRecycle to
deny payment if claim documentation is incomplete or
not in compliance, and establish penalties for false
documentation. While this is already being done by
CalRecycle, these amendments will help clarify and
improve program administration, and avoid future
frivolous lawsuits that can harm all program
participants. This measure will ensure that the intent
of the law is being upheld.
PRIOR RELATED LEGISLATION : AB 147 (Saldaņa) of 2009 would have
required manufacturers and producers of electronic devices to
submit information about the hazardous characteristics of the
device to DTSC, but the bill was vetoed.
AB 1535 (Huffman) of 2007 would have added personal computers to
the list of items covered by the Electronic Waste Recycling Act,
but was held in ESTM Committee.
PENDING RELATED LEGISLATION : AB 549 (Carter) seeks to require,
as a condition of making e-waste recycling or recovery payments
by CalRecycle, that the covered electronic device for which the
payment is claimed was used in California. AB 549 was approved
by the Natural Resources Committee by a 9-0 vote, and now awaits
hearing in the ESTM Committee.
AB 583 (Knight) seeks to transfer the duties, powers, and
authority of the Department of Toxic Substances Control (DTSC)
under the Electronic Waste Recycling Act to CalRecycle, and is
awaiting hearing in the ESTM Committee.
AB 960 (Lowenthal) seeks to revise the requirements imposed on
exportation of CEW to additionally include a person who exports
electronic waste or a previously used electronic device and
would also include, in the provision, an export intended for
reuse. The bill was approved by the Natural Resources Committee
and is set for hearing in the ESTM Committee on April 26.
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REGISTERED SUPPORT / OPPOSITION :
Support
Californians Against Waste
Opposition
None on file
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334