Largest e-recycling fraud in U.S. history sends owners of Kent firm to prison

For years, environmentally conscious residents across the Pacific Northwest have dutifully dropped off their broken LCD TVs and computer screens at special e-recycling centers for proper handling and disposal. For good reason: Tubes inside the flat-screen monitors contain mercury, a chemical that can cause organ damage and mental impairment if the fragile tubes shatter.

The Northwest’s largest recycler of the screens, however, was not disposing of them safely at all — it was secretly sending them to Hong Kong where workers, reportedly oblivious to the dangers and not wearing masks, were smashing them, releasing the toxins into the ecosystem.

All the while, the two co-founders of the recycling company — Kent-based Total Reclaim — earned about $7.8 million each from the business while telling the public the company was a “friend of the Earth,” prosecutors say.

The U.S. Attorney’s Office says Total Reclaim shipped 8.3 million pounds of mercury-containing flat-screen monitors from a storage facility on Harbor Island to Hong Kong — enough to fill 430 shipping containers — over at least seven years, starting in 2008. The company’s customers, among them the city of Seattle and the University of Washington, spanned Washington, Oregon and Alaska.

Total Reclaim co-founders Craig Lorch and Jeff Zirkle were each sentenced to two years and four months in prison by a federal judge in Seattle on Tuesday after pleading guilty last fall to a charge of conspiracy to commit wire fraud. They also will pay $945,000 in restitution and serve three years of supervised release.

Prosecutors said it’s only the third prosecution for phony e-recycling nationally, and the largest in U.S. history by volume. (The other two, in Colorado and Illinois, involved the improper disposal of lead-containing CRT monitors.)

“This is a serious offense,” U.S. District Court Judge Richard Jones told Lorch and Zirkle in a standing-room-only courtroom Tuesday. He noted their actions “struck a huge blow” to the public trust, “damage that can’t be recovered.”

He added: “The only reason you stopped is that you were caught.”

Sting operation

The Seattle-based watchdog group Basel Action Network (BAN), named after the United Nations accord from the 1980s that sought to prevent industrialized nations from dumping toxic materials in developing countries, began putting GPS trackers in electronic recycled materials earlier this decade to see where they really ended up.

BAN had set up an independent recycling-grading system and held Total Reclaim up as its gold standard. So BAN founder Jim Puckett was shocked to see the trackers showed Total Reclaim boxes ending up in Hong Kong.

When he confronted Lorch and Zirkle, they began what prosecutors described as a cover-up: They created new shipping manifests showing it was merely plastic going to Hong Kong and some of the e-waste must have inadvertently wound up there. (The two also had falsified documents in response to state audits on the company’s program.)

Unconvinced, Puckett and a PBS News crew led by Seattle-area journalists from KCTS traveled to Hong Kong and saw smashed tubes that contained mercury and Total Reclaim boxes — even ones from a special Earth Day event the company held.

Puckett said, and the PBS program reported, that the Hong Kong workers had no idea of the potential hazards of mercury, which the Environmental Protection Agency (EPA) says is especially damaging to the unborn children of pregnant women.

“For these workers, their ignorance was not bliss, it is death and disease,” Puckett said Tuesday.

As part of the e-recycling program created by the Washington state Legislature, Total Reclaim was required to properly dispose of the screens and not do so in a developing country.

Ultimately the EPA began investigating, and the company paid hundreds of thousands of dollars in fines to various regulators across the West while prosecutors launched a criminal case.

‘Prioritize their own profits’

In addition to the $7.8 million each co-owner made from the business during the seven-year period, they also saved $2.6 million they would have had to spend to properly dispose of the material, prosecutors say.

“In short, Lorch and Zirkle made a calculated decision to prioritize their own profits over the safety of the foreign workers they were hired to protect,” said Assistant U.S. Attorney Seth Wilkinson, the lead prosecutor.

Lorch, 61, of Seattle, and Zirkle, 55, of Bonney Lake, both spoke at their sentencing Tuesday and apologized. They portrayed the fraud as a business decision to deal with extra recycling volume, which then kept snowballing.

“My name will forever be associated with fraud,” said Zirkle as he nervously rushed through his prepared remarks so fast the judge had to ask him to slow down. “I’ve always been a proud man, but that pride is largely gone now.”

Lorch, his voice cracking at times, said, “I can’t possibly express how ashamed I am.” He added: “I will never forgive myself for the breach of trust against the customers, community and my family.”

The sentence imposed by Jones was between the five years in prison sought by Wilkinson and the defense’s recommendation of six months in prison plus a year of home detention.

The defendants, represented by at least four attorneys, presented dozens of support letters showing the good they had done in the community, from donating to charity to volunteering for nonprofits. The defense emphasized that there was no documented proof that any of the workers died or became sick from handling the LCD monitors, and that both defendants had no criminal history.

Their lead attorneys, John Wolfe and Harold Malkin, argued that even with the improper disposal of the LCD monitors, about 97% percent of the materials handled by Total Reclaim overall were recycled properly. They said the company, which has 60 employees and is the largest of its kind in the Pacific Northwest, relies on Lorch and Zirkle to survive, as do the customers that stuck with them after the fraud was revealed.

Total Reclaim still has 740 customers and took in $5.1 million in revenue last year. The defense attorneys said the company’s future would be in severe jeopardy if its two leaders were imprisoned.

Judge Jones ruled that the defendants could delay their prison sentence, to help the company wind down or prepare for a transition to new leaders. Zirkle will go behind bars first in three months, and then Lorch in July 2020.

After the sentencing, Lorch and Zirkle had no further comment.

Wilkinson said after the hearing that:“the sentence of more than two years in prison should send the message that business people who unlawfully cause harm to our environment and human health will be held accountable.”