How Two Guys May Have Pulled Off the Biggest Recycling Scam in Canadian History

The village of Andrew does not appear on the mental map of most Albertans. In the unlikely event it rings a bell at all, it is probably for one of two reasons: as the hometown of former premier Ed Stelmach, who took his share of lumps in the big-city newspapers for being a country bumpkin; or as the hometown of the world's largest duck, a venerable roadside attraction.

Now the 300-odd residents of the central Alberta village — 50 miles northeast of Edmonton — have a new claim to fame that's no less quirky: it may have been home of the largest recycling scam in Canadian history.

Alberta Reclaim and Recycle, an Edmonton-based company owned by Johnny Ha and Shawn Diep, are alleged to have swindled the province out of $769,778 CAD by bringing beverage containers in from Yukon territory in enormous amounts. Their transgression: claiming refunds for deposits on containers that had never been paid. The two men were slapped with an $833,778 "administrative penalty" by the Alberta government in February 2015 — the amount they earned from their scam, plus a $75,000 fine.

The case, first reported by the CBC and the National Post, is currently under appeal at the province's Environmental Appeal Board, but it is almost certainly the largest recycling racket Canada has seen. No other incidents appear to even come close.

The president of Alberta's recycling control board has never heard of a scam like this.

"Not in my 25 years in the industry," says Jeff Linton. "I have heard of a few situations in California that would compare to this. But not here."

From 2012 to 2013, Ha and Diep are accused of purchasing large bales of crushed beverage containers from a company in the Yukon, where two private contractors handle all recyclable material collected in the sparsely-populated northern territory. Those contractors then ship the recyclables to wherever they can get a decent price for them.

"They chase those markets wherever they can sell those materials," explains Dwayne Muckosky, director of community operations for the territorial government.

Once they had purchased the bales for their scrap value, Ha and Diep are then said to have brought them to Edmonton, where they allegedly broke them apart and stuffed the containers into plastic bags which they brought to the Andrew depot as though they had been brought in for a refund — which they dutifully kept for themselves.

The case is uniquely rare for several reasons, explains Linton. First, most of Alberta's neighboring jurisdictions have comparable surcharge scheme in place for recycling. It's simply not worth it to truck over cans from Saskatchewan or British Columbia.

"The frequency of people attempting to penetrate the system is low, but a handful of times a year you get somebody coming in from Manitoba or Montana or something like that," he says. Manitoba only charges a deposit for beer containers, while Montana has no deposit at all.

Another quirk of the Andrew case is that the few scammers that do try to game the system tend to be from the general public, not depot operators.

"I would say by and large it's the outsiders trying to find a way into the system," says Linton. "This situation, I would say, is very unique."

But while you might be able to make a bit of money driving a pickup truck of bottles from Manitoba to Alberta, the incredible profits from the Andrew scam only become possible when the operation scales to the extremes — and you can't show up at a bottle depot with giant bales of cans without attracting attention.

Recycling scams are more common in the United States, where distances between jurisdictions are much smaller, and 39 states don't charge a deposit on beverage containers.

In 2014, four men were sentenced to jail time for an ongoing scam that had bilked California's system for $329,887 US by hauling containers from Washington state.

The following year, five people were indicted in a scheme that involved trucking 250 million cans and bottles from Arizona over several years. That con was profitable to the tune of $14 million US.

In Canada, a comparably low population spread out over larger geographic distances makes long-haul scams less enticing, as does the fact that deposit charges on recyclables are reasonably consistent across the country (notwithstanding Manitoba, or Quebec's five-cent deposit compared to neighbouring Ontario's 10 cents).

But the Andrew case has understandably gotten attention from authorities, who are always on the lookout for potential loopholes in their systems — or those of their neighbors.

"Where [Yukon's] chain broke down would have been where it relates to [disposal] of the material," says Linton. "The security elements that are here in Alberta, and in BC and Saskatchewan alike, were not as strong in the Yukon, so it made this opportunity available."

Linton declined to say whether Alberta has had words with Yukon officials over their lack of government oversight, but Muckosky says that's not the case. Yukon is currently conducting a review of their recycling scheme, but it was launched "quite some time ago. It wasn't, per se, in response to this incident."

The appeal in the Andrew case will be heard April 22 in Edmonton. Diep declined to comment when contacted by phone. VICE News was unable to reach Ha.

Follow Taylor Lambert on Twitter: @TS_Lambert