Wardrobe Malfunction: Clothing Donation Bins Missing

September 30, 2013       Patrick Sullivan      

Two nonprofits are suing a for-profit textile recycling company alleged to have fraudulently removed some clothing donation bins in Michigan. The Society of Saint Vincent de Paul (SVdP), based in Maryland Heights, Mo., and Planet Aid, of Elkridge, Md., have filed a complaint with the U.S. Eastern Michigan District Court against American Textile Recycling Services (ATRS), of Houston, Texas.

The complaint, filed on September 18, alleges multiple violations of the Civil Racketeer Influenced and Corrupt Organizations (RICO) Act. ATRS allegedly convinced property owners throughout Michigan to remove a dozen of the plaintiffs’ clothing donation bins and replace them with their own. The complaint alleges that ATRS fraudulently sent letters purporting to be from a trucking company called JA Hauling to the plaintiffs’ national headquarters, when the letters were actually drafted and sent by ATRS.

“Defendant ATRS created, agreed to and did conduct and participate in the conduct of the enterprise’s affairs through a pattern of racketeering activity and for the unlawful purpose of defrauding Plaintiffs,” it is alleged in the complaint.

SVdP initially sued JA Hauling, but in the course of discovery, JA Hauling’s owner, James Ball, was found to be “just a guy set up by ATRS to do this,” said Dan Dalton, attorney for the plaintiffs, of Bloomfield Hills, Mich. law firm Dalton & Tomich. According to Ball’s deposition, he was instructed by ATRS to obtain a business license and begin removing bins. ATRS paid Ball $150 per bin removed, and Ball received between $30 and $40 from a scrap yard to scrap each bin, according to Ball’s deposition. Dalton said each bin was worth roughly $1,300, plus the contents.

ATRS allegedly sent letters to the national headquarters of SVdP and Planet Aid saying they had 72 hours to remove the bins, after which time they would be removed. The complaint contends the letters were strategically sent on Thursdays to the organizations’ national headquarters, so that when the local branches were aware of the letters, the 72 hours had passed and the bins had been removed and disposed of.

The lawsuit against Ball was dropped, because “I think he was a pawn,” said Dalton. Ball is not a defendant in this suit. Ball said in his deposition that ATRS instructed him to mark down the bin removal on his invoices as trash removal or furniture removal.

“(ATRS) didn’t want the bins whatsoever,” said Ball in the deposition. “We weren’t allowed to bring them even near the building.” Ball said ATRS told him he could put the bins’ contents into ATRS’s bins, “but we didn’t feel that was right,” said Ball. Instead, he donated the clothing to a local Goodwill.

“We have no information or knowledge of this lawsuit,” said Debra Stevenson Peganyee, chief marketing officer of ATRS. She said the company was made aware of the lawsuit through the media. “We have never been contacted by St. Vincent de Paul or Planet Aid. What we’ve seen in print is not factual or correct, but we cannot comment on something of which we have no knowledge.”

Dalton said the local Michigan counties declined to file criminal charges. “We pursued the criminal route first,” he said. The counties did not give a reason for not pursuing criminal charges, but “we’re in Detroit, and there’s a lot bigger things on officials’ minds than stolen bins,” said Dalton.

Dalton said his clients were not the only charities whose bins ATRS allegedly removed. He mentioned Volunteers of America (VoA), but VoA Michigan, based in Southfield, Mich., did not return a request for comment.

Though Ball personally received confirmation from the property owners or managers that they wanted the bins removed and replaced with ATRS bins prior to hauling them away, the complaint alleges that in at least one case, in Lincoln Park, Mich., the property owner rescinded permission but ATRS went forward with the removal anyway.

“Upon information and belief, ATRS fraudulently photocopied the signature of the Lincoln Park property owner or manager onto additional removal documents, which were sent to Plaintiffs through the U.S. mail,” said the complaint.

ATRS sets up recycling programs for nonprofit, churches and municipalities free of charge, said Peganyee. It pays the charity for the bin contents “at fair market value,” she said, and then, “We grade (the bins’ contents), sort it, reuse it, recycle it and resell it as the case may be according to the quality and type of item,” said Peganyee. ATRS displays the charity’s logo and contact information, as well as its own contact information, on each bin.

The Houston-based company operates 3,615 bins nationwide, and since its inception in 2002 has paid its partners nearly $4.2 million, according to the firm. The Michigan Humane Society (MHS), based in Detroit, is one such charity partner. “We just found out about (the lawsuit),” said spokesman Ryan McTigue. “To our knowledge (ATRS has) been upholding all legal and ethical standards.” McTigue said MHS would continue to partner with ATRS.

SVdP and Planet Aid are seeking unspecified damages totaling more than $75,000. “We need to do some discovery of that because we don’t know the contents of the bins,” said Dalton. “Really what we’re looking for is the replacement of the bins and getting (ATRS) to stop. It’s not really about the money, it’s about protecting these charities.”

According to industry association Secondary Materials and Recycled Textiles Association (SMART), about 3.8 billion pounds of textile materials are recycled per year in the United States. Paul Bailey, spokesman for SMART, said textile recycling is a billion-dollar-a-year industry. He said he couldn’t estimate how many clothing donation bins are in the United States at any given time or how many are run by nonprofits and how many are run by for-profits.

“Materials are a commodity and the price is set in a classic supply and demand scenario,” said Bailey. He said there is no commodities exchange where people can look up current prices for used clothing. Rather, “it goes market by market,” he said. “(Companies) are negotiating with new customers and existing customers as far as the materials they are supplying at that time.” Bailey said that because profit margins are so thin, “I’ve heard comments that contracts are won and lost on a quarter-of-a-cent per pound difference.”

SMART has not taken a position on the lawsuit of SVdP and Planet Aid versus ATRS, said Bailey. “The association is aware of the lawsuit only through news articles, and it doesn’t feel it can make a comment, but it will be monitoring the situation,” he said.

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