BEAUMONT, Texas-A federal jury has found three managers of Safe Tire Disposal Corp.'s tire recycling plant in Cleveland, Texas, guilty of conspiring to defraud the state of Texas out of about $700,000 in tire recycling reimbursements. The Aug. 28 conviction on federal charges of mail and wire fraud followed a week-long trial during which prosecutors charged that between January 1993 and February 1994 the defendants transferred-via mail and fax-manipulated and falsified ``daily tire receipts'' and billing statements in order to collect extra money from the state's Waste Tire Recycling Fund (WTRF).
Under the state program, Safe Tire and other tire recyclers in Texas receive reimbursements from the state fund based on the amount of waste tires collected free-of-charge from tire retailers, tire dump cleanup projects and other sources.
The processors shred the tires they collect and submit paperwork to the state to collect monthly reimbursements-85 cents per passenger tire or its equivalent (18.7 pounds). The fund is financed with a fee on new-tire sales.
The three defendants are Johnny ``Keith'' Hallum, the plant's transportation manager; Michael Darrin Riley, the plant manager; and William J. Stephens, the general manager in charge of all employees at the facility. According to the indictment, they conspired ``to manipulate the legitimate procedures of Safe Tire in a way that would allow Safe Tire to be reimbursed from the WTRF for processing waste tires which were never received or processed at the Cleveland plant.''
The defendants and ``corrupt employees under their control'' drove vehicles or trailers onto the scales at the plant to ``bump up'' the weight of the collected waste tires and created false manifests and weight tickets, the indictment said.
Prosecutors said the defendants also manipulated written reports on the inspection and calibration of the scales and used the U.S. Mail to submit the reports to Safe Tire's headquarters in Ardmore, Okla.
The daily tire receipts were sent via fax to Safe Tire's headquarters where the company calculated the amount of monthly reimbursement due from the state.
Mr. Stephens' attorney, Lee Hamel of Houston, said the defense's expert testimony showed the shredded rubber documented at the plant did exist. He plans to appeal the verdict following the sentencing hearing.
The three defendants face maximum five-year sentences in federal prison and $250,000 fines on one count of conspiracy to commit mail and wire fraud and three counts of mail fraud.
The Cleveland plant was Safe Tire's most productive facility, at least on paper, according Tom Keihnhoff, the U.S. attorney prosecuting the case.
The three defendants were motivated to manipulate plant production figures in order to gain bonuses-about $63,000 for Mr. Stephens and $15,500 each for Mssrs. Hallum and Riley-and opportunity for advancement within the company, he said.
An inside tip spurred a year-long investigation by the Texas Environmental Enforcement Task Force, comprised of state and federal agencies, which led to a federal indictment in January.
A federal investigation is still continuing, Mr. Keihnhoff said, but no indictments have been proposed against Safe Tire itself.
Safe Tire President Scott Holden said his company has been exonerated, but declined comment pending the resolution of the federal case.
Besides the Cleveland facility, Safe Tire operates three tire processing plants in Midlothian, Odessa and San Antonio, Texas, and one in Oklahoma.