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TEXAS MAN ARRESTED FOR SMUGGLING FREON INTO U.S. Arrest Underscores Federal Crackdown on Black Market in Ozone-Depleting Chemicals

Release Date: 06/24/99
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THURSDAY, JUNE 24, 1999 WWW.USDOJ.GOV

TEXAS MAN ARRESTED FOR SMUGGLING FREON INTO U.S.
Arrest Underscores Federal Crackdown on Black Market in Ozone-Depleting Chemicals

WASHINGTON, D.C. -- As part of an ongoing federal initiative to crack down on trafficking in chemicals that destroy the Earth’s ozone layer, federal agents in San Antonio late last night arrested Richard Schmolke on charges that he smuggled CFC-12 into the United States in violation of the Clean Air Act and federal Customs law.

United States Customs Service officials arrested Schmolke for his role in a scheme to smuggle more than 75,000 pounds of CFC-12 from Venezuela. The criminal complaint charges that he brought CFC-12, also known by the trade name Freon, into the United States from Venezuela with the intent to resell it.

“Smuggling CFCs into our country threatens human health and the environment,” said Lois J. Schiffer, Assistant Attorney General for Environment and Natural Resources. “Those who attempt to profit from this black market will be prosecuted and punished. We will not let people endanger our ecosystem and our children for a few dollars.”
“This case represents one of the largest seizures of Freon ever in the state of Texas,” said U.S. Attorney Bill Blagg of the Western District of Texas. “We will continue to vigorously pursue those individuals who use illegal means to undercut honest services, victimize legitimate business owners, and destroy our environment, all for financial gain.”

The United States largely banned the importation of chloroflourocarbons (CFCs) and other ozone-depleting chemicals in 1996. CFC-12, a refrigerant used in automobile air-conditioning systems, has been the primary chemical smuggled into the country and sold illegally since the ban, although one recent conviction involved the ozone-depleting substance known as Halon 1301, which is used as a fire suppressant.

Schmolke and his associate, Edwin Reilly, allegedly shipped six large industrial refrigeration units to Venezuela for refurbishing and recharging with CFC-12. According to the arrest affidavit, Schmolke and Reilly built these units to hold more than 2,500 pounds of CFC-12, even though the units require just three to four pounds of the chemical for operation. Once in Venezuela -- where CFC-12 production is legal for another decade -- the units were allegedly filled with unused CFC-12, which carried a street value in the United States of $600,000. When the units arrived back in the United States, Schmolke and Reilly removed the CFC-12 and put it into smaller cylinders for resale, according to the affadavit.

Schmolke is expected to be arraigned within ten days. Reilly pleaded guilty on February 19 to smuggling 75,000 pounds of CFC-12 and to tax charges for his role in the scheme, and he is awaiting sentencing.

“The Customs Service has been at the forefront of the government’s effort to combat Freon smuggling since this ozone-depleting chemical was banned in the United States,” U.S. Customs Commissioner Raymond W. Kelly said. “The arrest of Richard Schmolke underscores Customs’ continuing commitment to this initiative. Mr. Schmolke is accused of playing a critical role in one of the larger Freon smuggling rings that Customs has ever encountered.”

A Nationwide Enforcement Initiative

This case is the result of a nationwide enforcement initiative launched in 1995 by the Justice Department, the United States Customs Service, the U.S. Environmental Protection Agency, the FBI and the IRS. Since this initiative began, 88 defendants have been convicted and sentenced to a total of 48 years incarceration and $68 million in fines and restitution to the federal government. In the past year alone, 23 defendants have pled guilty or were sentenced in connection with illegally smuggling CFCs into the country.

“CFC smugglers get caught, convicted, fined and put in federal prison,” said Steve Herman, EPA’s Assistant Administrator for Enforcement and Compliance Assurance. “The message should be clear to anyone thinking of breaking the law – ‘Don’t try it.’”

A report issued last month by a consulting firm for the EPA concluded that illegal imports of CFC-12 have been significantly curtailed through aggressive law enforcement. Between 15 million and 30 million pounds of CFC-12 were illegally imported into the United States in 1994 and 1995. That volume dropped to an estimated 5 million to 10 million pounds illegally imported in 1996 and 1997.

In other recent developments under the CFC initiative:


Eastern District of New York

Alex Roitman was arrested in New York on June 7 under a federal indictment charging him with conspiracy, the receipt and transportation of unlawfully imported merchandise, Clean Air Act violations, and money laundering for allegedly attempting to smuggle 72,000 pounds of Freon from Russia. According to the indictment, the first shipment of 36,000 pounds was successfully smuggled into the United States.

The indictment alleges that Roitman, acting under various aliases and through companies located in Bayshore and Long Island City, New York, and Moscow, Russia, arranged a shipment of Freon from Russia to Texas in June 1995 under shipping documents claiming that the material would be immediately sent to Mexico upon its arrival in the United States. Once the Freon arrived at the Port of Houston, however, Roitman arranged to have it transferred to unmarked containers and transported to Long Island City, New York, where it was sold from an auto body shop. Roitman then attempted to have the empty original containers sent from Texas to Mexico along with false shipping papers, but the shipment was seized by Customs officials.

Districts of Maine and Massachusetts

On June 22, 1999, a federal judge departed upward from federal sentencing guidelines and sentenced Larry LeBlanc to 15 months imprisonment and a $7,000 fine following his guilty plea to charges of illegally importing R-12 (a CFC) into the United States from Canada.

Between September 1993 and July 1994, LeBlanc -- who was eligible for
probation and no incarceration under standard sentencing guidelines -- and City Sales, Ltd. of New Brunswick, Canada, illegally smuggled 75 tons of CFCs into the United States. Michael Cormier, a broker for City Sales, previously pleaded guilty in connection with the smuggling operation and was sentenced in October 1998 to eight months imprisonment.

In April 1999, Kenneth Parlee, a City Sales customer in Massachusetts, entered a guilty plea to a one count information charging him with willfully making and subscribing to a false federal income tax return. In 1993 and 1994, Parelee bought more than four tons of Canadian CFC-12 and sold it in the United States. Parlee failed to report to the IRS more than $4,000 in profits made on his resale of the refrigerant.


Central District of California

In April and May of 1999, Cowas Gustad Patel and Moussa Khalil Toubbeh, respectively, were sentenced for conspiring to smuggle CFC-12 into the United States from Mexico and for smuggling the refrigerant into the United States. Patel, who operated in San Diego, was sentenced to six months community confinement and placed on three years supervised release, and he must pay a $50,000 fine and forfeit approximately $85,000 in cash to the United States Customs Service. Toubbeh, who operated in Westminster, Calif., was sentenced to two years probation and 200 hours community service.

Between October 1996 and January 1997, Patel and Toubbeh were directly involved in transactions involving more than 275 30-lb. cylinders of smuggled CFC-12, as well as negotiating the purchase of approximately 1,500 30-lb. cylinders with an undercover U.S. EPA Criminal Investigation Division agent. Toubbeh was additionally charged with obstruction of justice for providing false invoices and checks to the grand jury.


District of New Jersey

On May 7, 1999, Gretchen M. Reynolds, a principal of Reynolds Services, Inc., was sentenced on wire fraud charges for a scheme designed to defraud a U.S. businessman into purchasing 10,000 pounds of recycled Halon 1301 that had not been approved for import by the EPA. Reynolds received four months of home detention, three years probation, and a $1,000 fine. This case represents the first prosecution in the United States related to the importation of Halon 1301, which has an ozone-depleting potential 100 times greater than CFC-12.


An indictment represents charges alleged by the Government and is not itself evidence. The government has the burden of proving the charges at trial beyond a reasonable doubt.

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