Father charged after Sayreville elementary school student dies in car fire

The junkie's junkyard: How addicts find the money for drugs

Mike Deak
NorthJersey.com
Trucks at Klein Recycling in Hillsborough.

HILLSBOROUGH - There is a multi-million dollar business on Camplain Road where four dead people are on the payroll.

The business is Klein Recycling which has been targeted in a State Commission of Investigation (SCI) probe of the illicit trade in stolen metals that puts cash in the pockets of addicts desperate to find money to satisfy their fix.

One witness told the SCI that the recycling firm was a "breeding ground"  for drug addicts who brought material, like copper wiring, sewer grates and manhole covers, as often as five times a day to be converted into a few-questions-asked source of fast cash.

Klein Recycling was not alone.

Tens of millions of dollars worth of metals ripped from cellphone towers, power stations and even graveyards are being fenced at secondhand shops and scrap yards throughout New Jersey by drug addicts, according to the SCI.

"By providing an easy route for drug addicts and opportunists to cash in on stolen metal and merchandise, these enterprises have helped spawn an endless cycle of theft, one that law enforcement cannot keep pace with, much less end, without a muscular response from the state," the 108-page SCI report stated.

But the volume of business at Klein was staggering.

According to bank records obtained by the SCI through subpoenas, more than $165 million flowed through Klein Recycling's two bank accounts from Jan. 31, 2012 to July 31, 2015.

The SCI also found "peculiarities" with Klein Recycling's payroll. Investigators found that five employees were fraudulently using Social Security numbers that had been legally assigned to men in Florida, North Carolina and Pennsylvania.

Four of the men are dead.

That's only the tip of the iceberg of what was happening at Klein Recycling, according to the state report.

Barrels full of metal at Klein Recycling in Hillsborough.

Heavy metal

It's no secret that addicts often resort to crime to find the money they need to pay for their habit.

A half century ago, Sgt. Joe Friday on "Dragnet" was preaching that one of the dangers of drug use was the threat addicts would turn to crime to obtain the money they needed to nurse their drug use. Whether it was shoplifting, burglaries — home break-ins or taking stereos from unlocked vehicles — or more serious crimes like armed robbery and prostitution, addicts'  crimes were one of the primary reasons why law enforcement authorities say that illicit drug use is a threat to a civil society.

As the opioid epidemic overspread the country this decade, addicts found new ways to get the cash they needed to buy drugs, You can't use a credit card to buy heroin and dealers don't accept ATM cards.

At Klein Recycling and other scrap yards, the SCI found that daily cars and pickup trucks rolled in with copper pipes taken from the basements of vacant homes, catalytic converters sawed from the bottoms of motor vehicles and large spools of copper wire stolen from Home Depot and Lowe's.

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The scrap yards have also been a destination for metal taken from cell towers. Verizon officials told the SCI that thefts were so common from cell towers that they "amounted to a threat to national security" because of the danger of interruptions to seam less cell coverage.

One addict, known by the fictitious name of Ross L., told the commission how his addiction to pain pills and heroin ruined his life. When his father, a second-generation business owner, died, he left his son with $800,000 in cash in a safe.

It's all gone.

But Ross L., now 34 and sober, told the SCI how another addict introduced him to the lucrative business of stolen metal recycling.

Ross and his friends scoured suburban streets during the early morning and absconded as many sewer grates and manhole covers that could fit in a Chevy Impala. They would also take copper wire and pipes from abandoned buildings.

In 2013, 63 manhole covers, similar to the ones pictured here, were stolen from an unfinished road off of Route 1 in South Brunswick in 2017.

When they were really desperate, sometime they took the material in broad daylight.

"We took a Chevy Impala and the amount of wire from above a ceiling that just fit in the trunk making a couple trips a day, we'd made a couple thousand dollars," he said.

"It was so heavy, the Impala would be, like dragging on the ground," he said.

That's how he found out about Klein Recycling. The junkies liked Klein because no questions were ever asked.

Even when Ross and his friends brought manhole covers and storm grates, no questions were asked.

Ross said Klein workers only occasionally checked the identification of people coming to the yard

"They didn't say, 'Where are you getting this much heavy metal from?' It's got to be somewhere it's not supposed to be, because we make three or four trips a day with your car scraping the ground on the way in and you're just some kids," Ross testified before the SCI.

Ross. and his friends were getting 10 cents a pound for manhole covers and sewer grates.

Another habitual metal thief, a 31-year-old oxycodone addict from Monroe, told the SCI how he appreciated Klein's see-no-evil business plan. He testified how he stole catalytic converters from the exhaust systems of commercial vehicles at a U-Haul truck yard, a vehicle repair shop and a state Department of Transportation yard and then converted them into cash at Klein.

In 2009, Gov. Jon Corzine signed a state law requiring scrap metal dealers to report suspicious transactions to authorities. But the SCI discovered that the Hillsborough Police Department did not hear from Klein unless police first approached the business about a report of stolen metal.

Scrap metal lined up at Kline Recycling in Hillsborough.

That state law also mandated scrap yards to confirm a seller's identity from a valid government-issued photo ID. But Ross said Klein workers only occasionally checked ID.

That's how Klein gained a positive reputation with junkies.

"I would say out of every five cars, three of them were people that obviously had stolen something or other, and drugs are sold right outside or trade," Ross said. "Even scrap metal stuff was traded, like, right outside before going in.

"It's very common, like, a breeding ground I would call it," he continued. "It seemed to me like....it was all people with drug problems with a few companies peppered in."

Hillsborough authorities told the SCI that the business has long been suspected of accepting stolen metal, including vehicles without salvage titles, batteries from cell towers and even material from competitors' Dumpsters, the report said.

Somerset County Prosecutor Michael Robertson said he would have no comment on the SCI report at this time.

No Hassle

When Phil Santaniello bought Klein Recycling in 2005, he was recycling himself.

In 2001, Santaniello pleaded guilty in federal court in Florida for his role in what prosecutors described as one of the largest health care scams in America.

According to the SCI, Santaniello ran the boiler room-style call center for a company "that brokered patients like cattle." Medicare and Medicaid recipients seeking help for their ailments were lured to fly-by-night treatment programs and psychiatric hospitals in Florida with free flights and miracle cures. In some cases, patients were held against their will in psychiatric wards while the federal government picked up the tab. Santaniello received illegal kickbacks from the facilities.

Santaniello, one of dozens charged in the case, was sentenced to four months in prison and ordered to pay $450,000 for conspiring to defraud the United States. He was also barred from participating in health care ventures, which led him to the recycling business.

According to its website, Klein Recycling was founded in 1947 and became one of the largest privately owned metal recycling companies in the metropolitan area. The company enjoyed a stellar reputation by following three basic principles, "Honesty, Integrity, Dependability."

According to the SCI, Santaniello, who operates Klein through a parent company, RickSant LLC, doesn't adhere to those principles.

The SCI report doesn't mince any words about Sabtaniello who "brazenly trafficked in stolen metal." The report said  he also "placed organized crime members on a payroll studded with Social Security numbers pilfered from the dead."

Klein Recycling in Hillsborough.

The SCI found that the five employees using the false Social Security numbers haave not filed a New Jersey tax return. One of the five employees told the SCI that he was an undocumented resident of Guatemala who got a Social Security number from a friend so he could work at Klein.

The number actually belongs to a living resident of Jacksonville, Florida.

The SCI also found that Santaniello had placed two men with ties to organized crime — Louis "Big Lou" Fazzini and Nicholas "Nicky O" Olivieri Jr. — on the firm's payroll for years, collecting money for work "that is unclear or unexplained."

Both Fazzini and Olivieri invoked their Fifth Amendment right against self-incrimination when asked by the SCI about their relationship with Klein.

Olivieri, 71, who was paid at least $158,000 between 2014 and early 2014, testified that he had been the "life partner" with Santaniello's mother for nearly 40 years and thought of him as his son.

In 1999, Olivieri pleaded guilty to federal racketeering charges along with Fazzini.

In 2012, Fazzini, 51, pleaded guilty to running a bookmaking operation and to operating a scheme in which he fraudulently obtained health insurance through a no-show job. He continued to receive pay from Klein even during a stay at a halfway house in Newark in 2015 after his release from prison. Records show that he received $113,790 from the business from 2012 through the third quarter of 2017.

Santaniello — who owns a home in Howell, a vacation house in Toms River and a 32-foot boat named "No Hassle" — invoked his Fifth Amendment rights 101 times in  testimony before SCI.

He invoked his Fifth Amendment rights when asked about whether Klein buys manhole covers and sewer grates. He also refused to answer whether Klein infrequently reports suspicious transactions to law enforcement.

What should be done

Klein Recycling is not alone in welcoming drug addicts trying to fence stolen goods.

On a September afternoon, SCI's surveillance at Federal Metals and Alloys on South Clinton Avenue in South Plainfield saw two men carrying bundles of what appeared to be new copper pipes into the scrap yard. An investigation found that the two men had returned stolen electric circuit-breakers to Lowe's and had gotten a gift card, which they used to pipe copper pipes at the store. They then walked to Home Depot, stole a shopping cart and used it to wheel the pipes to Federal Metals and Alloys.

A man recycling metal at Federal Metals and Alloys in South Plainfield.

Both men, who had a history of arrests on drug and theft charges, sold the new copper pipes, still taped and bundled, to the scrap yard without incident.

Though admitting it can't speak for other scrap metal dealers, Federal Metals & Alloys said in a statement  that it "adheres to all the state regulated laws when recyclable material is purchased."

"Our customers are both individuals and businesses who have a need and benefit from our company purchasing recyclable or outdated materials," the statement continued. "Our policy is to vet our customers and retain all documentation, including but not limited to, a valid driver's license, signature, video of the transaction along with written description of the material. This information is preserved as records in accordance with all state laws and regulations in our state-of-the-art industry standard computer system."

The firm denies it did anything wrong in the incident reported by the SCI. "In the lone instance noted in the SCI Report, our employee followed every standard by which we accept recycled and/or outdated material," the company statement said. "If law enforcement needs to trace individuals or material, which is beyond our scope of operation, we have full documentation available."

Federal Metals & Alloys in South Plainfield.

In Camden County, the SCI uncovered a story where a woman allegedly fenced $1,567 worth of copper wire labeled as belonging to Public Service Electric & Gas at a business called Sgt. Scrap. The report also found another scrap business in Camden County where a self-described heroin addict regularly sold copper wiring stripped from cell towers.

The commission also found what it called "pervasive rot" in secondhand stores, such as one in Gloucester County whose owner allegedly encouraged addicts to bring in pricey Dyson vacuum cleaners, many of them stolen from a local Target store.

The illicit trade in stolen metals is a major driver of New Jersey's opioid crisis, the commission concluded in its report, noting that more than a third of the overdose victims in two counties showed up in databases of people who had sold materials to secondhand stores, pawn shops and scrap metal yards. Many owners and employees of the businesses actively encourage addicts to steal and sell metal, the commission said.

"The enormous costs of the illicit bargain between thieves and unscrupulous owners are borne by all New Jerseyans: the ratepayers who see higher bills for cell service and electricity; the consumers who pay more for goods at retail stores; the taxpayers ultimately responsible for replacing infrastructure that has vanished in the night," the report said.

"By providing an easy route for drug addicts and opportunists to cash in on stolen metal and merchandise, these enterprises have helped spawn an endless cycle of theft, one that law enforcement cannot keep pace with, much less end, without a muscular response from the state."

The SCI recommended stronger state oversight of scrap yards and secondhand retailers. It noted that even in communities that regulate the secondhand stores, many police aren't aware of the authorities these regulations give them.

The commission recommended that the New Jersey State Police license scrap yards and secondhand stores and require criminal background checks for owners and employees. The report also suggested that the state require more documentation from sellers of metals and prohibit dealers from accepting metal marked as the property of telecommunications companies, utilities and local governments.

Staff Writer Mike Deak: 908-243-6607; mdeak@mycentraljersey.com

Staff Writers Suzanne Russell, Nick Muscage and James Nash contributed to this story.