Feds think illegal labor key to Houston division's record profits
When Houston-based IFCO Systems North America Inc. reported record profits last year, others in the unglamorous business of recycling wooden pallets couldn't help but wonder how the company did it.
"We were all very curious about this," said Chaille Brindley, assistant publisher of the trade magazine Pallet Enterprise. "They were able to do things that other companies just couldn't do."
Federal investigators think a significant portion of those profits came on the backs of illegal immigrant workers recruited in Houston and bused to at least 26 plants across the country, where they reassembled worn pallets for substandard wages.
And the company may have been able to keep prices low by paying low wages.
"Pallet recycling normally requires a lot of physical labor ... but you can earn a fair living doing that," Brindley said.
Major clients
With 53 plants across the country, the nation's largest supplier of recycled pallets has the infrastructure to handle large volumes for its major clients, such as Target, Kmart, Office Depot, Tyson, Rite-Aid and The Home Depot.
The company has stated that pallet recycling last year "contributed overproportionally" to its gross profit of $116.2 million — a nearly 40 percent increase over 2004. In all, the company raked in more than half a billion dollars in revenue.
"Being a national company allows IFCO to offer a complete range of services for pallet management, from supply through recovery, reconditioning and disposal," said Dave Russell, president of IFCO Systems North America, in a December 2005 press release.
"It also has a very low price," Brindley said. "A lot of retailers went because they were able to get that national service at a low price."
The company saysit recycles more than 50 million pallets annually. Some need only a few more nails or some metal clips to shore up loose corners. Most are stripped down to individual wood planks. It's back-breaking work where employees use crowbars to pry apart planks and reassemble them with heavy-duty nail guns.
A typical worker might make $9 to $14 an hour, Brindley added. Though IFCO officials could not be reached for comment Thursday , the family of one Houston employee, an illegal immigrant, said he was making about 25 to 35 cents per pallet, or about $6.50 an hour.
"That's a low number," Brindley said.
A criminal complaint alleges Houstonians James Rice, 36, and Abelino "Lino" Chicas, 40, established a plant in Guilderland, N.Y., with workers they knew to be illegal immigrants.
Neither could be reached for comment on Thursday.
Rice was a new market development and regional general manager in Houston last year. Chicas, a naturalized United States citizen from El Salvador, is the assistant general manager of the west Houston plant.
The criminal complaint states that Rice had accepted a resident alien card for an illegal immigrant — a confidential informant — trying to get a job with the company. The name on the card was not the informant's real name, and the photo did not resemble the informant, the complaint states. After Rice allegedly photocopied the card, he looked at it and stated, "looks like you to me," then advised a bookkeeper to change the informant's name on an employee list to the name on the false identification card.
'Writing on the wall'
The allegations surprised Houston employment and immigration attorney Jacob Monty, who tends to sympathize with illegal immigrant workers and the employers who might hire them.
"If these allegations are true, this shows a sheer disregard for identification requirements," Monty said. "Here you see the writing on the wall of playing fast and loose with requirements, and managers are facilitating employment of undocumented workers."
Monty thinks the allegations might have been the work of a few rogue, mid-level managers. Brindley, however, thinks the feds will ultimately try to use employees such as Rice and Chicas to go after executives, none of whom were charged in the complaint.
Though IFCO's parent company is based in Europe — its stock is publicly traded on the German stock exchange — its pallet recycling operations are based in Houston.