One of three former employees at Barrie electronics recycler GEEP denies allegations made in a lawsuit that he “orchestrated and engaged in a sophisticated and unauthorized scheme” by diverting iPhones destined for recycling and selling them for immense profit.
“He was not involved or engaged in any kind of fraudulent scheme related to changing codes on Apple products or in any other respect,” Barrie lawyer Paul Daffern wrote in a statement of defence on behalf of Edward Cooper.
Daffern would not discuss the case on the record.
Cooper, who for three years worked at the Barrie business that has become part of an international enterprise, is also cross-suing a Whitby scrap-metal recycling company, its operator, and the two other Barrie employees.
At the core of the cascading series of legal actions is Apple’s accusation that, instead of recycling iPhones and other Apple products, GEEP sold them for “unjust enrichment" of at least $30 million.
Apple is suing GEEP for $31 million, plus profits made from any sales of the products.
GEEP counters that it did no such thing and is pointing fingers at the former employees. It is, in turn, suing Cooper, Steve White and Rogers Micks — who all worked at the Barrie headquarters — along with Whitby Recycling Inc. and its president, Fu Yuan Yang, for $10 million.
GEEP Barrie Inc. emerged from Barrie Metals, which was started by Alfred Hambsch in 1983. Focusing on electronic waste and end-of-life recycling, it grew to 30 employees in 1995 and to 150 in 2007. By 2009, it had 12 locations in Canada, the United States, Europe and Central America and 570 employees.
In 2011, it was acquired by the Giampolo Group and in 2017 it became GEEP Canada Inc., after undergoing a series of amalgamations with other companies.
In 2019, GEEP’s assets were acquired by Quantum Lifecycle Partners LP.
In a statement posted to its website, Quantum declares that it is not party to this lawsuit and has no knowledge of it beyond what is publicly known.
In 2014, GEEP struck an agreement with Apple Canada Inc. for “the de-manufacturing, destruction and recycling of excess, obsolete and end-of-life electronics, including monitors printers, computer systems, iPhones, iPads, software and other peripherals," GEEP states in its lawsuit against the employees.
Apple was given the right to audit the process.
In 2017, Apple conducted a surprise audit at the Barrie facility, from which all the related lawsuits flowed.
Instead of destroying the devices, it shipped about 99,975 of them to Yang and Whitby Recycling, who then reactivated them and sold them in oversees markets, the Apple lawsuit alleges. Apple figured that represented 18 per cent of all Apple devices shipped to GEEP since January 2015.
It posited that the Apple products were taken to areas out of the view of closed-circuit television cameras and they never reappeared. Apple indicated its auditors found two bins of Apple watches in an unfrequented, off-camera area.
Then, continues the statement of claim, the books and records were manipulated as was GEEP’s electronic system of records so the devices could be shipped out of the facility.
Apple says it was a fraudulent and unlawful scheme that GEEP should have caught through examination of its books. It accuses GEEP of improperly supervising its employees and failing to prevent misappropriation, monitor its records to confirm destruction of Apple devices and implement systems to ensure their proper destruction,
Apple wants the case heard in Toronto.
But GEEP contends the three employees, along with Whitby Recycling and its president, orchestrated “a sophisticated and unauthorized scheme” to redirect the devices out of Barrie in exchange for kickbacks.
GEEP accuses Mick, Cooper and White of altering systems transactions to hide the movement of the Apple products out of the facility.
“GEEP states that when confronted with evidence of the the above described scheme, the defendant Micks admitted to diverting Apple assets and product, including iPhones to the defendants, Yang and Whitby Recycling, who, as a product broker, caused the Apple product to become re-activated and sold in other markets,” reads GEEP’s statement of defence.
“GEEP further states that as a result of the defendants’ wrongful acts, including breach of contract, tortious interference with contractual and economic relations, breach of fiduciary duty, breach of fidelity, breach of good faith, conspiracy, passing off, misappropriation, misuse of the GEEP’s property and unjust enrichment, GEEP has suffered extensive business losses as a result of the alleged breach of its obligations pursuant to the Service Agreement.”
GEEP wants that case to be heard in London, Ont.
Cooper, the only one named in the GEEP lawsuit that has filed a statement of defence to date, maintains in the court document that if there was any illicit activity going on, he wasn’t part of it.
Cooper began working for the ever-growing business in 2013, eventually becoming general manager of the Barrie facility, with the Detroit facility later added to his responsibilities.
Micks, according to the GEEP lawsuit, was a continuous improvement manager with GEEP from Nov. 8, 2014, until he was terminated for cause on Oct. 26, 2017.
Micks could not be reached for comment.
GEEP’s lawsuit indicates White started working at GEEP in 2002 and was general manager of training when he resigned on June 23, 2017. His lawyer, Christopher Salazar of Stewart Esten Law Firm in Barrie, declined comment.
Fu Yuan Yang is described as the president and director of Whitby Recycling Inc., “a scrap-metal cycling and brokerage services company, specializing in the purchase, sale and shipment of scrap metal and related logistics.” His lawyer did not respond to a request for comment.
According to Cooper’s statement of defence, in January 2016 his role changed to a corporate one and he became responsible for end-of-life operations. The Detroit facility consumed most of his focus and he was to support the Montreal and Texas divisions.
That August, Cooper said the president no longer wanted him on his team and he was handed a $50,000 severance and fired without cause. Cooper contends GEEP was losing money from 2010 to 2016.
By the time he was dismissed, he claims, GEEP should have known if he had been involved in any alteration of inventory or product codes. Reasonable due diligence and inventory controls would have easily found any wrongdoing, he argues.
And he pushes the blame on GEEP, which he said failed to carry out its obligations related to destruction and recycling processes.
“Its failure to keep these records or fulfill its contractual obligations to Apple led to GEEP’s breach of contract,” the statement claims, adding the records were not part of Cooper’s responsibility. “Cooper claims that he was not involved in any type of fraudulent scheme to defraud Apple and GEEP and did not receive any kickbacks from anyone.”
In his cross-claim, Cooper points the finger at the three others GEEP accuses of running the scheme, claiming contribution and indemnity and his legal costs.
Cooper wants his case to be heard in Barrie.
None of the allegations have been tested in court.
Marg. Bruineman, Local Journalism Initiative Reporter, barrietoday.com