Jaco Environmental workers remove an old refrigerator from a south Everett home in this photo from 2005. Jaco, which was based in Snohomish County, but had centers across the country, went out of business In November after the price of metal plummeted.

Jaco Environmental workers remove an old refrigerator from a south Everett home in this photo from 2005. Jaco, which was based in Snohomish County, but had centers across the country, went out of business In November after the price of metal plummeted.

Failed appliance recycler Jaco was hit by drop in metal prices

Appliance recycler Jaco Environmental suffered from a sharp downturn in scrap metal prices last year but probably was doomed even had metal prices not fallen so far, said a court-appointed receiver tasked with liquidating the company.

Jaco Environmental, with headquarters at 18323 Bothell Everett Highway south of Mill Creek, closed Nov. 23 after more than 26 years in business.

The company employed 350 full-time workers and 1,500 subcontractors in 28 states, said Mark J. Welch, a principal with Morris Anderson, the company appointed as receiver by King County Superior Court. Of those, 154 people worked locally.

Jaco Environmental was too aggressive by bidding too low on contracts with public utilities and private businesses to recycle appliances, Welch said.

“Once they had a contract, they were losing money every time they picked something up,” Welch said. “It was costing them more than they would make in revenue.”

Jaco Environmental ran into financial difficulties last year and stopped sending rebate checks to thousands of consumers the last four or five months it was in business, Welch said. As Jaco’s assets have been liquidated, all those consumers have been repaid to the tune of $4.5 million, Welch said.

“The priority to me is all the creditors, but most importantly to make sure all of these consumers get taken care of,” Welch said. “They bought a refrigerator knowing that they would get a rebate.”

Jaco Environmental president Terry Jacobsen and controller Mike Jacobsen did not reply to messages sent to their LinkedIn accounts.

The company got its start in Snohomish County but spread around the U.S. and had contracts with dozens of utilities and private companies, such as Best Buy, to pick up refrigerators and other appliances and then recycle pieces of the equipment.

On its website, Jaco Environmental said that it would recycle 95 percent of the components and materials of discarded appliances.

The remaining 5 percent was “productively used as ‘fluff’ to facilitate the decomposition of biodegradable landfill material.” The company was one of the major recyclers used by U.S. Environmental Protection Agency’s Responsible Appliance Disposal Programs. About half of the program’s partners, including utilities, retailers, manufacturers and states, relied on Jaco, according to the EPA.

“Our understanding is that the market is in the process of accommodating the gap left by the Jaco Environmental receivership,” an EPA spokesman said in an email.

Welch said the company would get paid from the utilities and other companies wanting to dispose of old appliances and also would make money off selling scrap metal.

During the past year, scrap metal prices fell dramatically. The value of a ton of scrap metal dropped from $340 in January 2015 to $170 in December, said Joe Pickard, chief economist for the Institute of Scrap Recycling Industries in Washington, D.C.

“When you see a slowdown in China or Europe or other parts of the world like we’ve been seeing, that has a big impact on our industry,” Pickard said.

But demand is not the only problem. He said metal producers are producing an excess. That’s hurt recyclers.

Jaco executives blamed the falling scrap metal prices for their woes last year in an email to Best Buy. The email dated July 31, 2015, is part of a lawsuit against Jaco by Best Buy, which is seeking to recoup debt owed to the company.

“As stated earlier, the various obligations we have here at Jaco are being evaluated and prioritized as we continue to manage through a tremendous and continuing reduction in scrap,” the email said. “It is clear of course that the amounts owned and the amounts due today (July 15, 2015) will not be timely paid.”

Jaco is also being sued by advertising firm Runyon Saltzman Einhorn, in Sacramento, California, and by KeyBank, its biggest creditor, which is seeking $15 million, according to one lawsuit.

Welch said the company didn’t file for bankruptcy because company executives didn’t have a plan to emerge from its debt. So company executives walked away.

Since then, Welch and his company have been liquidating Jaco’s assets. He said they’ve moved all of the equipment out of Jaco’s recycling centers. They’ve sold parts of Jaco to a Georgia company and are seeking to sell equipment to Jaco competitors. He said the dive in scrap metal prices hurt the company.

“You’ll never survive if you’re living on commodities,” Welch said. “That’s shown time and time again.” But he said what truly hurt the company was bidding too cheaply for the work it was doing. While that worked for years, it eventually caught up with Jaco.

“There are a lot of companies that have been around for a long time that don’t make it,” Welch said. “The price of doing business goes up. The cost of equipment and the cost of labor keeps going up.”

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