A memorable "Seinfeld" episode features Kramer and Newman taking thousands of cans and bottles to Michigan so they can get a nickel more per container than in New York -- but it's not funny when you own a small grocery store in a border town.

Lori Machus, who owns Central Super Market in Kingsford, Mich., with her husband, said 16 cans someone brought in for redemption recently cost her $1.60 when she didn't notice that they weren't purchased in Michigan. The redeemer was paid, but the money will come out of Machus' pocket.

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Michigan requires a 10-cent deposit on bottles and cans, the highest in the nation. That dime can be refunded when cans and bottles are returned -- but by law it's supposed to apply only if they were purchased in Michigan.

Minnesota and Wisconsin don't have bottle deposits, which can create an incentive to travel to Upper Peninsula border towns such as Kingsford to pick up some quick cash for emptied containers.

Eva Smith-Furgason, a manager at Northwind Natural Foods Co-op in Ironwood, Mich., said because the co-op sells only natural products, there's not much of a problem distinguishing legitimate from phony returns. But when a Walmart opened in town three or four years ago, that store's automated center for returns apparently wasn't calibrated properly, and people took advantage of the opportunity.

"People were coming in with truckloads (of cans)," she said.

Charges filed in Maine

In Maine, which also has a more expansive bottle-redemption law than neighboring states, three people have been accused of illegally cashing in more than 100,000 out-of-state bottles and cans for deposits, the first time criminal charges have been filed in the state over bottle-refund fraud, a prosecutor said.

A couple who run a Maine redemption center and a Massachusetts man were indicted last week for allegedly redeeming beverage containers in Maine that were bought in other states.

Thomas and Megan Woodard, who run Green Bee Redemption in Kittery, face the more serious charge of allegedly passing off more than 100,000 out-of-state containers -- with a value of more than $10,000 -- as if they had been purchased in Maine.

That's just the tip of the iceberg.

An estimated 90 million cans and bottles are fraudulently cashed in each year in Maine, costing beverage distributors $8 million to $10 million, said Newell Augur, executive director of the Maine Beverage Association.

People from other states -- especially New Hampshire, which has no "bottle law" -- routinely redeem loads of cans and bottles in Maine, Augur said. Redemption centers pay customers 5-cent refunds on most beverage containers and 15 cents for wine and liquor bottles. The centers, in turn, get that money back from distributors, plus a 3½- or 4-cent handling fee per container.

In the 1996 "Seinfeld" episode, Kramer and Newman hatch a plan to drive a truckload of cans and bottles to Michigan, because the redemption fee there was 10 cents, double New York's nickel deposit.

Kramer laments it can't be done. "You overload your inventory and you blow your margins on gasoline," he says at one point. But Newman offers up free space in a mail truck he has to drive to Michigan before Mother's Day -- "the mother of all mail days," he calls it -- and the pair head off. (They end up aborting the trip while chasing down Jerry's stolen Saab.)

"That was a very funny episode," Augur recalls. "But this is not a laughing matter."

Officials estimate that up to 1 billion beverage containers are sold in Maine each year. Containers sold in other states, however, carry the Maine deposit stamp because it's not cost-effective to change labeling for each state.

The redemption rate -- and the instances of fraud -- have gone up with the poor economy, Augur said.

In all, 10 states have redemption laws, but Maine is susceptible to fraud because it has expanded its 1978 bottle-deposit law through the years beyond soda, beer and other carbonated beverages. It now accepts containers from juice, water, sports drinks and liquor.

Michigan's law

Michigan's deposit law, which was enacted late in 1978, includes beer, soft drinks, carbonated and mineral water, wine coolers and canned cocktails. The recycling rate is 96 percent, the highest in the country, according to a 2009 story in the Detroit Free Press.

Fines for knowingly attempting to return containers purchased in other states in Michigan range from $100 to $500.

Smith-Furgason likes the law and wishes other states had it. "If you go from Michigan to Illinois or from Michigan to Wisconsin, you'll see a lot more bottles and cans on the side of the road than you do in Michigan," she said.

But Malchus said she wishes there were no deposit law, because it creates a hassle for her small business. Bigger stores have machines that scan bottles and cans to determine which were purchased in the state. In Machus' 6,000-square-foot store, it's done by hand, and then the containers are sorted again in a back room to make sure they all came from Michigan.

"It's filthy and disgusting," she said, explaining that some people use pop cans as ash trays before returning them.

Like Wisconsin and Minnesota, New Hampshire doesn't have any redemption law. In Massachusetts, redemptions are limited to beer, carbonated soft drinks and mineral waters.

Distributors say redemption fraud is most prevalent along Maine's border with New Hampshire.

In 2003, the owner of redemption centers in the border towns of South Berwick and Kittery paid a $10,000 fine following a state crackdown on redemption fraud, but Assistant Attorney General Leanne Robbin said last week's indictments were the first criminal charges she's aware of in a redemption case in Maine.

The Woodards, the indicted owners of the Maine redemption center, did not return a call to their home seeking comment.

They are accused of knowingly accepting containers at their redemption center that were purchased in another state, and therefore not eligible for a refund in Maine, and then selling them to distributors for the combined handling and redemption fees.

Peter Prybot, a 62-year-old lobsterman and writer from Gloucester, Mass., denied the allegations in the indictment, which charges him with redeeming more than $1,000 of empty containers in Maine that weren't eligible to be redeemed.

Prybot said he accumulated cans and bottles during road trips to Maine and later cashed them; he said they all came from Maine.

Augur said legislation has been introduced that could help alleviate the problem by allowing distributors to sue individuals they believe are illegally redeeming large numbers of containers in Maine.

News Tribune reporter John Lundy contributed to this report.