Dealers Turn Used Rags Into Riches -- Clothing Given To Charity Ends Up In Third World, Profits U.S. Businesses

Meet Vahan Chamlian, the world's largest dealer in secondhand clothes.

If you have ever donated your used duds to charity for a tax deduction, there's a chance you helped pay for his $1 million Fresno, Calif., home, his wife's Rolls-Royce or the corporate jet he uses for client calls worldwide.

"The American public is very generous," the 71-year-old Chamlian said with a chuckle, an imported cigar clamped in his teeth and a diamond pinky ring sparkling on his left hand.

According to Dun & Bradstreet, which collects financial data on companies nationwide, Chamlian's five companies grossed $78.6 million last year from the recycling and sale of used clothing.

His suppliers? The Salvation Army, Goodwill Industries and a multitude of other charities.

The Salvation Army and Goodwill reportedly take in 75 percent of the used clothing donated nationwide. Chamlian buys 8 million pounds a month, nearly two-thirds of it from them. The goods shipped to his three California factories come from all over the country.

From America's castoffs, Chamlian and his competitors - roughly 100 used-clothing dealers based in port cities from New York to Houston to Los Angeles - have created a multimillion-dollar export industry. The clothing is baled up and shipped overseas, where it fetches prices far higher than those charged in American thrift stores.

"Our members call it turning garbage into gold," said Bernie Brill, president of Secondary Materials and Recyclable Textiles, or SMART, a trade association based in Maryland.

Although some donors think they are giving their used clothing to the local poor or homeless, very little is ever given to anyone.

Instead, the charities that collect tattered jeans, outgrown dresses and worn-out athletic shoes sell the best of the lot at thrift shops, auction some to swap-meet vendors and market the rest - for as little as 13 cents a pound - to business people like Chamlian, whose biggest buyers are in Third World countries.

Last year, the United States exported 481 million pounds of used clothing - with a declared value of $249 million - to 139 countries. Ships with 40,000-pound containers of clothing leave Long Beach, Oakland and Los Angeles several times a week. The most frequent destinations are the poorest countries in the world.

After six weeks at sea, the container ships with Chamlian's goods often make port in West Africa. From the coast, 500-pound bales of clothing are moved inland by truck or train.

On one route, the last stop is Niger, the world's most impoverished nation, according to the United Nations. It's average per capita income is $275 a year.

There, in dusty street markets, a shirt donated to an American charity and sold to a used-clothing dealer for perhaps 10 cents commands a price of $5 to $15, the equivalent of one to three weeks' wages. El Haji Hamadou Ali, a distributor in Niamey, Niger, the nation's capital, says that a pair of trousers goes for about $10 - half a month's pay.

Although expensive by local standards, clothing from the United States, say dealers and diplomats, is immensely popular even secondhand because of its quality and the cachet of owning something American. The costs are often driven up by a maze of corrupt customs officials, bribe-seeking border guards and a network of local wholesalers and vendors.

"It's disgusting," Barbara Austin, a private customs broker at the Port of Long Beach, said of the markups. She compared the trade to "those people who make rubbings of gravestones and earn money off them."

According to Chamlian's figures, however, his markup isn't driving up retail prices in Niamey. He says he buys at 13 cents a pound on average and sells at 65 cents. He makes no apologies for what he does, noting that he employs more than 800 people in his Los Angeles, Fresno and San Lorenzo operations.

Chamlian, an exuberant Armenian immigrant who came to California from Lebanon 40 years ago, takes pride in having personally paid to have a private elementary school built in Glendale, Calif., where many of the schoolchildren are of Armenian descent.

"We contribute to local taxes. We employ local people," he said. "Besides, these charities do good work."

Indeed, charity executives in Southern California say they use the revenue from used-clothing sales to support a variety of worthy programs - from Goodwill's job training for the disabled, to the Salvation Army's shelter and treatment programs for homeless alcoholics and drug abusers.

Also, their thrift stores provide affordable clothing for Americans who otherwise couldn't hope to purchase an almost new jacket or a barely worn pair of shoes.

But up to 60 percent of donated clothing never sees the inside of a thrift shop.

"We go through 25,000 pieces of clothing to find 10,000 we can sell in the thrift stores," said Maj. Oliver Stenvick, who oversees the Salvation Army's massive processing warehouse in Anaheim, Calif.

Even those who frequent charity stores are "very fussy," said Maj. Daniel Starrett, who oversees the Salvation Army's $105 million-a-year thrift and salvage operations in eight Western states.

"You'd think if you put a blouse out there for 25 cents with no buttons, people would buy it. But they won't."

At Chamlian's State Center Waste Materials Corp. facility north of downtown Los Angeles, 200 workers sort, fold and pack mountains of used clothing.

To get to the factory, Chamlian jets into a San Fernando Valley airport, where a red carpet awaits him on the tarmac. There, he steps into the back of a Cadillac with vanity plates that read "LA RAGS."

He avoids the factory floor and refuses to have his picture taken there. Despite his financial success, he said, "I'm not happy this is what I do. I would rather be an investment banker."

He prefers to receive visitors in an air-conditioned office where a large portrait of himself at a younger age faces the door.

On a recent 93-degree day, the mammoth factory was filled with the pungent odor of a million pounds of mostly dirty laundry. Outside, a tractor-trailer had just disgorged 20,000 pounds of clothing from the Salvation Army's Anaheim warehouse.

A forklift took a huge bite from the pile and, holding its load aloft, drove into the factory. A woman surrounded by 11 piles of clothing - men's pants, women's pants, ladies' cotton, children's cotton - grimaced as the forklift dumped the clothing near her feet. All but a few of the workers are immigrants from Mexico. One woman said she has worked there for 14 years, earning $189 a week.

Once the clothing is sorted, it is weighed and resorted into 100- or 500-pound bales to fill orders from around the world. None of the clothing is washed, but a line of women neatly fold it.

"We're the only ones in the business who do that," said Chamlian's nephew John, who manages the seemingly chaotic floor operations. "That attention to detail, it's what makes us the best."

The elder Chamlian boasts that he got to be bigger than all of the other used-clothing dealers in America, because "I am smarter than any of them."