Mandatory Compliance With The Regulatory State Is A Lucrative Business Model For A New California NGO

First get paid, then start creating your company. If you’ve ever built a business the old-fashioned way, you’ll want to pay close attention to the way a for-profit German corporation built a lucrative California nonprofit organization with a government-guaranteed revenue stream.

As The Federalist reported last week, companies that make or distribute any form of textiles in California are required to start making payments this year to a nongovernmental organization (NGO) that has been designated by the state as the official “producer responsibility organization” (PRO), which will develop a statewide textile recycling plan. Under the terms of the Responsible Textile Recovery Act of 2024, mandatory payments to the NGO in 2026 start at $1,000, then shift to an “eco-modulated” future sum that has yet to be determined.

The purpose of all that effort is to divert textiles from the landfill, creating a new culture of readaptation in which Californians supposedly learn to repair and repurpose their old fabric and keep using it. As the tagline for an upcoming consumer awareness campaign says:

To see how all of that works in practice, read the extraordinary proposal submitted to the state by a very new nonprofit corporation called Landbell USA. You can find that 235-page document here, on the website of the California Department of Resources Recycling and Recovery, which calls itself CalRecycle.

In that document, you’ll find these paragraphs on page 33. (The page numbers for the PDF file don’t match the page numbers at the bottom of the pages, so I’ll use the number from the bottom of the page for everything that follows.)

First paragraph: Remember that every company subject to the new regulatory requirements owes a mandatory $1,000 payment this year, so “35,000-40,000” companies making payments to the PRO implies $35 million to $40 million in first-year revenue, backed by steep penalties for noncompliance. (On page 133, Landbell USA predicts that initial noncompliance will limit revenue for the first two years to a little under $20 million.)

Second paragraph: Preliminary staffing will require the hiring of senior managers, after which “an organization can be formed underneath these three leaders.”

So Landbell USA secured mandatory payments totaling tens of millions of dollars a year as its corporate revenue, then promised to hire some people and form the organization.

It gets more complicated from there.

The Landbell Group is a for-profit German corporation that formed Landbell USA to compete for the California PRO designation. California’s textile recycling law requires that the state’s designated PRO be a nonprofit corporation, which the Landbell Group is not, so the German Landbell couldn’t just compete for the California role; it had to form a new entity. The creation of the new U.S.-based nonprofit happened in a rush. And it’s still not entirely clear just how much Landbell USA, the nonprofit corporation that promised in its application to one day hire some people, exists.

Look at the website for Landbell USA, and scroll to the bottom, where you’ll find this:

If you search for 224 W. 35th St. Ste 500 in New York City, you’ll find a bunch of businesses using it as their address. That’s because it’s a shipping center with post office boxes, which you could already tell by the presence of “#811” inside a suite. Meanwhile, you can see for yourself the address Landbell USA used in its application to the State of California for the PRO designation: It’s a condominium in the San Diego suburb of Carlsbad. With up to $40 million in government-mandated revenue and a plan to hire some staff at some point, Landbell USA operates out of a PO box and a condo.

Filing for nonprofit status with the IRS, Landbell USA listed the addresses of its actual offices and corporate officers:

Landbell USA President John Hayes, who works from an office in Dublin, is the head of North American “compliance solutions” for H2 Compliance, a subsidiary of the German-based Landbell Group. (The Virginia address at the top is a rented workspace.) A California business effort will be led by an Irish executive from his office in Dublin, working under the umbrella of a German company, though H2 Compliance has now also created a U.S.-based corporation.

You can see the scramble for eligibility in the paper trail. The application to the state of California from Landbell USA is dated Dec. 23, 2025, but Landbell USA incorporated in Delaware on Oct. 31 of the same year, and first filed notice of its intent to do business in California after it applied to the state for the PRO designation:

CalRecycle chose Landbell USA as the state’s textile PRO that same month.

You may have noticed, looking at the screenshots from Landbell USA, how often and how casually they refer to their role as a part of the Landbell Group. The organization’s website declares that relationship, and its proposal to the state says that Landbell USA “has discussed the operational planning and staffing with some of our larger Landbell Group PRO affiliates.” But California’s textile recycling law forbids the participation of for-profit corporations as or with the state’s PRO, though the exact nature of the limits on cooperation with the for-profit entity is a contested question. The California nonprofit Landbell USA keeps saying that it’s an arm of the for-profit Landbell Group, and Landbell USA marketing videos appear on the Landbell Group’s YouTube channel.

That blurring of lines between the for-profit German corporation and the nonprofit American corporation that operates out of a PO box has led to a lawsuit against both the state and Landbell USA from a textile industry trade group, the American Apparel & Footwear Association, which has asked a Superior Court judge in Sacramento to block the designation of Landbell USA as California’s textile PRO. A hearing is scheduled in that case in August.

The Federalist sent a long series of questions to CalRecycle, Landbell USA, and the lawyers for the American Apparel & Footwear Association. Most simply, we asked both CalRecycle and Landbell USA to provide the address of Landbell USA’s California business office, since we can’t find an office address for the company other than the condo and the PO box. We also asked Landbell USA and CalRecycle for Landbell USA’s current staffing numbers.

Landbell USA has not responded to our questions, and neither did the lawyers who are suing them.

CalRecycle, the state agency overseeing the implementation of the textile recycling law, responded to a series of email messages with a short message from Acting Communications Director Lance Krug on Tuesday morning saying that the agency could not respond immediately. Email messages to the agency director and regular communications director produced automated “out of the office” responses. The Federalist will update this story if CalRecycle or Landbell USA eventually provide responses.

Meanwhile, if you’re an entrepreneur, consider this new business model: In the regulatory compliance industry, it appears that you can lock in a regular source of eight-figure annual revenue before you have an office or a staff.