Iron Mountain And Shred-It Pay $1.1 Million To Resolve Lawsuit Over Failure To
Properly Shred Sensitive Government Documents
PHILADELPHIA, July 9, 2013
PHILADELPHIA, July 9, 2013 /PRNewswire/ --Two of the biggest
document-shredding companies in America, Iron Mountain Corporation ("Iron
Mountain", NYSE "IRM") and Shred-It USA ("Shred-It"), have agreed to pay a
total of $1.1 million to settle a lawsuit alleging that they defrauded the
government by failing to shred sensitive documents as required by their
contracts with the United States government.
The settlement follows a multi-year investigation by the United States
Department of Justice triggered by a lawsuit filed by Pennsylvania resident
Douglas Knisely, owner of a family-operated document-shredding business.
A third Defendant, Cintas Corporation ("Cintas", NASDAQ "CTAS"), a
multi-billion company based in Cincinnati, Ohio, continues to contest
allegations that it defrauded the federal government by failing to properly
shred sensitive documents.
The qui tam lawsuit filed in federal district court in Philadelphia in 2010 by
Mr. Knisely alleged that Iron Mountain, Shred-It, and Cintas, the three
largest vendors of secure document-shredding services in the United States,
failed to shred sensitive government documents as required by their contracts
with the United States General Services Administration ("GSA"). A copy of Mr.
Knisely's qui tam Complaint, which Iron Mountain and Shred-It are settling
today can be found at www.falseclaimsact.com.
Details of the Iron Mountain, Shred-It, & Cintas Scheme
According to Mr. Knisely's Complaint, since at least 2006, Iron Mountain,
Shred-It, and Cintas have been paid millions of dollars pursuant to contracts
with the United States to shred highly sensitive documents for federal
government agencies, including: the Department of Defense; Department of
Homeland Security; Department of Justice; Social Security Administration;
Department of the Treasury; and the Department of Veterans Affairs.
Iron Mountain, Shred-It, and Cintas obtained these lucrative government
contracts as a result of their application to the GSA to become approved GSA
Schedule 36 vendors of document-shredding services. The GSA Solicitation to
become an approved document-shredding vendor stated:
A) SHREDDINGS: include both on-site and off-site for shredding
services, which is designed to handle a variety of classified and
unclassified materials. Shredders shall be designed to produce residue
particle size not exceeding 1/32 inch in width with a 1/64-inch tolerance by
½ inch in length. There is no need to separate paper grades or remove
staples, clips or other bindings.
To protect the security of government documents, the solicitation
unambiguously required that document-shredding vendors use shredders designed
to produce residue particles not exceeding 1/32 inch in width (with a
1/64-inch tolerance) by 1/2 inch in length.
The Solicitation further requires vendors to certify to the United States the
destruction of materials, as follows:
CERTIFICATE OF DESTRUCTION
A signed certificate of destruction must be issued upon completion of each
job. The certificate shall indicate the date of destruction, identify the
material destroyed, method of destruction, and be signed by the individuals
designated to destroy and witness the destruction. Destruction officials
shall be required to know, through their personal knowledge, that such
material was destroyed.
According to the Qui Tam Complaint, Iron Mountain, Shred-It, and Cintas have
repeatedly failed to shred sensitive documents of numerous federal government
agencies using shredders that were designed to produce residue particles not
exceeding 1/32 inch in width (with a 1/64-inch tolerance) by 1/2 inch in
length. Employees of Iron Mountain and Cintas admitted, as alleged in the
Complaint, that their employers did not possess equipment that could shred
documents to sizes that small.
Cintas, for example, stated that it used a pierce-and-tear shred process that
produced a standard shred size of 5/8 inch wide by 2 inches long – which is
approximately 100 times larger than the size mandated by the GSA
solicitation. Additionally, according to the allegations in the Complaint, by
not using the shredders mandated by the GSA to produce residue particles not
exceeding 1/32 inch, Defendants were able to obtain additional revenue by
re-selling the improperly shredded government documents to paper recyclers.
Documents shred using 1/32 inch shredders are generally unsuitable for
Relator Douglas Knisely
Relator Douglas Knisely is the owner and operator of Knisely Security LLC
("Knisely Security"), based in Lock Haven, Pennsylvania. Knisely Security is
a small, family-owned business that provides secure shredding services in
rural, central Pennsylvania.
Mr. Knisely has over 32 years of experience in law enforcement and security,
and is an expert on security related to document destruction. He is a
graduate of the Pennsylvania State Police Academy and the Executive Protection
Institute. Mr. Knisely also received a protection professional certification
from the American Society for Industrial Security. He also has significant
experience shredding documents, having started his career performing
Department of Defense classified document destruction.
Mr. Knisely Exposes Defendants' Scheme
Mr. Knisely, as the owner and operator of a small family-owned document
shredding business, was interested in performing secure document shredding for
federal government offices located in central Pennsylvania. But he could not
submit a bid for the government work because his company's shredders did not
satisfy the mandatory requirement in the GSA Solicitation that shredders be
designed to produce residue particles not exceeding 1/32 inch in width (with a
1/64-inch tolerance) by 1/2 inch in length.
Mr. Knisely observed, however, that Iron Mountain, Shred-It, and Cintas (three
of the largest players in the document shredding business) were receiving
millions of dollars in shredding business from the U.S. government. As
alleged in the Complaint, Mr. Knisely was concerned because, as an expert in
the document-shredding industry, he knew that shredding trucks regularly used
by the Defendants were not designed to produce residue particles not exceeding
1/32 inch in width (with a 1/64-inch tolerance) by 1/2 inch in length.
Mr. Knisely knew, therefore, that the three Defendants had obtained contracts
to shred sensitive government documents by falsely representing that their
shredding equipment satisfied the unambiguous requirements of the GSA
Solicitation. Mr. Knisely, unwilling to misrepresent to obtain government
contracts, also was concerned about the security risks caused by the three
Defendants' failure to shred sensitive government documents (including
potentially classified materials) in compliance with the federal government's
Mr. Knisely decided to contact legal counsel and, in 2010, he filed his qui
tam lawsuit to stop the Defendants' illegal scheme.
Details of the Settlement
The settlement with the United States announced today, required Iron Mountain
and Shred-It to pay the United States a total of $1,100,000.
As required by statute, Mr. Knisely is entitled to receive a minority share of
the government's recovery for reporting Defendants' fraudulent scheme. In
addition, the False Claims Act requires a Defendant to pay the Relator's
reasonable attorneys' fees and costs expended in the prosecution of this
Defendant Cintas has not, at this time, agreed to resolve the False Claims Act
allegations against it—allegations that Iron Mountain and Shred-It have
settled with the United States. Accordingly, Mr. Knisely's whistleblower
lawsuit on behalf of the United States will continue against Cintas. Pursuant
to the False Claims Act, a Defendant found to have violated the Act is liable
for treble damages plus an additional civil monetary penalty of $5,500 to
$11,000 per false claim (which, in this case, could include each instance
where government documents were shredded without the required documents
The Complaint also alleges that Cintas violated the federal Lanham Act by
touting its document-destruction business with misleading statements that have
deceived customers and given Cintas an unfair advantage in the marketplace.
Mr. Knisely was represented by Marc S. Raspanti and Michael A. Morse of the
national whistleblower law firm of Pietragallo Gordon Alfano Bosick &
Raspanti, LLP; and James E. Beasley, Jr., and Maxwell S. Kennerly of The
Beasley Firm, LLC.
Attorney Michael A. Morse praised Mr. Knisely's courageousness in exposing the
Defendants' scheme, adding: "This case presents a real-life David versus
Goliath. Mr. Knisely, the owner of a small, family shredding business in
central Pennsylvania refused to cut corners in order to obtain government
contracts. He had the courage to blow the whistle on the three largest
shredding companies in the nation."
Attorney Marc S. Raspanti added: "We are pleased that Iron Mountain and
Shred-It agreed to a settlement that will result in a substantial recovery for
United States taxpayers and will heighten awareness of document destruction
practices nationwide. Iron Mountain and Shred-It were cooperative throughout
this entire process."
The Federal False Claims Act
The False Claims Act allows private persons (known as "relators") to file a
lawsuit against those businesses and individuals that have directly or
indirectly defrauded the federal government. The False Claims Act was enacted
by Congress at the request of President Lincoln, who signed it into law on
March 2, 1863. The Act was strengthened in 1986, and again with amendments
enacted in 2009 and 2010. The Act is the government's primary tool against
fraud by its contractors, as evidenced by the recovery of more than $33
billion since 1986.
Pietragallo Gordon Alfano Bosick & Raspanti, LLP, is one of the largest and
most successful whistleblower law firms in the United States. Lawyers in the
nationwide whistleblower practice group of Pietragallo Gordon Alfano Bosick &
Raspanti have served for more than 25 years as lead or co-lead counsel in
whistleblower cases that have recovered more than $1 billion for federal and
state taxpayers. For more information on the Federal False Claims Act, State
False Claims Acts, SEC Whistleblower Program, the IRS Whistleblower Reward
Program, or the nationwide whistleblower practice of Pietragallo Gordon Alfano
Bosick & Raspanti, LLP, call (215) 320-6200, or visit www.falseclaimsact.com,
Marc S. Michael A. Morse Jesse Abrams-Morley
MSR@Pietragallo.com MAM@Pietragallo.com JAM@Pietragallo.com
SOURCE Pietragallo Gordon Alfano Bosick & Raspanti, LLP
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