Iron Mountain and Shred-It have agreed to pay $1.1 million to settle a lawsuit claiming that the companies defrauded the United States government for document shredding services. A third defendant, Cintas Corporation is continuing to contest the allegations. This constitutes the three largest providers of shredding in the United States.
This is a qui tam lawsuit brought about by Douglas Knisely. This allows persons not associated with the government to file fraud lawsuits against federal contractors. The person does not need to be damaged by the fraud. They are generally awarded 15%-25% of the settlement amount. The defendants are now also required to pay the legal fees of the person bring the qui tam lawsuit.
The lawsuit claimed that the three defendants failed to meet the GSA standards for particle size. The three defendants provide shredding services for several departments including the Defense, Homeland Security, Justice, Social Security Administration, Treasury, and Veterans Affairs. The GSA standard for paper shredding particle size is 1/32 inch by 1/2 inch with a variance of 1/64 inch. The standard also requires the shredder to provide a document of destruction for all materials destroyed.
Mr Knisely is the owner Knisely Shredding in Lock Haven, Pennsylvania. His expertise in the field allowed him to know that the equipment used but Shred-It, Iron Mountain, and Cintas are not designed to shred to the GSA specification.
There is equipment that will shred to the GSA specification but is more expensive to operate. This will level the playing field for companies that do provide the shredding requirements that the GSA demands. Alternatively, they may change the requirements for documents not needing the highest levels of security. This would also allow firms that accurately describe their shredding to compete on government contracts.