Two commercial paper-shredding companies have agreed to pay the federal government a combined $1.1 million settlement in a qui tam suit alleging they didn't shred official documents to the size specified by the General Services Administration. A third company hasn't settled.
Shred-it, which operates in Pennsylvania, will pay $300,000, and Iron Mountain, which is located in Massachusetts, will pay $800,000, to the federal government, according to the settlement agreements. Cintas, based in Ohio, is still contesting the suit.
Douglas Knisely, the relator, will get $210,000 from the Iron Mountain settlement and $78,750 from the Shred-it settlement. As part of the accord, he will also get attorney fees, the amount of which was not disclosed in the settlement agreements.
Knisely was represented by attorneys in Pietragallo Gordon Alfano Bosick & Raspanti's Philadelphia office.
The settlements with Iron Mountain and Shred-it were reached in December 2012 and April 2013, respectively. They were made public Tuesday with the filing of a stipulation of dismissal as to Shred-it in the case against all three shredding companies, captioned Knisely v. Shred-it USA. The case was filed in the Eastern District of Pennsylvania.
Knisely runs his own Pennsylvania-based document shredding company, according to the complaint, which was filed in 2010. He alleged in the complaint that the three major shredding companies he named had charged federal agencies millions of dollars since 2006 under contracts requiring them to shred sensitive documents to a size not larger than .03 inches wide and a half-inch tall.
According to Knisely, some of the agencies that used the companies' services were the Department of Defense, the Department of Homeland Security, the Department of Justice, the Social Security Administration, the Department of the Treasury and the Department of Veterans Affairs.
Knisely discovered the basis for his False Claims Act suit when he became interested in getting a government contract for shredding, but didn't have machinery that would meet the strict requirements of the government contract, according to a statement from the Pietragallo law firm.
"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," the release said.
"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," it said.
From the Department of Justice Civil Frauds Unit, Assistant U.S. Attorney Thomas Johnson and Gregory Pearson handled the case for the government, according to a release from the U.S. Attorney's Office for the Eastern District of Pennsylvania.
David Ogden of Wilmer Cutler Pickering Hale and Dorr in Washington, D.C., represented Iron Mountain and Thomas Coulter of LeClairRyan in Richmond, Va., represented Shred-it.