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Stericycle Settles 7-Year Qui Tam Lawsuit; Pays Over $26M

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Waste management company Stericycle, Inc. (SRCL - Free Report) finally entered into a settlement agreement for a qui tam lawsuit that has been going on since 2008. The lawsuit alleged that the company’s management had been systematically overcharging government entities for its services.

The lawsuit has now been settled by all parties involved, and the settlement terms require Stericycle to pay $26,750,000 in aggregate to the Federal Government and all affected states in exchange for resolving all claims.

In 2008, a qui tam complaint was filed against Stericycle by a former employee on behalf of the Federal Government, and later fourteen states and the District of Columbia. A qui tam action is a whistleblower lawsuit filed by a private citizen against an entity believed to have violated a contract with the government. The lawsuit claimed that Stericycle methodically implemented automated price increases without giving notice of the same to government entities.

The lawsuit alleged that Stericycle programmed its billing system to automatically increase rates by 18% every 9 months, without any relevant cost hike to justify them. The price hike system, beginning in 2003, was designed to evade detection and increase its revenues and violated the terms of its contract with the federal customers.

The whistleblower lawsuit was filed by a former employee of the company, and came to light in 2013 when New York Attorney General Eric Schneiderman announced a $2.4 million settlement between New York and Stericycle. The settlement was a compensation for overcharging public entities like schools, hospitals, and police and fire departments for waste management services. The state also imposed strict guidelines on the company for future rate hikes.

The lawsuit also claims that Stericycle’s upper management was aware of and complicit in the illegal scheme.

Stericycle continued to refute all allegations raised under the qui tam action, and insisted that the settlement was agreed upon to simply avoid the uncertainty, delay and the expense associated with continued litigation. The waste management company did not admit to any fault or wrongdoing as alleged under the lawsuit.

Stericycle presently carries a Zacks Rank #4 (Sell). Better-ranked stocks that look promising and are worth a look now in the broader services industry include FTI Consulting, Inc. (FCN - Free Report) , Hill International, Inc. and The Hackett Group, Inc. (HCKT - Free Report) , each carrying a Zacks Rank #2 (Buy).

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