On July 11 in U.S. District Court for Northern Illinois, the St. Lucie County Fire District Firefighters' Pension Trust Fund and the Boynton Beach Firefighters' Pension Fund filed suit against Stericycle Inc., which is headquartered in Lake Forest. Stericycle operates in 21 countries as a waste disposal company, specializing in the disposal of medical, pharmaceutical and hazardous industrial waste, as well as the disposal of confidential documents.
Charles A. Alutto is president and chief executive officer. In February 2016, the company said it brought in almost $3 billion in 2015.
The five-count suit alleged Stericycle violated the U.S. Securities Act and the U.S. Securities Exchange Act. Besides the company itself, the suit also targets several officers and directors of Stericycle, as well as a number of investment houses that served as underwriters to Stericycle.
The lawsuit said the two firefighter pension funds bought more than 3,000 shares of common stock between them in the second half of 2015. However, in October that year the value of Stericycle’s stock fell 19 percent and in April 2016, plunged another 22 percent. Shareholders lost millions of dollars.
Stericycle blamed the decline on market conditions, but plaintiffs allege the real reason was Stericycle was hemorrhaging customers, because of “fraudulent billing practices.”
The lawsuit said Stericycle derives 63 percent of its revenue from what it terms “small quantity” customers, as the company pursues such accounts because they garner more profits. However, plaintiffs alleged Stericycle “engaged in a systematic and deliberate scheme” to regularly raise rates “without justification or notice to its (small quantity) customers.”
Plaintiffs alleged Stericycle would “simply increase” a customer’s bill, hoping the customer would either not catch it, or if the customer did, still pay without squawking. The increases varied by customer, but in some cases were jacked up by as much as 18 percent every six months, according to the suit.
Nonetheless, the company’s billing practices spurred a number of customers to walk away, which began taking a toll on revenue by the third quarter of 2015, leading to the drop in stock value, plaintiffs alleged.
Plaintiffs contended Stericycle misled investors into believing the company was above board in its dealings, which served to artificially buttress the price of Stericycle securities by making it appear the company’s relations with customers were solid.
The firefighter pension funds have asked for the class action to cover investors who bought stock between Feb. 7, 2013 and April 28, 2016. They seek compensatory damages in an amount to be proved at trial.
The pension funds are represented by the firm of Bernstein, Litowitz, Berger & Grossman, which has offices in New York, Chicago, San Diego and New Orleans.