Beyond a shred of evidence, a sales boom

Despite Enron shredding scandal, document-destruction industry grows in 'paperless' electronic age.

As the owner of a paper-shredding company, Rick Carey might understandably wince these days at the image the Enron shredding scandal is casting on his industry.

But despite the headlines - not to mention the "paperless" electronic age - these are boom times in the document-destruction business. With the increase in credit-card fraud, identity theft, and corporate espionage, most people doing the shredding aren't committing a crime - they're avoiding being victims of crime.

"Some people thought Enron would have a backlash in the shredding industry," says Mr. Carey, president of Datasafe Security Services in West Bridgewater, Mass.

Instead, mobile shredding trucks rumble through city streets and suburban office parks, and corporate shredders whir away, feeding a business that is growing by 20 percent to 30 percent a year, according to the National Association for Information Destruction (NAID). Sales of commercial shredding services total between $300 million and $400 million a year, says president David Culbertson.

From just two- or three-dozen companies 20 years ago, the business has grown to more than 600 firms today, says Robert Johnson, NAID's executive director.

The resulting blizzard of confetti gets recycled into everything from paper plates to toilet paper.

"People shred everything that's got their name on it these days," says Robert Ordway, president of SecureShredders.com in Orange, Calif. "In the high-tech world we live in, there are all kinds of ways people can get at you. If they have your Social Security number, address, and mother's maiden name, they can do pretty much anything."

What a change from the innocent days when it was enough to crumple a sheet of paper and lob it into the nearest wastebasket, without worrying that it might end up in the wrong hands.

John Wagner, president of Allegheny Paper Shredders Corp. in Delmont, Penn., traces the shredder's beginnings to a 1930s German inventor inventor, Adolph Ehinger, who adapted a hand-cranked Bavarian noodle cutter to shred paper.

The industry languished until the early 1970s. Then came Watergate. Revelations that conspirators in the Nixon White House had destroyed incriminating documents put shredders on Page 1.

"The year before Watergate, I sold 70 shredders," Mr. Wagner says. "The year after Watergate, I sold 400." Enron is "another Watergate" for shredding, he says.

Initially, banks made up the primary market, using shredders to destroy negotiable documents - checks, stocks, bonds. Today, giant machines serve many businesses, devouring everything from marketing plans and customer lists to sales data and payroll records. Uniformed, bonded employees stride the halls of corporate America, shredding the contents of locked bins on the premises or at off-site locations.

Customers are free to watch the process. "They're paying for the thrills," says Ron Hannon, president of Data-Grater in Windham, N.H. He charges about $12 to shred 100 pounds of paper.

The newest shredding trucks are equipped with cameras. Some off-site operators are also installing cameras in their facilities. Customers can remain at their desk, watching over the Internet as their documents are destroyed.

At home, wastebasket-sized units, costing from $15 to $200, chomp down on such delicacies as preapproved credit-card applications, medical records, and canceled checks.

Depending on the level of security required, blades can cut pieces ranging from 1/4-inch-wide strips to confetti slivers 1/32 by 7/16 of an inch.

Carey attributes the industry's growth to three things: competition that forces executives to protect business secrets; the confidentiality essential in some businesses; and legal compliance.

The Gramm-Leach-Bliley Act of 1999 requires all companies that extend credit to protect the security and confidentiality of customers' records. And the Health Insurance Portability and Accountability Act includes what Carey calls a "huge" privacy and security requirement.

Some managers are more concerned about protecting electronic privacy than guarding papers, says Carey, whose background is in security.

"They'll get very excited when you talk about electronic eavesdropping - the sexy James Bond kind of stuff, with laser beams bouncing off windowpanes, or wiretapping, or hackers," he says. "Nobody ever saw James Bond picking through a recycling bin." Yet electronic piracy is expensive and is a serious federal crime. Dumpster-diving, by contrast, is simple, cheap, and legal.

Despite scandals focusing on the nefarious destruction of documents, Mr. Johnson emphasizes the positive uses. "If companies don't shred their confidential materials and don't protect their trade secrets, they forfeit their ability to protect them in a court of law." In 1987, the Supreme Court ruled that when a person throws something away, he gives up any right to ownership of it.

Not all shredding is routine. "I've done some weird stuff," says Mr. Hannon. He was once summoned to Beacon Hill in Boston to destroy a stack of love letters. Another man paid him $100 to pulverize a videotape. Carey recalls a day when a man carrying a large binder approached him as his shredder was grinding away. "Do you mind if I throw this in?" the man asked. Carey agreed, and the man flung a wedding album in.

Ms. Martin recalls one woman who used her shredder to cut lettuce.

Not everyone needs a shredder, says Hannon. "My mother sends me her stuff. I say, 'Mom, just rip it up. You only have six envelopes.' But she wants to be sure it's shredded."

For executives concerned that shredding could create problems similar to those at Enron, Carey offers reassurance: "If you're doing shredding as a standard business practice as part of a regular, documentable business program, you're fine. That's different than having the attorney general at your door with a subpoena. Once you're in trouble, it's definitely not the time to start shredding."

Despite sales growth, Wagner says the field is still in its infancy.

"People talk about a paperless society," he says. "You and I are never going to see it. A hundred years from now, they'll still be talking about it. There'll be more paper than ever."

And, he trusts, more shredders.