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Firms Specialize in Turning Records Into Pulp : Industrial Spying, Fallout From Computer Revolution Give Business a Boost

June 11, 1985|JAN KLUNDER | Times Staff Writer

When the large insurance company discovered its error, it was too late. One day earlier, the company had unwittingly handed over its master computer control log to be shredded by a private firm that specializes in destroying business records--and destroying them quickly.

"They had to reprogram the entire computer system," said Bill Toby, sales manager for the Van Nuys-based Golden State Fibres, one of the two Valley-based companies in the record-shredding business.

The possibility of costly errors, however, has not kept customers away from Golden State or the other firm, Bonded Destroyers, also based in Van Nuys.

Concern Over Espionage

Indeed, rising concern about industrial espionage has provided a boost for the two companies. They have also benefited from the mounds of printouts generated by the computer revolution--a revolution that was supposed to reduce the flow of paper but apparently did just the opposite.

"You can put so much information on computers today," Toby said. "Everyone has the information at their fingertips, but it's also printed out on paper. Companies don't want their competitors to know what they're up to, and a vice president certainly doesn't want his employees to know how much he is making."

Golden State shredded 30% more material in the first five months of this year than in the same period a year ago, according to co-owner Barbara Collet. However, profits for the company, which sells its refuse to recycling firms, are running about 20% behind 1984's pace because of a sluggish recycling market, Collet said.

At Bonded Destroyers, volume has doubled over the past 2 1/2 years and profits have risen at a "steady, gradual, very healthy" rate, according to co-owner Michelle Scozzari, who declined to provide specific figures.

The two firms report that most of their business comes from defense contractors, oil companies, insurance firms and law offices.

Many small businesses have begun purchasing their own office shredders in response to fears that employees or competitors might steal company secrets, according to George Shultz, president of the Los Angeles-area chapter of the Assn. of Records Managers and Administrators.

However, an increasing number of larger firms with a lot of records to destroy are turning to private destruction services because of the high cost of staffing and equipping their own shredding centers, Shultz said.

Bonded uses a portable mill to grind records on its customers' premises, while Golden State hauls materials back to a huge shredding machine at its one-acre plant on Sepulveda Boulevard.

"We're dealing with sensitive information," said a purchasing agent for a Valley insurance company that does business with Golden State. "You want your customers to know that it's being destroyed properly. Claim forms contain people's personal history. The world wouldn't end if anyone saw it, but we wouldn't want a claim form blowing around on Sepulveda Boulevard."

Risks Are Too Great

A security official for a Valley defense contractor agreed, saying the risks are too great to dispose of documents without first destroying them.

"If you look at it from the standpoint of industrial espionage--I'm not talking about the Soviet bloc, but about competitors--ordinary trash bins are open and somebody can go through and search in there," the security official said. "It's one of the best ways of getting sensitive materials.

"Once that trash company hauls that bin away, it becomes their property, and company X, Y or Z can buy it from them. Our adversaries have been known to go into those trash bins."

Both officials requested anonymity for themselves and their employers, saying the companies do not want competitors to know where the firms' records are being destroyed.

Firms Are Bonded

When the insurance company gave Golden State its master computer control log by mistake, the shredding firm was not held responsible. Nor are such firms accountable for documents that have been subpoenaed in court, company officials say.

Both firms are bonded and will certify that they have destroyed the material they were given. If the documents turn up later in the wrong hands, the companies can be held liable, officials said.

Although Golden State and Bonded are the only two records destroyers based in the Valley, similar firms elsewhere in Los Angeles County also have area contracts. Officials at the two firms maintain that there is very little competition between them and plenty of new business to tap in the Valley.

However, because of the sensitive nature of some records, the destruction business relies on trust and word-of-mouth promotion for customers. Neither firm does much advertising beyond the Yellow Pages.

High Start-Up Costs

Golden State and Bonded officials said that, although their business is growing, other destruction firms have not sprung up, largely because of high start-up costs.

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