NEW YORK (TheStreet) -- Sometimes the best clues to what is really going on in a company can be found in local news media in a company's hometown. Or in towns they operate in.
The latter is the case with Stericycle (SRCL), the medical waste disposal company.
Of particular note: Controversy surrounding its waste disposal incinerator in the community of North Salt Lake, Utah, which is the only medical waste incinerator between the Pacific Ocean and Utah and one of a dozen or so in the country.
Based on many local media stories, including this one in the Deseret News, Stericycle's Utah incinerator seems to have a problem: According to Utah press, it repeatedly belches toxic fumes, which has not gone over well with the housing subdivision that borders the plant.
Nearby residents have held protests, with activist Erin Brockovich leading some. And the facility, whose permit to operate expires in next month, has been in the crosshairs of state and federal pollution regulators tied to allegations that its pollution tests were doctored.
Stericycle first acknowledged an issue at its Utah facility in its second-quarter 10-Q, where it disclosed that on May 28 it received "a notice of violation and order to comply" from Utah's Division of Air Quality. According to the company, the violation noticed alleged "violations of certain conditions of the operating permit" for the incinerator.
At the time, Stericycle said it planned to "cooperate fully" with federal and state regulatory agencies, and we will continue to do so through the resolution of this matter."
A quarter later the disclosure changed: It no longer said it was cooperating with "federal" authorities; instead Stericycle said it was "in discussion with the Division of Air Quality regarding a resolution of this matter" after filing a response to the violation notice.
That's where this gets interesting. Between the end of the second quarter and the end of the third quarter, the situation in Utah started to intensify. In July, KUER radio, public radio in Utah, ran a story headlined, "Stericycle May Lose its Permit to Operate Medical Waste Incinerator."
The story quoted Division of Air Quality Director Bryce Bird as saying there's a possibility the agency would revoke the incinerator's permit. "If they come to the point where they can't verify continued compliance, I think that is an option," he said.
Then he added this zinger: The U.S. Department of Justice is conducting a criminal investigation into Stericycle's alleged manipulation of emissions tests.
"The investigation was reported in local papers, but not to investors," says longtime short-selling analyst John Bossler of C and L Research, who is perhaps best known for spotting trouble at Exide, the battery company.
Stericycle didn't return my multiple calls in recent weeks asking about it.
But Harold Burge, who manages Utah's environmental program, told me, "We have received requests for information from the EPA's criminal investigation division. That's all we know."
Then, last week Utah's press reported that Stericycle now wants to move the facility.
Reality Check: It's unclear just how much of Stericycle's revenue comes from that one incinerator. The Utah situation hasn't been mentioned on recent earnings calls, but anything that threatens its continued operation -- given its role in the West -- would presumably have an impact. Meanwhile, a year ago the company agreed to settle a whistleblower case with the state of New York that alleged it overcharged state and local entities. Subsequently, a number of class actions have been filed around the country with similar charges. Furthermore, insider trading maven George Muzea of Muzea Insider Consulting says he rates the stock "on the negative side of neutral" based on "fairly aggressive selling of option stock that doesn't expire in a few years by the CFO."
Next up: Stericycle's earnings call on Feb. 5. The question: Will anybody ask or care about what's going on in Utah -- or any of the other issues? Moral: Just because they haven't been reported in the national press doesn't mean they're not important.
-- Written by Herb Greenberg