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NSA leak creates risks for Booz Allen

Jun. 10, 2013 - 06:00AM   |  
By JIM McELHATTON   |   Comments
Edward Snowden Speaks To The Guardian
Edward Snowden speaks during an interview in Hong Kong. Snowden, a 29-year-old former technical assistant for the CIA, revealed details of top-secret surveillance conducted by the National Security Agency regarding telecom data. (The Guardian / Getty Images)

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Within six years, Booz Allen Hamilton more than doubled its sales to the federal government to more than $4 billion in 2012. But within days, claims from a purported midlevel, high school dropout employee have changed everything.

Booz Allen stock tumbled Monday at one point by as much as 5 percent after the company confirmed it employed Edward Snowden, the 29-year-old Maryland man who has claimed to be the source of new details about classified U.S. surveillance programs.

Snowden’s leaks to the Guardian and Washington Post newspapers have shed light on government programs collecting data on millions of Americans’ phone and Internet usage, though officials insist they aren’t reading emails or listening in on conversations.

But Snowden’s actions also raised broader security questions about how a midlevel contract analyst could access such sweeping national security classified data and whether many others could do the same.

“I, sitting at my desk, certainly had the authorities to wiretap anyone, from you or your accountant, to a federal judge, to even the President if I had a personal email,” Snowden said in an interview with the Guardian.

Like any public relations crisis, the ability of Booz Allen — which prides itself as a top contractor to intelligence agencies — to survive with its reputation depends on its handling of the fallout, experts say. Yet at the same time, any response is complicated by the fact that its biggest customer — the federal government — is likely instructing Booz Allen on how much information about its former employee to make public, experts say.

“There is not a precedent anywhere ever for something like this,” said Michael Robinson, senior vice president of crisis communications consultant Levick Strategic Communications. He is not working for Booz Allen.

“The only play Booz Allen has is to be as cooperative with the government as it can be in all things,” he said. “If the government wants Booz Allen to speak, they speak. If the government wants Booz Allen not to say anything, they clam up.”

So far, the company has said little other than to issue a brief statement confirming that it employed Snowden for less than three months and that he was assigned to a “team” in Hawaii.

“News reports that this individual has claimed to have leaked classified information are shocking, and if accurate, this action represents a grave violation of the code of conduct and core values of our firm,” the statement read.

In a routine disclosure to the Securities and Exchange Commission last month, Booz Allen cited various risks to corporate operations, including employee misconduct involving the “improper use of our clients’ sensitive or classified information.”

“It is not always possible to deter employee or subcontractor misconduct, and the precautions we take to prevent and detect this activity may not be effective in controlling unknown or unmanaged risks or losses, which could materially harm our business,” the company said in an SEC filing.

Scott Sobel, president of Media & Communications Strategies, a Washington-based crisis communications firm, said the company may be discussing other options as it seeks to contain the fallout over the disclosures, such as ordering an independent outside review headed by experts formerly of the National Security Agency, CIA or FBI.

“What they say now will set the tone for whether they’re going to be defensive or proactive,” Sobel said. “It will create a baseline for how their clients, prospective clients and especially the government are going to react to them in the future.”

Unlike other major contractors, like Boeing, which sells airplanes to the private sector and gets revenue from sources other than the government, Booz Allen is almost entirely dependent upon federal agencies. SEC forms show federal agencies accounted for 99 percent of the company’s business in fiscal 2013. Nearly one-quarter of that work came from intelligence agencies such as NSA.

Federal procurement records show the company ranked No. 26 among all federal contractors in 2006, with nearly $2 billion in federal contracts. Last year, the company ranked No. 15 with a little more than $4 billion, records show.

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