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Background check contractor at risk of suspension, experts say

USIS faces fraud claims in lawsuit

Nov. 3, 2013 - 06:00AM   |  
By SEAN REILLY   |   Comments
The Justice Department joined in a False Claims Act lawsuit filed against USIS, which performs about 45 percent of security clearance background checks.
The Justice Department joined in a False Claims Act lawsuit filed against USIS, which performs about 45 percent of security clearance background checks. (Staff)

The government’s top contractor that performs security clearance background investigations appears to be scrambling to head off suspension or debarment as it comes under increased fire for allegedly defrauding the government.

Last week, the Justice Department joined in a False Claims Act lawsuit filed against USIS of Falls Church, Va.. The firm performs almost two-thirds of the background checks for security clearances that are extended to millions of federal employees and contractors, according to one lawmaker.

The case, unsealed last week, was filed in Alabama two years ago by Blake Percival, a former director of fieldwork services at the company, who alleges that USIS systematically submitted background investigations to the government that were incomplete or not properly reviewed, which, if true, would constitute fraud.

“We will not tolerate shortcuts taken by companies that we have entrusted with vetting individuals to be given access to our country’s sensitive and secret information,” Stuart Delery, head of DOJ’s civil division, said in a news release. “The Justice Department will take action against those who charge the taxpayers for services they failed to provide, especially when their non-performance could place our country’s security at risk.”

The department is mulling whether to proceed with its own complaint.

In his suit, Percival charges that the firm defrauded the government by forwarding cases to the Office of Personnel Management that had either not undergone a contractually required review or “had not been investigated at all.”

The practice, known as “dumping,” aimed to pump up revenue because USIS is paid about $1,900 for every investigative report turned in to OPM before the next-to-last day of the month and just 75 percent of that amount thereafter, Percival alleges. When Percival refused to order his employees to continue dumping, he was fired in June 2011, according to the suit.

USIS, which became aware of the allegations 18 months ago, has cooperated with the investigation, said the company’s spokeswoman Brandy Bergman. She declined comment on whether the company has had any discussions with OPM about the possibility of suspension or debarment. By press time late last week,an OPM spokesman had not responded to the same question.

The company, owned by the investment firm Providence Equity Partners, came under scrutiny earlier this year because it performed the background checks both for Edward Snowden, the one-time National Security Agency contractor who has leaked details of classified programs to the media, and Aaron Alexis, a former Navy reservist who gunned down a dozen people at the Washington Navy Yard in September before being killed by police. In the latter case, OPM has said that it believes that the check on Alexis was complete and fully complied with investigative standards.

Federal contractors faced with charges of serious wrongdoing typically respond by bolstering their ethics programs and removing problem executives as a way to demonstrate they are “responsible” companies that can continue to be entrusted with federal work.

USIS has revamped its senior management team and hired an independent integrity officer reporting directly to the board and CEO, according to Bergman. “We have acted decisively to ensure the quality of our work and adherence to OPM requirements,” Bergman said in a statement. Of the three USIS employees accused by Percival of participation in the dumping scheme, none is still with the firm.

Bob Meunier, a former suspension and debarment official with the Environmental Protection Agency who is now a consultant, said it appears that USIS — formerly known as U.S. Investigations Services — is trying to avert a cutoff of government business.

“In this day and age, you would be a fool to do nothing if you knew you were under investigation,” Meunier said, stressing that he had no direct knowledge of the case.

Jessica Tillipman, a contracts law specialist and assistant dean at George Washington University Law School, also sees USIS at risk of suspension or debarment. While any federal suspension or debarment official would likely take that option more seriously after the Justice Department intervened in a False Claims Act suit, the outcome would hinge in part on what steps the company does “to remedy the issue,” she said.

Since January, the company’s CEO has been Sterling Phillips, who in 2010 was brought in to lead tech firm GTSI in a shakeup after that company was briefly suspended from federal contracts for allegedly gaming set-aside programs.

USIS is the largest of three contractors that do background checks for OPM and other agencies, handling about 65 percent of the total, according to Sen. Claire McCaskill, D-Mo.

At the Senate hearing last week, Elaine Kaplan, OPM’s acting director, said her agency continues to have “some level” of confidence in USIS, citing its management changes since Percival’s suit was filed.

“Rely, but trust, but verify,” Kaplan said, according to a transcript.

The Government Accountability Office has urged OPM to create yardsticks to measure the quality of background investigations. Brenda Farrell, a GAO director for defense capabilities and management, said at the Senate hearing that several years ago OPM had an agreement with the defense and intelligence communities to move forward, “but at this time, all we know is that that plan has fallen apart.”

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