Justice Department says federal contractor routinely faked security clearance reviews

Introduction

“Shelves are as clean as they could get. Flushed everything like a dead goldfish.”

That’s what a key supervisor in charge of reviewing federal security clearances told a superior in April 2010, in a message boasting about how he and his colleagues had approved numerous clearances and sent them on to the federal Office of Personnel Management without conducting required quality reviews.

The quote, which federal prosecutors say appeared in an email sent between two senior employees at a federal contractor called US Investigative Services (USIS), appears in a court filing by the Justice Department on Jan. 22 that supports and adds startling detail to a whistleblower’s previous legal claim against the firm.

The filing bluntly accuses USIS, which OPM pays to review security clearance applications for more than 100 federal agencies and departments, of deliberately defrauding the government from March 2008 through at least Sept. 2012 by pretending it conducted quality reviews that actually never occurred.

It says this fraud was not perpetrated by rogue employees, but orchestrated by the firm’s leadership as a matter of official policy. The motive was greed, according to the filing. “USIS management devised and executed a scheme to deliberately circumvent contractually required quality reviews … to increase the company’s revenues and profits,” it states.

The firm’s desire to complete its work quickly and the heavy pressures it placed on employees to comply with unrealistic investigative deadlines were described by the Center for Public Integrity in October 2013. Multiple employees reported then that these pressures became particularly intense before the end of every quarter, when the company strove to close as many investigations as possible to boost its earnings and report higher income.

The initial impetus for speed in security clearance reviews came from Congress, which passed a law in 2004 demanding that most be finished in 60 days. But the practice at USIS of skipping required quality reviews and sending them along — known as “flushing” the investigations — became frequent after private equity investors acquired the firm in 2007, they said.

In the 25-page court filing, by an assistant attorney general in the Justice Department’s civil division and a U.S. attorney in Alabama, the Justice Department describes how systematic this was — to the point where it was assisted by special software that attached a notation to unreviewed records asserting that they had been reviewed, even when they had in some instances never been opened.

It said an unnamed “Workload Leader” at a USIS office in western Pennsylvania oversaw most of the dumping, which increased as reviewers regularly failed to meet increasingly ambitious internal goals. The firm’s chairman set the revenue targets and its chief financial officer enforced them by deciding “how many cases needed to be reviewed or dumped,” the filing said. The orders were passed down by telephone, in meetings, and occasionally in emails.

USIS, in a prepared statement emailed by a spokeswoman who insisted that her name not be used, said “integrity and excellence are core values at USIS that guide the work of our outstanding 6,000 employees, many of whom have served our country in the military or through other government service. The alleged conduct referenced in the civil complaint is contrary to our values.”

The statement further said the allegations “relate to a small group of individuals over a specific time period … Since first learning of these allegations nearly two years ago, we have acted decisively to reinforce our processes and management to ensure the quality of our work and adherence to OPM requirements. We appointed a new leadership team, enhanced oversight procedures, and improved control protocols. From the outset, we have fully cooperated with the government’s investigation.”

The filing accused those involved of attempting to hide their systematic faking of quality reviews, partly by cutting back on dumping when audits were scheduled, and partly by lying in a letter to OPM after the agency expressed concerns. “We do not want the customer to see this,” a USIS employee said in an April 2010 e-mail to one of the firm’s quality control managers.

The discovery of the alleged scheme is problematic for both the firm and for OPM. USIS, headquartered in Falls Church, Va., not only was responsible for conducting and reviewing its own investigations, it also was paid to review background investigations conducted for OPM by other contractors. The Justice Department said that at least 665,000 of the investigations it told OPM had been completed were not subjected to required quality checks.

While it did not fix a precise financial value on the flawed work, the filing said the government supported the claims of the whistleblower — a former director of fieldwork services at USIS — for damages equivalent to triple the fees the government paid, plus penalties of between $5,500 and $11,000 for each fraud. It also said the firm had improperly obtained $11 million in bonus payments, given partly for its speedy work.

The company, which was created by privatizing part of OPM in the mid-1990’s in a deal that gave many of its employees valuable stock, had revenues in 2010 of roughly $680 million, an executive of the firm said. Two of those whose security files it reviewed and approved became notorious recently: One was NSA contractor Edward Snowden and the other was Aaron Alexis, whose shooting spree at the Navy Yard in Washington last September killed 12 others.