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DOJ Intervenes In Whistleblower Case Against Background Check Firm

In October, we wrote about the government’s intention to intervene in a pending whistleblower case against USIS, a security background check firm that is now accused of submitting hundreds of thousands of flawed background investigations. The Department of Justice has filed its complaint, which provides further insight into the allegations.

The complaint states that during the period between March 2008 and September 2012, USIS released at least 665,000 background investigations as complete when they had not received required levels of quality review. These “dumped” cases spanned across most government agencies, including the Department of Justice, Department of Homeland Security and the Defense Intelligence Agency. The complaint states that USIS management was acutely aware that the firm’s practice of dumping cases and quotes one manager as saying they, “flushed everything like a dead goldfish.” About 90% of USIS’ work is for the U.S. government and the company has been awarded more than $4 billion in federal contracts. See WSJ article. The company was responsible for the security checks of Aaron Alexis, the defense contractor responsible for last September’s shooting spree at the Washington Naval Yard, and Edward Snowden, the infamous NSA leaker, but the complaint does not allege that either of these checks were compromised.

Blake Percival, a longtime employee at USIS, was the original whistleblower that helped bring these allegations to light. Among the allegations, are claims that USIS created a special software program called “Blue Zone” to assist in dumping practices by sending cases to the government even when they had not undergone proper review. The company’s officials allegedly received close to $12 million in bonuses from the federal government, although USIS says it has replaced all officials implicated in the scheme.

In addition to alleging violations of the FCA, the United States’ complaint alleges USIS breached its contract with the Office of Personnel Management. This claim gives the United States a fallback in case it cannot prove the requisite scienter under the FCA.  However, breach of contract (like other common law claims) would only permit the United States to recover single damages plus interest, not the treble damages and civil penalties that are possible under the FCA. Common law claims can only be pursued by the United States; private citizen whistleblowers lack standing to bring such claims.

We also wrote last year about the government’s parallel criminal investigation of USIS. There is still no further news on that front, but we will update you when there is.

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