Jessica Karmasek Aug. 24, 2015, 11:31am


WASHINGTON (Legal Newsline) - U.S. Investigations Services Inc., a company that performed background checks on Edward Snowden and the Navy Yard shooter and was forced to declare bankruptcy earlier this year, has agreed to settle allegations that it violated the False Claims Act, the U.S. Department of Justice said last week.

USIS, along with its parent company Altegrity, have agreed to forgo their right to collect payments they claim were owed by the U.S. Office of Personnel Management, or OPM, valued at at least $30 million.

The companies, headquartered in Northern Virginia, agreed to the deal in exchange for a release of liability under the FCA, according to the DOJ.

From its privatization in 1996 until September 2014, USIS provided background investigative services for OPM under various fieldwork contracts.

The government alleged that beginning in at least March 2008 and continuing through at least September 2012, USIS deliberately circumvented contractually required quality reviews of completed background investigations to increase the company’s revenues and profits.

Specifically, USIS allegedly devised a practice referred to internally as “dumping” or “flushing,” which involved releasing cases to OPM and representing them as complete when, in fact, not all the reports of investigations comprising those cases had received a contractually-required quality review.

The government argued that, relying upon the company’s false representations, OPM issued payments and contract incentives to USIS that it would not otherwise have issued had OPM been aware that the background investigations had not gone through the quality review process required by the contracts.

“Shortcuts taken by any company that we have entrusted to conduct background investigations of future and current federal employees are unacceptable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.

“The Justice Department will ensure that those who do business with the government provide all of the services for which we bargained.”

Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia, who helped with the settlement, said contractors who do business for the federal government have a responsibility to provide the goods and services they promise.

“This particular company failed to meet its obligations of comprehensively reviewing the backgrounds of current and prospective federal employees,” Cohen said in a statement.

In February, Altegrity, USIS and their affiliates filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code in Delaware, listing more than $1 billion in both assets and liabilities.

The settlement of USIS’ FCA liability is part of a broader settlement that also resolves other matters between the federal government and USIS/Altegrity that were part of the bankruptcy proceeding, the DOJ noted.

It’s been a difficult year for the company, which conducted background checks on potential government hires for nearly 20 years.

Among those checks USIS was responsible for: Snowden, who leaked top secret information from the National Security Agency, and Aaron Alexis, the shooter who killed 12 people at Washington Navy Yard in September 2013.

The company already owes nearly $1.6 million for a class action lawsuit filed against its affiliate Hireright Inc., according to its Chapter 11 filing. A preliminary settlement was reached in January, but that was before Altegrity filed for bankruptcy.

In October, USIS was forced to lay off thousands following the federal government’s dropping its contract.

Soon after, a proposed class action was filed in Pittsburgh federal court by a former employee who says he wasn’t given proper warning of the mass layoffs. Thomas Karaniewsky worked at the company’s Grove City, Pa., plant.

The class action filed by Karaniewsky in the U.S. District Court for the Western District of Pennsylvania has since been stayed due to the company’s bankruptcy filing.

Also in October, the Government Accountability Office ruled in favor of FCi -- USIS’ main competitor -- which challenged a $210 million contract awarded to one of USIS’ subsidiaries by the Department of Homeland Security.

USIS currently is suing FCi in a Virginia state court, claiming a former employee who now works at FCi conspired to interfere with USIS’ bid for a FBI contract.

In January, the GAO -- as a result of a bid protest by USIS -- ruled against a $13.3 million, one-year contract given to FCi, finding that the labor categories included in the contract do not encompass the types of employees FCi has.

USIS’ lawsuit against FCi and former employee Michelle Dittmer is still listed as “active” by the Loudoun County Circuit Court in Virginia.

It accuses the two of conspiring with executives at FCi to secure the $13 million FBI contract.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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