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Background check company that OK'd Snowden, Navy Yard shooter goes bankrupt; Lawsuit against rival still pending

By John O'Brien | Feb 23, 2015

WASHINGTON (Legal Newsline) – An investigation services company that performed background checks on Edward Snowden and the Navy Yard shooter declared bankruptcy weeks after winning its protest of a $13 million contract awarded to its main competitor, all while a lawsuit against that same competitor remains pending.

Last month, the Government Accountability Office 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.

The decision came as a result of US Investigation Services’ bid protest. The company has also sued FCi in a Virginia state court, claiming a former employee who now works at FCi conspired to interfere with USIS’ bid for the FBI contract.

“(W)e recommend that the agency consider the feasibility of terminating the task order awarded to FCi,” Susan Poling wrote for the GAO.

“Should the agency conclude that it is not feasible to terminate FCi’s task order, we recommend that USIS be reimbursed the costs associated with preparing its (bid).

“In the alternative, if the agency determines that it is feasible to terminate FCi’s task order, we recommend that the agency make award to the concern next in line for award, if otherwise proper.”

The good news for USIS didn’t apparently last long. Its parent company filed for bankruptcy on Feb. 8, listing more than $1 billion in both assets and liabilities.

It’s been a rough year for the company, which conducted background checks on potential government hires for nearly 20 years. Two of those checks included 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.

Problems for the company include:

-A $1.6 million class action lawsuit against the company listed on the bankruptcy filing;

-Mass layoffs that followed the U.S. government dropping its contract with USIS;

-Another class action that was filed in Pittsburgh federal court by a former employee who says he wasn’t given proper warning of the company’s mass layoffs in 2014. Thomas Karaniewsky worked at the company’s Grove City, Pa., plant before the layoffs; and

-An October ruling from the GAO in favor of FCi, which challenged a $210 million contract awarded to one of USIS’ subsidiaries by the Department of Homeland Security.

USIS’ lawsuit against FCi and former employee Michelle Dittmer is stilled 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.

Among the executives listed in the allegations are CEO Sharon Virts, president Scott Miller and vice president William Thomas.

It cites an email received by USIS employee between FCi personnel that it says showed Dittmer was violating her non-compete and non-solicitation agreement that she once signed with USIS to help FCi.

“Specifically, the email revealed that Dittmer, along with other FCi employees, had been meeting with USIS personnel to obtain ‘signed letters of intent’ for submission with FCi’s bid,” says the complaint, filed on Oct. 31.

“The email further revealed that, to assist FCi in preparing its bid, Dittmer had been in contact with Hannah McMillan, a then-current USIS employee who Dittmer had supervised while at USIS, in order to obtain USIS’ confidential information and trade secrets.”

Miller encouraged Dittmer’s actions, the complaint says, by asking, “Who are the critical (subject matter experts) who bring the key domain knowledge? Who are the most product? Hanna will know.”

Thomas responded that the company was “going to share the roster of who we have and who is missing with Hannah tomorrow and target any particular skill set or SMEs who may add more value,” the complaint says.

Jonathan Goldman, FCi’s chief growth officer, later noted in the email exchange that these actions gave the company “a great head start on the competition,” the complaint claims.

“As their own words show, Dittmer and FCi conspired with McMillan to use USIS’ confidential information and trade secrets in order to benefit FCi in its response to the FBI’s (request for quotations),” the complaint says.

On Jan. 9, in response to FCi’s motion, the case was stayed while the bid protest was being considered by the GAO.

“Pending the outcome of the protest, the contract has not been conclusively awarded to FCi,” the defendants wrote.

“If the protest is sustained, that will be essentially wholly determinative of this case.”

That may not be the case, though. The FBI overrode a stay and proceeded with FCi, which was hired to determine what information in agency files could be declassified.

So, even though the protest was sustained, it could be too late for the FBI to back out of the contract, considering USIS' bankruptcy. That would leave the company to pursue only the money it spent preparing its bid as compensation and possibly keep the $13 million figure in play in the civil suit.

From Legal Newsline: Reach editor John O'Brien at jobrienwv@gmail.com.

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