Background check probe zeroes in on USIS contracts

Tuesday - 2/11/2014, 4:24pm EST

A key House committee is zeroing in on gaps in the security clearance process.

Among the issues considered Tuesday by the House Oversight and Government Reform Committee were contracting practices at the Office of Personnel Management that allowed the largest background-investigation contactor — accused by the Justice Department of taking improper shortcuts and defrauding the government — to conduct quality reviews of its own work.

The committee's probe comes following a former employee's whistleblower lawsuit, also joined by the Justice Department, alleging that the company, USIS, had improperly signed off on hundreds of thousands of background investigations that had never been properly vetted — a practice known as "flushing" or "dumping" records. All told, according to the Jan. 22 DoJ complaint, the company dumped more than 665,000 background investigations between 2008 and 2012.

The company currently holds a $2.46 billion contract with OPM to conduct the fieldwork for background investigations. However, the company also holds a much smaller support-services contract — up to $288 million depending on work requested — under which it is responsible for conducting final quality review of those same investigations.

OPM: Company 'circumvented oversight efforts'

A report published Tuesday by Rep. Elijah Cummings (D-Md.), the ranking member of the committee, reveals that OPM officials interviewed by committee staff allege that USIS "misused" that secondary contract "to obtain information about OPM's oversight efforts and evade detection of its alleged fraudulent activities for more than four years."

In a Jan. 8 interview with committee staff, Merton Miller, director of OPM's Federal Investigative Services division said: "I'm not splitting hairs, but they knew how we were auditing. They knew what kind of reports we generated to oversee that they were actually performing the activities." Miller also said the company "circumvented our oversight process, and they falsified records to help do that."

Appearing before the committee Tuesday, the current CEO of USIS, Sterling Phillips, who was not with the company when the alleged misconduct occurred, said the allegations stem from only a small group of employees.

"Since first learning of these allegations two years ago, the company has acted decisively to ensure the quality of USIS's work and compliance with OPM requirements," Phillips said in his prepared remarks. "New leadership has been installed, oversight has been enhanced and internal controls strengthened."

The Justice Department's complaint alleges that high-level executives, including the former president and CEO of the company, were aware of and even directed the dumping of cases to maximize profits.

"The top people are gone," Cummings said. "They've either been fired or they left, right? They were the ones that were orchestrating this ... When you say just a few bad apples, I mean, this is a little bit more than that."

Cummings said he wants a broader review of USIS, including USIS' holding company Altegrity, which was formed by Providence Equity Partners after the private equity firm purchased USIS in 2007 for $1.5 billion.

OPM: Contractors won't perform final reviews

OPM Director Katherine Archuleta told the committee that the agency is phasing out the role of USIS — and any other contractor — in conducting final quality reviews. Currently, about 50 USIS employees perform final checks. But starting Feb. 24, that work will be absorbed by OPM employees. OPM first announced the move last week.

OPM Inspector General Patrick McFarland criticized the practice of contractors performing final quality reviews, telling committee members it was "an absolute conflict" and saying it did "quite a job on the quality" of thousands of background investigations.

OPM has vouched for the quality of the cases that USIS allegedly dumped because all background investigation cases eventually underwent final quality reviews.

But that view is "premature and overly confident," McFarland said in his prepared remarks. "OPM is assuming that the final closing reviews conducted at the time were sufficient despite the fact that, as OPM's support contractor, USIS personnel were performing many of the final closing reviews."

OPM suspended individual USIS employees from working on the contract when it first learned of the allegations, Archuleta told committee members. However the agency hasn't yet decided whether it will pursue suspending or debarring the contactor, which would block the company from new federal work.

OPM's actions to bring in house the final quality reviews do not negate the other parts of the underlying support-services contract USIS holds with OPM.

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