Corners Cut in Outsourced Background Checks: A Case for the Public Sector

by Nick Schwellenbach, 1/23/2014

Yesterday, the Justice Department alleged in a court document that a government contractor that conducts background security investigations for the U.S. government committed fraud for more than four years on more than 650,000 investigations for personnel seeking clearance to access secret classified government information. The company, U.S. Investigations Services (USIS), has been accused of knowingly billing the government for about 40 percent of investigations it conducted during that period despite cutting corners, called “dumping” by the company.

The charges highlight the problems that come with privatizing critical government functions. Introducing the profit motive can lead to shoddy work in pursuit of profit. These functions are arguably the type of work that should be done in-house by government employees that do not face that complication. Indeed, some background investigations are already handled by government employees – and more could be.

The details found in the Justice Department’s complaint are troubling and seem to validate concerns raised for years by critics of government outsourcing.

“Beginning in at least March 2008 and continuing through at least September 2012, USIS management devised and executed a scheme to deliberately circumvent contractually required quality reviews of completed background investigations in order to increase the company’s revenues and profits,” according to the Justice Department filing in the U.S. district court in Montgomery, AL, joining a whistleblower lawsuit. “Given that USIS was paid by OPM for each completed case, the more cases USIS completed each month the more money it received from OPM. USIS’s dumping practices also enabled the company to receive annual performance incentive payments that it would not otherwise have been entitled to receive absent the dumping.”

There may have been repercussions due to USIS’s alleged emphasis on quantity over quality.

USIS cleared Aaron Alexis in 2007. Last year, Alexis shot and killed 12 people working at the Washington Navy Yard. According to The New York Times:

The 2007 background report done by USIS on Mr. Alexis showed that investigators learned he had been arrested three years earlier in Seattle, but the report did not include the crucial information that he had shot the tires of a construction worker’s car in what he told the police was an anger-fueled blackout. Mr. Alexis was given a secret security clearance in 2008, which was still valid on Sept. 16 when he stalked and killed a dozen victims at the navy yard with a sawed-off shotgun before the police killed him. Investigators relied on an interview with Mr. Alexis, who claimed he had only deflated the construction worker’s tires…

USIS also cleared Edward Snowden to work as a contract employee for Booz Allen Hamilton on work for the National Security Agency (NSA) in 2011. He later spirited away well over one million secret files from the U.S. intelligence community, some of which deal with domestic surveillance by the NSA. The inspector general of the Office of Personnel Management (OPM) – the agency that contracts with USIS – said in a Senate hearing in June that “there may be some problems” with USIS’s investigation of Snowden but did not explain what they might be.

Those disclosures by Snowden, who initially blew the whistle in China and currently resides in Russia, have sparked a public debate over the NSA’s activities. The latest development: the federal Privacy and Civil Liberties Oversight Board today released a report that stated that one of the most controversial programs Snowden disclosed information about raises constitutional and privacy concerns, lacks a legal foundation, and is of minimal value – leading the board to recommend “the government end the program.” However, the Justice Department has also charged Snowden with theft, “unauthorized communication of national defense information,” and “willful communication of classified communications intelligence information to an unauthorized person.”

Regardless of one’s views of Snowden’s disclosures or of the Justice Department’s pursuit of him, it is troubling that a company paid by U.S. taxpayers might have done a shoddy job when reviewing him for access to the nation’s top secrets. Others might have different, hostile motives.

The Justice Department stated in its complaint that “USIS Senior Management was fully aware of and, in fact, directed the dumping practices.” It added that “Beginning in at least March 2008, USIS’s President/CEO established the internal revenue goals for USIS. USIS’s Chief Financial Officer determined how many cases needed to be reviewed or dumped to meet those goals.”

In one September 2010 e-mail chain quoted by the Justice Department complaint, USIS senior employees discussed the need to hit revenue targets by pushing through more investigations without proper review. “[W]e all own this baby, and right now we are holding one ugly baby,” according to USIS’s vice president of field operations. Another USIS employee responded, “if they’re going to tell us to just dump all those cases anyways without a proper review, which [sic] will only make that ugly baby even uglier…”

USIS released a statement that denied the fraud reflected the company as a whole: “These allegations relate to a small group of individuals over a specific time period and are inconsistent with the strong service record we have earned since our inception in 1996. 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 and remain focused on delivering the highest quality service under our OPM contracts.”

Whatever the case may be regarding the extent of what happened at USIS, the danger is too great that a private company could put profit over public safety and security. There is also the risk that comes with the massive expansion of the national security state that has led to far more individuals needing security clearances and background checks. This increase in demand for investigations, along with pressures to keep the number of official federal workers down, has led to more outsourcing of background check investigations. The lesson of USIS is that we need more of the “public” back in the public sector.

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