DOJ wants USIS parent company to pay damages despite bankruptcy filing - The Washington Post

The once massive government contractor that performed the bulk of the background investigations used in U.S. security clearances is essentially dead and gone. USIS lost its lucrative contracts after it was accused of defrauding the federal government in a whistleblower lawsuit, and its parent company filed for bankruptcy.

But the Justice Department is not done with the case. The department, which joined the lawsuit last year, is now arguing that Altegrity’s bankruptcy plan should not preclude the whistleblower from collecting damages.

The filing in U.S. Bankruptcy Court on Friday comes as Congress hopes to question a representative of the company on the massive computer breach at the Office of Personnel Management that potentially exposed the personal information of as many as 4 million people.

The leaders of the House Oversight and Government Reform Committee have requested that officials from USIS and KeyPoint Government Solutions, which now performs a large portion of the government’s background checks, appear for questioning at a hearing scheduled for Wednesday.

Both USIS and KeyPoint were hacked last year, though it is not clear whether those attacks were related to the breach at OPM.

After a hearing last week on the breach, Rep. Elijah E. Cummings (D-Md.), the committee’s ranking Democrat, said in a statement that he now feels “more strongly than ever that the Oversight Committee must hear directly from OPM’s two contractors — KeyPoint and USIS — either in transcribed interviews or in formal testimony before the committee.”

Last year, the Justice Department joined the whistleblower lawsuit against USIS filed by Blake Percival, a former fieldwork services director. The suit accused the company of submitting investigations that they said were complete even though they had not received a required quality review, in an effort to increase profits. The elaborate process was known as “dumping” or “flushing” and affected 665,000 cases, the suit said.

[Even after Snowden, quota system on background checks may imperil U.S. secrets]

USIS, which performed the background investigations of Edward Snowden, the National Security Agency leaker, and Aaron Alexis, the Washington Navy Yard shooter, lost the contract late last year, and now the work is performed largely by KeyPoint and CACI.

USIS has billed for an additional $44 million for work performed for OPM, the filing said.

But the Justice Department and Percival want to ensure that any judgment they might win will be paid out by the company. The filing objecting to Altegrity’s bankruptcy plan also said that Altegrity faces an investigation by the Labor Department into alleged violations in the company’s retirement and health-care plans. It did not detail what those violations were.

The Labor Department did not return calls requesting comment. Altegrity declined to comment.

In the filing, Justice Department attorneys said that the whistleblower lawsuit has been stayed — the reason is under seal — so they have not been able to get all of the relevant documents and testimony.

As a result, additional parties, “including Altegrity and individual employees involved in the fraudulent scheme,” could be named as defendants in the case, they wrote.

Christian Davenport covers federal contracting for The Post's Financial desk. He joined The Post in 2000 and has served as an editor on the Metro desk and as a reporter covering military affairs. He is the author of "As You Were: To War and Back with the Black Hawk Battalion of the Virginia National Guard."