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Dead Among Those Interviewed in Faulty Background Checks

Photographer: Saul Loeb/AFP via Getty Images

U.S. Senator Claire McCaskill, a Democrat from Missouri, has said that USIS is under criminal investigation by the inspector general for the company's "systemic failure to adequately conduct investigations." Close

U.S. Senator Claire McCaskill, a Democrat from Missouri, has said that USIS is under... Read More

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Photographer: Saul Loeb/AFP via Getty Images

U.S. Senator Claire McCaskill, a Democrat from Missouri, has said that USIS is under criminal investigation by the inspector general for the company's "systemic failure to adequately conduct investigations."

Anthony J. Domico, a former contractor hired to check the backgrounds of U.S. government workers, filed a 2006 report with the results of an investigation.

There was just one snag: A person he claimed to have interviewed had been dead for more than a decade. Domico, who had worked for contractors CACI International Inc. (CACI) and Systems Application & Technologies Inc., found himself the subject of a federal probe.

Domico is among 20 investigators who have pleaded guilty or have been convicted of falsifying such reports since 2006. Half of them worked for companies such as Altegrity Inc., which performed a background check on national-security contractor Edward Snowden. The cases may represent a fraction of the fabrications in a government vetting process with little oversight, according to lawmakers and U.S. watchdog officials.

“The process for granting security clearances across the federal government is broken,” Senator Ron Johnson of Wisconsin, the top Republican on a Senate panel overseeing government contracting, said in an e-mail.

Passing a government background check is a requirement before an employee or contractor can be granted a security clearance to access classified information. The process has been under increasing scrutiny since Snowden, a former National Security Agency contractor who had worked for McLean, Virginia-based Booz Allen Hamilton Holding Corp. (BAH), leaked secret documents on U.S. surveillance programs.

Snowden’s Vetting

Snowden held a top-secret clearance, and his background check was done by the USIS unit of Falls Church, Virginia-based Altegrity in 2011, according to Senator Claire McCaskill, a Missouri Democrat. USIS, the government’s No. 1 provider of such work with $253 million in awards this year, is under investigation by an inspector general who has said there may have been shortcomings in the company’s vetting of Snowden.

Among the 10 background-check workers employed by contractors who have been convicted or pleaded guilty to falsifying records since 2006, eight of them had worked for USIS, according to the inspector general for the U.S. Office of Personnel Management. The personnel agency is responsible for about 90 percent of the government’s background checks.

In one case, Kayla M. Smith, a former investigative specialist for USIS, submitted some 1,600 falsified credit reports, according to the inspector general’s office.

Convicted Workers

She pleaded guilty in August 2009 to falsifying one out of three credit checks she performed during an 18-month period, according to a Justice Department statement. Smith, then 25, received three years of probation. She also was ordered to pay about $95,300 in restitution to USIS and an estimated $4,300 to the personnel office.

In a twist that hints at how widespread the fabrications in the background check system may be, the investigator who had vetted Smith was convicted in a separate falsification case, Patrick McFarland, inspector general for the personnel office, said at a June 20 hearing held by two Senate panels.

The most recent case involved Ramon Davila, 59, a former worker for contractors including USIS, Fairfax, Virginia-based ManTech International Corp. (MANT) and Largo, Maryland-based Systems Application & Technologies.

Davila pleaded guilty last month to submitting documents that contained false reports about interviews he had never conducted and records he had never obtained. His sentencing is scheduled for September, according to the Justice Department.

Talking Dead

Domico, who claimed to have interviewed a person who turned out to be dead, falsified documents in more than two dozen cases in 2005 and 2006, according to a Justice Department press release. He was sentenced in April 2010 to five months in prison and ordered to pay $69,611 in restitution to the personnel agency, according to the department. It wasn’t clear which company he worked for when he claimed to have interviewed the deceased person.

Attempts to reach Domico, Smith and Davila by phone were unsuccessful. Jody Brown, a spokeswoman for CACI, declined to comment. Representatives for ManTech and Systems Application didn’t provide comment. A USIS spokesman didn’t respond to a phone call seeking comment on the cases.

There may be “considerably more” botched background investigations, McFarland told senators at the hearing. “I don’t believe that we’ve caught it all by any stretch,” he said.

McFarland said his office doesn’t have the funds needed to conduct thorough probes.

Oversight Bill

While the personnel office charges other federal agencies to conduct the checks, it isn’t allowed to include the cost of the inspector general’s oversight in its prices, according to McFarland.

Johnson and Senator Jon Tester, a Montana Democrat who chairs a Senate oversight panel, plan to introduce legislation this week that would provide the inspector general access to funding for a broader investigation.

The bill would also require the personnel office to temporarily suspend any employee under investigation for falsifying background checks. It would establish government-wide standards for screening federal workers requiring security clearances.

McCaskill has said that USIS is under criminal investigation by the inspector general for the company’s “systemic failure to adequately conduct investigations.”

Flawed Checks

USIS is the government’s top provider of federal background check investigations, handling about 45 percent of the reviews that the personnel office hires contractors to perform.

The company received a subpoena in January 2012 from the inspector general and “has cooperated fully with the government’s civil investigative efforts,” it said in a June 26 statement. USIS said it has never been informed that it is under criminal investigation.

McFarland has found flaws dating to 2009 with background checks overseen by the personnel office. The agency’s primary contractors are the USIS unit of Altegrity, owned by Providence Equity Partners LLC; KeyPoint Government Solutions Inc., a unit of Veritas Capital, a New York-based private equity company; and CACI, based in Arlington, Virginia.

USIS Competitors

The Office of Personnel Management has awarded contracts valued at $466 million for background checks so far this fiscal year, which began Oct. 1, 2012, according to data compiled by Bloomberg Industries. Of that amount, USIS received 54 percent, or $253 million, Keypoint got 35 percent, or $162 million, and CACI got 11 percent, or $51 million.

USIS received 95 percent of the personnel office’s spending on background investigations in fiscal 2007, according to the data.

“Competition is already eating away at USIS’s market share, and its competitors can try to use the bad publicity to their advantage,” said Brian Friel, a contracts analyst at Bloomberg Industries.

McFarland’s office recommended in a 2010 audit that the contractors be required to undergo standardized training and verify all records used in background investigations. Those recommendations are unresolved, according to the inspector general.

Security Clearances

The government is increasingly relying on companies to conduct background investigations for security clearances. The ranks of contract workers helping to do background checks on contractors and federal employees swelled 15 percent to almost 6,800 last year from fiscal 2011, according to the personnel office.

Contractors are under tremendous pressure to complete a growing number of security clearances as quickly as possible, said Larry Allen, president of Allen Federal Business Partners, a consulting firm in McLean, Virginia.

“Investigators are overworked, they don’t always feel they are compensated fairly, and there is a lot of pressure put on them by the Office of Personnel Management to get things done in a timely manner,” Allen said in a telephone interview. “Ultimately, some people slip through the cracks.”

To contact the reporters on this story: Chris Strohm in Washington at cstrohm1@bloomberg.net; Nick Taborek in Washington at ntaborek@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net

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