June 29 (Bloomberg) -- U.S. investigators have uncovered evidence the federal contractor that did a background check on Edward Snowden falsified its work dating to 2008, according to two people familiar with the situation.
The company, USIS, told the government it had completed primary and secondary background investigations between 2008 and 2011 when evidence suggests otherwise, said the people, who asked not to be identified because they weren’t authorized to speak about the investigation. The Washington Post reported the findings yesterday.
The company conducted at least one review of Snowden, the former National Security Agency contractor who this month exposed U.S. classified programs to collect phone records of Americans and monitor Internet communications of suspected foreign terrorists.
Patrick McFarland, inspector general for the U.S. Office of Personnel Management, said during a congressional hearing last week his agency is investigating USIS. He said he believes there may have been shortcomings in the company’s vetting of Snowden.
Senator Claire McCaskill, a Missouri Democrat, said during the hearing that the company is under criminal investigation and the inspector general’s probe is tied to “systemic failure to adequately conduct investigations.”
USIS is the government’s top provider of federal background check investigations, handling about 45 percent of the reviews that the Office of Personnel Management hires contractors to perform. The company is part of Falls Church, Virginia-based Altegrity Inc., owned by Providence Equity Partners LLC.
Ray Howell, a USIS spokesman, didn’t respond to questions about whether the company skipped required steps. “USIS has been fully cooperating with the government throughout this process,” Howell said in an e-mail.
The inspector general works with the Justice Department to conduct investigations as soon as it finds evidence of wrongdoing, Susan Ruge, spokeswoman for the inspector general, said in a phone interview. She declined to comment further.
USIS was responsible for a “re-investigation” of Snowden that was tied to his clearance renewal, McFarland said. It isn’t clear who conducted Snowden’s original background check, which wasn’t done by the personnel office, according to the inspector general’s office.
The company has been under investigation since late 2011 by the IG’s office, Michelle Schmitz, assistant inspector general for investigations, said at last week’s hearing.
Snowden’s disclosures have drawn attention to the government’s vetting process and to the companies that gain from reviewing the backgrounds of some 4.9 million workers authorized to access classified materials.
USIS 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. The company said it has never been informed that it is under criminal investigation.
Passing a background check is required before a federal employee or contractor can be granted a security clearance. The Office of Personnel Management is responsible for most of them, conducting more than 2 million investigations a year.
It wouldn’t make sense for the personnel office to suspend or cancel its work with USIS before an investigation is complete, said Steve Ryan, the head of government contracts at the law firm McDermott Will & Emery LLP in Washington.
“They have to make a finding that a company lacks current responsibility for its work in order to trigger that kind of outcome,” Ryan said in a phone interview.
The government would need to significantly grow to end its reliance on contractors for background checks, Ryan said. “The question is, does Congress want to pay for that?” he asked.
USIS received $253 million under contract work for the personnel management office in fiscal year 2012, according to data compiled by Bloomberg. That represented 67 percent of the office’s spending on contracts for investigations that year.
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.”
Barring USIS from doing background investigations would have a “major impact” on the company’s profits, even though it performs other security-related work, Allen said.
The government’s investigation of the company it pays to check out people it wants to hire has created a “somewhat circular situation,” he said.
“Like in any game of musical chairs, someone is left without a seat when the music stops and it’s usually the contractor,” he said.
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