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Inadequate Background Checks Lead to Major Whistle Blower litigation

federal government

As a leading California Whistle Blower law firm, we like to share with you new developments in the law of Whistle blowing. Last week, the Justice Department filed a lawsuit against the largest private security background check contractor, accusing it of methodically filing more than 660,000 failed background investigations (think Edward Snowden).

The company is US Investigations Services LLC. The 25 page civil complaint joined a whistle blower’s lawsuit in US District Court. Close ties of USIS and the federal government resulted in “flushing” background checks. That’s code word for not having the proper background done. As usual, the company responded by blaming “a small group of individuals”, the typical rogue employee line we routinely here. What’s preposterous here, though, is that fraud was systemic and massive, hardly likely to be the work of a rogue employee (and what, exactly, would that rogue have to gain by creating this fraud?)

USIS handled 45% of the government background checks. These are relied upon by Departments of Defense, Homeland Security and others. Access to classified documents is based in large part on these checks. The whistle blower accused the company of rushing through improperly reviewed checks and hiding this practice from the Office of Personnel Management, which oversees such work. Using this scheme, the company netted $12 million bonuses from the US. The fraud was carried out in part by use of a special software program called “Blue Zone”. This allowed the company to send cases to the feds even if they hadn’t been thoroughly reviewed as required by its contracts. This lead to 665,000 cases being “dumped” on the government between 2008 and 2010.

There is no indication that this particular whistle blower (a long term employee who served as director of fieldwork services until he left in 20111), was terminated for the reporting. In fact, a recent study of whistle blowers shows that they are also not prosecuted to the extent companies are for participating in the schemes in which they report, even where they are guilty of wrongful conduct. Latest surveys show only about a 25% prosecution rate of individuals who participate in fraudulent governmental billing as opposed to the corporate prosecution rate.

Most of our “largest” whistleblower lawsuits are based on the Federal False Claims Act. However, in our primary California state-wide employment law practice, we rely heaving on State Laws, such as Labor Code 1102.5, whistleblower Protection Act 9149.20-.23 Cal Government Code 8548.1-.5; Health and Safety Code section 1278.5, 53298.¬† Relators (private individuals who file suit on behalf of the government) routinely share in a percentage of the award given to the government. This can be up to 30% but is more typically 15-20% of the recovery.