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Bottom Line Drove Security Clearances at USIS
October 30, 2013 posted by Steve Brownstein
About seven months before his company gave Edward Snowden a clean background check, Bill Mixon was flogging his executives for not pushing security investigations through fast enough.
Mr. Mixon, then chief executive of US Investigations Services LLC, warned managers at its Grove City, Pa., operations that USIS wasn’t meeting targets for completing checks, say former USIS officials. Federal agencies use those checks in deciding who gets security clearances and access to America’s secrets.
“You better not have one f— case on your books,” one former company official says he was told by Mr. Mixon. USIS was approaching the end of its 2010 fiscal year in September.
It was a demand, former USIS officials say, that Mr. Mixon made repeatedly that year: Do what it takes to finish background checks, even if they aren’t thoroughly vetted.
Mr. Mixon didn’t respond to requests for comment.
The stress on revenue was also a familiar refrain to managers who had been with USIS for years. Since the government spun USIS off in 1996, its management had gradually built a corporate culture that made revenue top priority. A previous CEO, in 2006, chided managers at a meeting to “get off your ass to make a buck.”
The push to hurry out security checks reached a crescendo, former USIS officials say, in late 2010.
The approach apparently worked after Mr. Mixon’s repeated threats: USIS met its target, and executives got bonuses, former USIS officials say. And it won federal contracts in 2011 that could total up to $2.7 billion.
But USIS’s approach also failed America to an extent only now becoming clear.
USIS in April 2011 conducted what federal officials say was an insufficient security check of Mr. Snowden, the National Security Agency contractor who leaked national secrets. USIS did a 2007 security examination of Aaron Alexis, the military contractor who died during his September shooting spree at the Washington Navy Yard.
USIS is at the epicenter of intensifying scrutiny of private companies that do government background checks, based on a portrait that emerges from court documents, congressional officials, contracting records and interviews with a dozen former USIS employees.
A federal grand jury is investigating allegations by employees that USIS improperly “flushed” cases by rushing them through the system without proper review. The grand jury has recently issued new subpoenas for key players to testify, former USIS officials say.
At least eight USIS investigators whose job was to gather material for checks have been convicted of fabricating information used to push applications through.
One of them, Marcus Travers, in May pleaded guilty in U.S. District Court in Washington, D.C., to fraud for fabricating information, saying in a statement that “The mistake was made due to the pressure I felt of completing the case.”
“USIS takes these allegations seriously,” says Brandy Bergman, managing director at Sard Verbinnen & Co., USIS’s outside public-relations firm. “Since they were first brought to our attention over one year ago, we have acted decisively to ensure the quality of our work and adherence to OPM requirements,” referring to the Office of Personnel Management.
The background-check system is so beset with problems that it is time to take another look at its privatization, says Sen. Tom Carper (D., Del.), head of the Senate Homeland Security Committee, which plans hearings on the system. “What about that change still makes sense?” he asks.
That change—part of Al Gore’s privatization drive as vice president in the 1990s—has left most federal background checks in the hands of private companies.
USIS is the largest. Its more-than-6,000 employees handle about 45% of federal background checks, federal estimates show. And 90% of its work comes from the U.S. government. It has been awarded more than $4 billion in contracts over the past decade from the Pentagon, Federal Bureau of Investigation, Department of Homeland Security and the Social Security Administration and other agencies, contracting records show.
Much of the scrutiny of USIS focuses on its Grove City office. Field investigators around the country send their findings there, where workers examine the reports before passing them to federal officials who use the information to approve or reject security clearances.
Grove City had an incentive to rush cases, former USIS officials say, because of its contract terms: It would get the bulk of its payment, they say, when it sent a case to a federal agency and the final payment when the agency closed the case. One of those officials says the upfront payment was 90% for a period starting in 2008.
That made it attractive for USIS to send a case on quickly for the upfront payment, even if an agency later sent it back for further review, former USIS officials say. When Grove City sent cases in, USIS officials called it the “cash-register ring.”
The cash-register culture had roots predating Mr. Mixon. At first, USIS was much like the government agency it was until 1996, when Washington spun it off as an employee-owned entity with an exclusive five-year contract to do background checks.
After the employee owners sold USIS to two private-equity firms, Carlyle Group LP and Welsh, Carson, Anderson & Stowe, in early 2003, the new management began pursuing a more aggressive strategy, former USIS officials say.
At a 2006 USIS leadership conference speech then-CEO Randy Dobbs told employees to reach under their seats; each found a dollar bill.
“I’ve just shown you the secret to making money and growing,” Mr. Dobbs can be heard saying on a YouTube video. “I want you to think for the next three days as you’re going back to your business and functions: How do I get off my ass and make more bucks for this business?”
Mr. Dobbs, who left USIS in 2008 and is now an executive in the health-care industry, didn’t respond to requests for comment, nor did Welsh. A Carlyle representative declined to comment.
The profit push hit a higher gear after 2007, former USIS officials say, when Carlyle sold USIS to another private-equity firm, Providence Equity Partners LLC.
Providence in 2008 promoted Mr. Mixon, a USIS official, to the CEO spot and stepped up pressure on him and his executive team to search for ways to increase profits while meeting federal demands to reduce the long wait times in investigations, former USIS officials say. Providence representatives declined to comment.
Soon after Mr. Mixon took over, USIS began using new software that let it more quickly push cases through without significant review, former USIS officials say. That paved the way for USIS to begin “flushing” more cases to meet financial targets, they say.
Under Mr. Mixon, pressure increased. Executives set up monthly, then weekly and then daily targets for USIS workers to complete cases, former USIS officials say. In 2009, Mr. Mixon and executives started getting daily revenue counts.
Some Grove City managers tried to challenge corporate demands that they rush cases through even if they weren’t fully reviewed, former USIS officials say. Some workers protested in writing but were told that they would be fired if they didn’t do what they were told, they say. In corporate meetings, executives defended USIS’s handling of cases, saying the procedures hewed to legal interpretations of USIS’s federal contracts.
Federal reviewers didn’t always catch problems in cases USIS sent in, former USIS officials say. Mr. Mixon called the practice of letting questionable cases go to the government a “calculated gamble,” one says.
Mr. Mixon’s demands escalated in 2010, as USIS prepared to bid on a critical multibillion-dollar deal, a five-year contract to do background checks for the Office of Personnel Management, former USIS officials say.
The Grove City office grew chronically understaffed, former USIS officials say. Managers asked for up to 300 people to review the cases, but had as few as 200 at times. Executives rebuffed appeals to add workers, they say.
In June 2010, Grove City’s case backlog started to grow, creating what some USIS officials viewed as untapped revenue that undercut profit targets. Providence sent representatives to monitor USIS leadership meetings, former USIS officials say.
As the bidding on the federal contracts and the fiscal year-end approached, executive meetings became brutal battlegrounds where Mr. Mixon would publicly rebuke managers who weren’t hitting profit targets, former USIS officials say.
Field investigators also felt the pressure. USIS employees in California complained to state regulators in September 2010 that USIS forced them to work through unpaid meals and didn’t pay workers on time. That led to a 2011 class-action lawsuit in U.S. District Court in Los Angeles that USIS settled for $900,000.
Mr. Travers, who pleaded guilty to fraud, also cited high demands: “I panicked under pressure in the situation, and made a huge error in judgment,” he said in his statement. He didn’t respond to requests for comment.
In the weeks leading up to the September 2010 fiscal year-end, former USIS officials say, Mr. Mixon repeatedly pushed managers to eliminate the backlog. “He said, ‘I don’t care what it takes. Get them out. We’ll pay for the consequences later,’ ” says one official.
At a September management dinner, Mr. Mixon chastised the Grove City manager for failing to reach targets, says a former USIS official who was there, and managers repeatedly checked the anemic numbers on their cellphones; they could see that they weren’t hitting benchmarks. “It was crystal clear to everybody that we better get this bonus or heads are going to roll,” the official says.
Within weeks, one former USIS official says, USIS “flushed” pending cases, allowing it to hit its targets for cases submitted and helping ensure bonuses for executives, former USIS officials say.
The USIS strategy to present itself as an efficient government contractor also worked. In 2011, it won two five-year contracts valued at up to $2.7 billion to help the Office of Personnel Management do checks. That office declined to comment, saying its investigation is ongoing; it referred questions to the Justice Department, which declined to comment.
The intensity culminated in several acrimonious management meetings in mid-2011 that focused on Mr. Mixon, former USIS officials say. Mr. Mixon left USIS in November 2011 and is president of a Minnesota medical-equipment-supply company.
Around that time, USIS fired a manager in the Grove City office who oversaw the review process, former USIS officials say. He then approached the Office of Personnel Management with allegations of improper conduct at USIS, they say. In early 2012, that agency’s inspector general came to USIS with the allegations, they say.
In the past year, USIS has replaced almost its entire 13-member leadership team, has added scores of workers charged with overseeing the quality of investigations and has eliminated financial targets as a basis for bonuses, says a person familiar with USIS’s current management.
The federal investigation continued little-noticed until this May, when USIS came under fire for the Snowden affair. The Office of the Director of National Intelligence concluded that USIS failed to interview enough people or properly examine Mr. Snowden’s international travel as part of its 2011 re-investigation of his clearance.
USIS has said federal officials could have asked it to take a closer look at Mr. Snowden and that it was ultimately the NSA’s job to approve his clearance.
In July, a federal grand jury in Washington issued subpoenas seeking documents from former USIS officials involved in the alleged case-flushing, as first reported by The Wall Street Journal.
Earlier this month, USIS again came under scrutiny, for its 2007 check of Mr. Alexis. The Office of Personnel Management said USIS had conducted a thorough review, but Navy records showed he had lied about his credit history and a 2004 arrest for shooting out a worker’s tires.
And USIS still faces claims it pushes employees too hard. Dawn Kojac, a former USIS investigator, sued it in U.S. District Court in Southern Florida this month, alleging it fired her in 2012 because she didn’t meet quotas and undercut her supervisor’s bonus.
“It was a never-ending nightmare,” Ms. Kojac says. “Every day you had that pressure.”
by Dion Nissenbaum
