Consumer Fraud

U.S. government asks court to block immunity shield in Alegrity Whistleblower Case

whistleblower 5 370x210 U.S. government asks court to block immunity shield in Alegrity Whistleblower CaseThe U.S. government motioned Friday to block a former security contractor’s bid to shield itself and its executives from liability in a whistleblower lawsuit accusing it of fraudulently overcharging the government and billing it tens of millions of dollars for work it never performed.

Alegrity Inc., the bankrupt parent company of U.S. Investigations Services (USIS) which used to provide top-level security screenings for the government, plans to emerge from bankruptcy with all of its businesses except USIS intact.

Alegrity is currently liquidating USIS amid a False Claims Act lawsuit that accuses the company of “flushing” or “dumping” unfinished security investigations it was contracted to complete for the federal government.

Former USIS employee Blake Percival filed the whistleblower complaint in 2011, accusing the company of fraudulently classifying its security investigations as complete and reviewed for quality to collect the highest rates and bonuses for the work.

According to the Wall Street Journal, the complaint asserts “USIS’s bonuses depended on speedy completion of security investigations, and the system was allegedly geared to make sure the money came in even if the goals weren’t met.”

The results of USIS’s allegedly deficient work have been widely publicized, though their link to USIS has not. USIS vetted Edward Snowden to work for the National Security Agency (NSA) and also cleared Aaron Alexis, the federal government contractor who shot 12 people to death at the Washington Navy Yard in 2013.

Last year, a security breach in USIS computers exposed employment files of tens of thousands of Department of Homeland Security employees.

Following the cyberattack, the U.S. government chose not to renew its USIS contracts, a move that dealt a huge financial blow to Alegrity, which heavily depended on the government contracts.

Now Alegrity is seeking to re-emerge from chapter 11 reorganization, a plan that includes extending legal immunity to the executives who may have conducted and participated in the scheme to defraud the government.

The federal government, which is backing Mr. Percival’s claims, has asked the court to block Alegrity’s immunity requests,  saying that “certain high level USIS and Alegrity officials might have been knowledgeable of and may have even participated in the fraud.”

In addition to supporting the whistleblower complaint, the U.S. is also investigating Alegrity’s compliance with the Employee Retirement Income Security Act and may seek additional penalties.

Source: Wall Street Journal