Criminal Liability For Deficient Background Checks: Snowden And The False Claims Act

by Michael Volkov

snowden5Just when you thought the risks for businesses could not get any worse, the government recently found yet another hook for a criminal investigation.  The False Claims Act continues to create significant and real risks for government contractors.   Prosecutors enjoy wide authority to use the False Claims Act for criminal and civil violations.

Just last week, we learned that a criminal grand jury is now investigating  USIS, the company responsible for conducting the background check and security review of Edward Snowden, the CIA employee whistleblower.  USIS is suspected of cutting corners on Snowden’s background check which resulted in Snowden’s hiring and eventual disclosure of sensitive information.

The government is investigating USIS under the criminal statutes of the False Claims Act.  For companies which do business with the federal government, this should have sent shudders through every boardroom, compliance officer and legal counsel.  While the specific facts are not known, potential criminal liability for improper and deficient performance of a background check under a government contract sends an important message to every government contractor.snowden2

When it comes to screening employees, subcontractors and their personnel, and other third-parties, companies need to exercise great care and document the steps they take to conduct an adequate due diligence of each employee.  The task is a lot easier than it sounds because companies face legal risks if they secure too much information, violating the candidate’s privacy rights during a background check.  The balance is difficult to maintain and now becomes even more complicated with potential criminal liability attaching to a background check of an employee.

Government contractors can argue that a failed background check for an employee is different from the USIS situation because the government service provided by USIS was the background check itself.  That may be a distinction without much of a difference when it comes to liability under the False Claims Act.

In the Snowden case, prosecutors are focusing on short-cuts USIS took in the vetting process which they believe may have resulted in Snowden being wrongly cleared.   Under the False Claims Act, prosecutors will claim that USIS “defrauded” the federal government in the performance of the contract.  According to press reports, USIS employees told prosecutors that they were pressured to approve Snowden’s application, along with others as part of USIS’ business operations.

snowden4Compliance officers for government contractors are probably walking the hallways of their companies muttering to themselves, “I told you so.  I told you so.”  The issue of background checks has been identified as a risk for human resource and compliance officers.  Up till now, civil litigation has been the most significant risk when a background check crosses into an individual applicant’s privacy and results in an improper disposition of an employment application or even a promotion.

For the first time, criminal prosecutors are focusing on background checks themselves for potential criminal violations.  Add this new risk to the list of priority projects for your Human Resources Officer and your Chief Compliance Officer.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

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