[House Hearing, 113 Congress]
[From the U.S. Government Printing Office]




                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES


                             SECOND SESSION


                           FEBRUARY 11, 2014


                           Serial No. 113-105


Printed for the use of the Committee on Oversight and Government Reform


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                 DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
TREY GOWDY, South Carolina               Pennsylvania
BLAKE FARENTHOLD, Texas              TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington             ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming           DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia                 PETER WELCH, Vermont
THOMAS MASSIE, Kentucky              TONY CARDENAS, California
DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina         MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan        Vacancy

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                    Stephen Castor, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

                            C O N T E N T S

Hearing held on February 11, 2014................................     1


The Hon. Katherine Archuleta, Director, U.S. Office of Personnel 
  and Management
    Oral Statement...............................................     5
    Written Statement............................................     7
Mr. Stephen Lewis, Deputy Director for Personnel, Industrial and 
  Physical Security Policy, Counterintelligence and Security 
  Directorate, Office of Under Secretary of Defense for 
  Intelligence, Department of Defense
    Oral Statement...............................................    12
    Written Statement............................................    14
The Hon. Patrick McFarland, Inspector General, U.S. Office of 
  Personnel Management
    Oral Statement...............................................    18
    Written Statement............................................    20
Ms. Susan A. Ordakowski, Vice President, Contracts and 
  Compliance, Keypoint Goverment Solutions
    Oral Statement...............................................    28
    Written Statement............................................    30
Mr. Michael Rhodes, Executive Vice President, Mission Systems and 
  Service Business Group, Caci International, Inc.
    Oral Statement...............................................    36
    Written Statement............................................    38
Mr. Sterling Phillips, CEO, US Investigations Services, LLC
    Oral Statement...............................................    42
    Written Statement............................................    44


Opening Statement of Elijah Cummings, Ranking Member.............    80
OGR Majority Staff Report ``Slipping Through the Cracks: How the 
  D.C. Navy Yard Shooting Exposes Flaws in the Federal Security 
  Clearance Process'' submitted for the record by Chairman Issa..    82
OGR Majority Staff Report ``Contracting Out Security Clearance 
  Investigations: The Role of USIS and Allegations of Systemic 
  Fraud'' submitted for the record by Chariman Issa..............   127
The court cases regarding Blake Percival submitted for the record 
  by Chairman Issa...............................................   141
April 4, 2011 letter from OPM's Branch Chief Steven Anderson to 
  USIS VP Field Operations, submitted by Chairman Issa...........   144
Opening Statement by Rep. Stephen Lynch, submitted for the record   146
Statement of Rep. Gerald Connolly................................   149
A Statement by Brenda Farrell, GAO...............................   151
Bonus Chart and list of Altegrity Contracts submitted for the 
  record by Rep. Elijah Cummings.................................   175



                      Tuesday, February 11, 2014,

                  House of Representatives,
      Committee on Oversight and Government Reform,
                                           Washington, D.C.
    The committee met, pursuant to call, at 9:35 a.m., in Room 
2154, Rayburn House Office Building, Hon. Darrell E. Issa 
[chairman of the committee] presiding.
    Present: Representatives Issa, Mica, Turner, Walberg, 
Lankford, Amash, Meehan, DesJarlais, Farenthold, Woodall, 
Collins, Bentivolio, DeSantis, Cummings, Maloney, Norton, 
Tierney, Lynch, Connolly, Speier, Duckworth, Kelly, and Lujan 
    Staff Present: Jen Barblan, Majority Counsel; Molly Boyl, 
Majority Deputy General Counsel and Parliamentarian; Lawrence 
J. Brady, Majority Staff Director; Ashley H. Callen, Majority 
Deputy Chief counsel for Investigations; Caitlin Carroll, 
Majority Press Secretary; Sharon Casey, Majority Senior 
Assistant Clerk; John Cuaderes, Majority Deputy Staff Director; 
Carlton Davis, Majority Senior Counsel; Adam P. Fromm, Majority 
Director of Member Services and Committee Operations; Linda 
Good, Majority Chief Clerk; Frederick Hill, Majority Deputy 
Staff Director for Communications and Strategy; Mark D. Marin, 
Majority Deputy Staff Director for Oversight; Ashok M. Pinto, 
Majority Chief Counsel, Investigations; Jessica Seale, Majority 
Digital Director; Sarah Vance, Majority Assistant Clerk; Peter 
Warren, Majority Legislative Policy Director; Rebecca Watkins, 
Majority Communications Director; Jaron Bourke, Minority 
Director of Administration; Aryele Bradford, Minority Press 
Secretary; Lena Chang, Minority Counsel; Jennifer Hoffman, 
Minority Communications Director; Peter Kenny, Minority 
Counsel; Elisa LaNier, Minority Director of Operations; Juan 
McCullum, Minority Clerk; and Dave Rapallo, Minority Staff 
    Chairman Issa. The committee will come to order.
    Today's hearing is entitled DC Navy Yard Shooting: Fixing 
the Security Clearance Process. I will now recognize myself.
    The Oversight Committee exists to secure two fundamental 
principles: first, Americans have a right to know that the 
money Washington takes from them is well spent, and, second, 
Americans deserve an efficient, effective Government that works 
for them. Our duty on the Oversight and Government Reform 
Committee is to protect these rights. Our solemn responsibility 
is to hold Government accountable to taxpayers because 
taxpayers have a right to know what they get from their 
Government. It is our job to work tirelessly in partnership 
with citizen watchdogs to deliver the facts to the American 
people and bring genuine reform to the Federal bureaucracy. 
This is our mission.
    I now recognize myself.
    Michael Arnold, Kathy Gaarde, John Roger Johnson, Arthur 
Daniels, Richard Michael Riggell, Martin Bodrog, Vishnu Pandit, 
Kenneth Bernard Proctor, Mary Francis Knight, Gerald Read, 
Sylvia Frasier, Frank Kohler. Typically, these 12 public 
servants who lost their life on September 16, 2013, when a 
deranged gunman entered Building 197, the headquarters of the 
Navy Sea Systems Command at the Washington Navy Yard, would not 
be read in the Halls of Congress. But I think today, as we look 
into why we are here, we are not here to embarrass the 
companies, we are not here to embarrass the Office of Personnel 
Management, but we are here to recognize that a horrendous act 
of violence occurred, one in which we believe, in all 
likelihood, best practices in employment could have prevented 
    But more than that, this was a deranged individual who had 
a security clearance. So more than simply the question of 
whether or not he should have been employed, or should have 
been in therapy, or should have been incarcerated, we are 
asking the question of when we go beyond simply an employment 
look, but in fact a secured employment look, how could we miss 
someone who had repeatedly used a weapon in a deranged way: 
flattening tires with a gun, shooting holes in the roof of his 
own house simply because someone was making too much noise? 
These are not the acts that an employer would accept and allow 
somebody to have access to a building and access to a building 
in which they committed unspeakable acts.
    This hearing will not deal entirely with management 
practices in hiring of Federal employees; it will primarily 
deal with the 4.9 million Americans holding security 
clearances, because the standard for security clearances should 
be higher than those for employees. But as a former employer, I 
must tell you I am disappointed that the system is not in place 
to catch every person of this type of history, no matter 
whether they had a security clearance or not.
    This committee has been conducting a bipartisan 
investigation into the facts and circumstances surrounding this 
incident. My partner, Mr. Cummings, and the entire committee 
staff on both sides, have in fact seen glaring mistakes in the 
existing Federal security clearance process as a whole. Over 
the course of our four-month investigation, these questions 
have come up: Why did the Federal Government grant security 
clearance to a man with a known violent criminal past, one he 
attempted to cover up? Why didn't the Federal Government revoke 
that clearance when his unstable mental condition raised red 
    We, again, are not here to point fingers specifically at 
this, but, rather, those 12 names I mentioned are names that 
should not have died in vain without real change.
    I want to thank the ranking member for being my partner in 
this. I want to make it very clear that this is not a problem 
created by this Administration; this is a problem of 
bureaucracy, longstanding, but no longer can we stand for it. 
We owe that much to the families of each of the victims.
    With that, I now recognize Mr. Cummings for his opening 
    Mr. Cummings. Thank you very much, Mr. Chairman.
    There is no doubt that we need to conduct a thorough--and 
when I say thorough, I mean thorough--investigation to 
determine how Aaron Alexis was able to obtain and keep a 
security clearance given his troubling background. We owe this 
to the families of the 12 people he killed and the others he 
injured, as well as all Americans who rely on the background 
check system to protect our national security.
    Mr. Chairman, I want to thank you and your staff for a 
bipartisan approach on this investigation. Our work has the 
potential, and I do say the potential, to stand as an important 
part of this committee's legacy if we follow through on these 
    Here is what we know so far: First, Alexis obtained a 
security clearance from the Navy in 2008, and his background 
investigation was conducted by U.S. Investigation Services, 
USIS. USIS is the single biggest contractor that performs 
background investigations for the Office of Personnel 
Management, completing more than the Government or any other 
    Four years before Alexis got his clearance, he was arrested 
in Seattle for shooting out the tires of someone's car. USIS 
did not obtain a copy of that 2004 report, and OPM did not 
require one because the City of Seattle refused to cooperate 
with similar requests in the past. Something wrong with that 
picture. Instead, USIS obtained a summary that omitted 
references to the weapon and said only that Alexis was charged 
with malicious mischief. If USIS and the Government had 
obtained a copy of that arrest report, perhaps Alexis's 
clearance would have been denied. Under its contract, USIS also 
was required to conduct a quality review of its background 
investigation of Alexis. However, nobody has confirmed that 
USIS did that quality review; USIS has not confirmed it, nor 
has OPM, and, interestingly, nor has the inspector general.
    In 2011, a long-time USIS employee, its director of 
fieldwork services, accused USIS of a massive conspiracy to 
bilk the United States taxpayers. Let that sink in. Although 
USIS was required to conduct quality reviews of all of its 
background investigations, this official reported that USIS was 
``dumping'' unfinished cases and billing OPM for work anyway. 
Inexplicably, USIS also had a separate contract with OPM to 
conduct additional quality reviews on behalf of the agency. In 
other words, USIS was checking its own work.
    In January, the committee conducted a transcribed interview 
with Merton Miller, OPM's associate director of Federal 
Investigative Services. He accused USIS of using information 
obtained through its second contract to evade detection of its 
fraud under the first. He said this: ``They circumvented OPM's 
oversight of their performance of their quality review. I am 
not splitting hairs, but they knew how we were auditing.'' He 
continued, ``They knew what kinds of reports we generated to 
oversee that they were actually performing the activity, so 
they circumvented our oversight process and they falsified 
records to help do that.''
    The Department of Justice has now determined that these 
allegations have merit and filed a false claims suit seeking 
more than $1 billion from USIS, claiming that the company 
charged taxpayers for work it never performed on, ladies and 
gentlemen, listen to this, on 665,000 background investigations 
from 2008 to 2012. We are better than that. The Department 
stated, ``USIS management devised and executed a scheme to 
deliberately circumvent contractually required quality reviews 
of completed background investigations in order to increase the 
company's revenues and profits.''
    In 2007, USIS was purchased by a private equity firm known 
as Providence Equity Partners. The committee's investigation 
revealed that, directly after the acquisition, USIS adopted 
aggressive new financial incentives to accelerate its work. 
During this period, USIS executives received huge bonuses, 
including more than $1 million for the company's CEO, Bill 
Mixon, and about $470,000 for the company's chief financial 
    As I close, the Justice Department alleges that both 
officials were ``fully aware of and, in fact, directed the 
dumping practices.'' USIS also received millions of dollars in 
bonus payments from OPM, and I would like to know why that is, 
for its seemingly incredible progress, including $2.4 million 
in bonuses in 2008, $3.5 million in bonuses in 2009, and $5.8 
million in bonuses in 2010. That is taxpayer dollars. In the 
wake of this scandal, the company's CEO, CFO, and nearly two 
dozen other officials have resigned, been terminated, or left 
the company. In fact, just yesterday, yesterday, USIS informed 
us that the president of its investigation services division 
has also now resigned. These revelations cry out for an 
investigation, but to date the committee has not conducted a 
single transcribed interview of any USIS employee.
    Mr. Chairman, I know you wanted to focus first on OPM's 
oversight, and I do too, but given what we have now uncovered, 
these serious allegations must be investigated. While I have no 
objection to Mr. Phillips being here today, he was hired only 
last year and has no firsthand knowledge of these allegations. 
We should investigate, as we should in any case like this, how 
bonuses and incentives were paid to USIS executives--and, by 
the way, I want to know that from OPM--as well as the roles 
played by Providence Equity Partners and Altegrity, the holding 
company formed to house USIS.
    Finally, Mr. Chairman, I appreciate that your staff 
provided us with a draft of your report last week, but I regret 
that you issued it yesterday without including most of the 
information about USIS that we asked to be included. For these 
reasons, I am issuing my own staff report today that provides 
that information, and I ask that it may be a part of the 
    Chairman Issa. Without objection, the minority comments, in 
addition to the majority staff report, will be joined, and I 
share with the gentleman that, assuming the Department of 
Justice will concur, that we will be doing further transcribed 
    Mr. Cummings. Thank you very much. I really appreciate 
that, Mr. Chairman.
    Chairman Issa. Thank you.
    All members may have seven days to submit opening 
    We now welcome our panel of witnesses.
    Mr. Sterling Phillips is the CEO of US Investigations 
Services, LLC; we are joined by the Honorable Katherine 
Archuleta, who is the newly named Director of the U.S. Office 
of Personnel Management, or OPM; Mr. Stephen Lewis is the 
Deputy Director of Personnel, Industrial and Physical Security 
Policy at the Department of Defense; the Honorable Patrick 
McFarland is the Inspector General of the U.S. Office of 
Personnel Management, again, OPM; and Ms. Susan Ordakowski is 
the Vice President of Contracts and Compliance at KeyPoint 
Government Solutions; and we are joined by Mr. Michael Rhodes, 
who is the Executive Vice President, Mission Systems and 
Services Business Group, for CACI International, Inc.
    Pursuant to the rules, I would ask that you all please rise 
and take the oath, and raise your right hands, please. Do you 
solemnly swear or affirm that the testimony you are about to 
give will be the truth, the whole truth, and nothing but the 
    [Witnesses respond in the affirmative.]
    Chairman Issa. Please be seated. Let the record reflect 
that all witnesses answered in the affirmative.
    In order to allow time for this large panel, I would ask 
that you all observe strictly the five minute clock. Your 
entire opening statements are in the record, so your comments 
may be completely in addition to that, if you would like.
    With that, we first recognize the gentlelady, OPM Director 
Katherine Archuleta.

                       WITNESS STATEMENTS


    Ms. Archuleta. Chairman Issa, Ranking Member Cummings, and 
members of the committee, thank you for inviting me to testify 
today regarding the role of U.S. Office of Personnel Management 
in the Federal security clearance process. I appreciate the 
committee's oversight of this matter and I want you to know how 
deeply committed I am to ensuring the integrity and the 
efficacy of our programs and our products.
    Understandably, this issue has come under greater scrutiny 
since the tragedy at the Washington Navy Yard, which took the 
lives of 12 people and injured 8 more. I want to express my 
deepest sympathies and condolences to those who lost loved ones 
in the Navy Yard tragedy. I can only imagine the anguish felt 
by the families of those affected by this senseless attack, and 
those individuals are in my thoughts and in my prayers as they 
move forward in light of this awful event.
    OPM plays a critical role in protecting our national 
security. We conduct more than 2 million investigative actions 
each year for over 100 Federal agencies. This represents 95 
percent of all background investigations. Each agency is 
responsible for determining whether an individual requires 
clearance and adjudicating eligibility for access to classified 
information. OPM provides the background information for many 
agencies to make an informed decision about security 
    Since arriving at OPM three months ago, I have made this 
issue a top priority. Of central importance to me are 
addressing legitimate questions about the background 
investigation process and working with DOJ and OPM's Office of 
Inspector General to investigate the outrageous allegations of 
fraud by one of our contractors.
    Let me be clear: OPM does not tolerate and has never 
tolerated fraud in any form. It is wholly inconsistent with 
OPM's core values and does not reflect the integrity and the 
dedication of hardworking OPM employees. When any allegation of 
fraud is brought to OPM's attention, OPM works closely with DOJ 
and OPM's OIG to bring those involved to justice.
    The case against USIS outlined in the complaint filed by 
DOJ raises grave concerns of an egregious violation of the 
public trust. Since we learned about these issues, OPM has 
taken steps to improve the oversight of our contracts, remove 
contractor employees from the contract, and strengthen our 
overall operations. It is imperative that we have a process in 
place that meets the highest standards of quality, efficiency, 
timeliness, and integrity; the American public expects no less 
and so do I.
    At the President's direction, and under the leadership of 
the director of OMB, OPM has been working with its colleagues 
on the Sustainability and Security Performance Accountability 
Council to review the Federal security clearance and 
suitability processes. The background investigation program is 
a complex undertaking and OPM is vigilant in ensuring the 
highest standards of quality.
    Mr. Chairman, I have made this issue one of my top 
priorities. Starting last week, I directed that the quality 
review process conducted by OPM be fully federalized. We no 
longer have contractors participating in our ongoing final 
federally controlled quality process. Having Federal employees 
now perform this function acts as an internal quality control, 
preventing any contractor from performing the final quality of 
review of its own work.
    OPM remains committed to developing effective, long-term 
policies and processes for ensuring high quality review 
standards. As the largest provider of investigative products, 
OPM recognizes that, in a rapidly changing world, the 
background investigation program, and the security clearance 
process in particular, must keep up with the times while 
continuing to meet existing demands.
    We continue to work with ODNI as the security executive 
agent and our other reform partners to ensure that we have 
processes in place that meet the high expectations set by 
Congress, our interagency partners and, most importantly, the 
American public. As the new director of OPM, I look forward to 
working with this committee to ensure the highest quality of 
background investigations through strong leadership, 
accountability, and forward thinking.
    Thank you for the opportunity to testify today, and I 
welcome any questions you may have.
    [Prepared statement of Ms. Archuleta follows:]


    Chairman Issa. Thank you. At this time I ask unanimous 
consent that the cases filed in the Alabama court, entitled 
Blake Percival v. U.S. Investigation Services, Inc., and the 
second one entitled United States of America ex rel Blake 
Percival v. U.S. Services be placed in the record. Without 
objection, so ordered.
    Chairman Issa. We now go to Mr. Stephen Lewis.


    Mr. Lewis. Chairman Issa, Ranking Member Cummings, and 
distinguished members of the committee, I appreciate the 
opportunity to appear before you today to address the practices 
and the procedures in the Department of Defense regarding the 
personnel security clearance process. I am here today on behalf 
of Under Secretary of Defense for Intelligence Michael Vickers, 
who serves as the principal staff assistant to the secretary 
and deputy secretary for security matters.
    In addition, the USDI is the senior official for DOD's 
personnel security program and has the primary responsibility 
for providing oversight, guidance, and development for policy 
and procedures governing civilian, military, and industrial-
based personnel security programs within the DOD.
    In order to address the Department's personnel security 
policies and practices, I believe it is important to first 
identify the national level policy framework. Executive Order 
13467 designates the Director of National Intelligence as the 
Security Executive Agent with the responsibility to develop 
uniform policies and procedures to ensure effective completion 
of investigations and determinations of eligibility for access 
to classified information or to hold National Security 
Positions, as well as reciprocal acceptance of those 
    In addition, E.O. 13467 designates the Director of the 
Office of Personnel Management as the Suitability Executive 
Agent with similar responsibilities for those who have 
positions that require eligibility for logical and physical 
access to Federal Government installations and information 
    Finally, 13467 creates a Performance Accountability 
Council, chaired by the Deputy Director for Management in the 
Office of Management and Budget, and includes the DNI and the 
Director of OPM with the responsibility to ensure alignment of 
suitability security and, as appropriate, contractor employee 
fitness investigative and adjudicative processes.
    With regard to the oversight roles and responsibilities 
within DOD, the heads of DOD Components are responsible for 
establishing and overseeing implementation of procedures to 
ensure prompt reporting of significant derogatory information, 
unfavorable administrative actions, and adverse information 
related to its personnel; and this information goes to 
appropriate officials within their component and, as 
applicable, to the DOD Consolidated Adjudication Facility. This 
responsibility applies to military service members, DOD 
civilians, and embedded contractor personnel.
    Under the National Industrial Security Program, cleared 
contractors are required to report adverse information coming 
to their attention regarding their cleared employees. In 
addition, the Defense Security Service is responsible for 
conducting oversight of companies cleared to perform on 
classified contracts for DOD and 26 other Federal departments 
and agencies that use DOD industrial security services.
    The Department has worked very hard to create improvements 
that produced greater efficiencies and effectiveness in the 
phases of initiating and adjudicating background 
investigations. In 2011, the Government Accountability Office 
removed DOD's personnel security clearance program from its 
high risk list.
    We have used multiple initiatives to review and confirm the 
quality of the investigative products we receive, the quality 
of our adjudications, and the accuracy and completeness of the 
documentation of adjudicative rationales in support of 
oversight and reciprocity. In addition, we have implemented a 
certification process for DOD personnel security adjudicators.
    I thank you for your time and look forward to answering 
your questions.
    [Prepared statement of Mr. Lewis follows:]

    Chairman Issa. Thank you.
    Mr. McFarland, you are recognized for five minutes.


    Mr. McFarland. Good morning, Chairman Issa, Ranking Member 
Cummings, and distinguished members.
    Recent events, including the horrific actions of Aaron 
Alexis and the unauthorized disclosure of classified 
information by Edward Snowden show how critical it is to 
continuously improve and strengthen the background 
investigations process. I am grateful that the committee is 
holding this hearing and taking steps to address this issue.
    The U.S. Office of Personnel Management carries an immense 
responsibility regarding its critical role in safeguarding our 
Country's national security. There is no other entity of the 
Federal Government that serves in the capacity of a first 
responder to such a vast linkage of current Federal employees 
and the constant flow of applicants for Government positions.
    The background investigations OPM performs are the very 
first step in determining whether a person deserves the trust 
of the United States and should be permitted access to 
restricted areas and sensitive information. Director Archuleta 
has requested several briefings from us on the issue and we are 
very appreciative of her strongly stated support for our work.
    We performed an in-depth examination of Mr. Alexis's 
background investigation, which was conducted by USIS in its 
role as a contractor for OPM's Federal Investigative Services. 
During this review, we found that although the OPM procedures 
in place at that time were followed, other steps, such as 
directly contacting the King County District Court, could have 
provided critical additional information.
    The committee's recently released report entitled Slipping 
Through the Cracks contains a straightforward analysis that 
shows several weaknesses in the background investigation 
process and contains multiple recommendations that I believe 
will greatly strengthen OPM's program. The Office of the 
Inspector General is ready and willing to offer any assistance 
we can as the committee pursues its reform efforts.
    It has been well publicized that the OIG is the lead 
investigating entity in a civil suit against USIS. My written 
testimony more fully describes the allegations contained in the 
complaint filed by the Department of Justice. In short, the 
complaint alleges that USIS failed to perform quality reviews 
related to at least 665,000 cases as required under its 
contract with OPM. This permitted USIS to release more 
background investigation cases to OPM, which in turn allowed it 
to increase the company's bottom line.
    The exact damages suffered by OPM will be determined by the 
court at trial. The penalties imposed under the False Claim Act 
range from $5,500 to $11,000 per false claim or statement. If 
each of these 665,000 cases were considered a false claim or 
statement, penalties could range from approximately $3.7 
billion to $7.3 billion.
    In closing, I would like to offer a very sincere thank you 
to this committee and to their staff for crafting the recent 
legislation entitled The OPM IG Act. Subcommittee Chairman 
Blake Farenthold and Ranking Member Steven Lynch provided the 
much needed forum for us to explain the dilemma facing our 
Office of Inspector General as a result of an agency funding 
decision. As you know, an unconscionable denial of funding 
greatly thwarted our efforts to properly audit and investigate 
an OPM program of paramount national security concern, the 
Federal Investigative Services. Regardless, we utilized as best 
we could our office's general appropriation funding to 
accomplish as much oversight as was feasible.
    Chairman Issa and Ranking Member Cummings, you have our 
organization's pledge, now with access to the OPM Revolving 
Fund, that we will fully engage our audit and investigative 
resources to protect the national security. Thank you.
    [Prepared statement of Mr. McFarland follows:]

    Chairman Issa. Thank you.
    Ms. Ordakowski.


    Ms. Ordakowski. Good morning, Chairman Issa, Ranking Member 
Cummings, and members of the committee. Thank you for the 
opportunity to be here today to discuss the Federal security 
clearance process. My name is Sue Ordakowski. I am the Chief 
Contracts and Compliance Office of KeyPoint Government 
Solutions, and I am also the Acting Program Executive for the 
KeyPoint OPM Background Investigation Program. I joined 
KeyPoint shortly after the company won its first Government 
contract in 2004, and my role is to make sure the company does 
things the right way.
    The committee initially invited KeyPoint's President, Jeff 
Schlanger, to testify, and he is here today, but, as we 
discussed with your staff, he recently availed himself of an 
opportunity to return to public service as the chief of staff 
to the Manhattan district attorney. He remains on KeyPoint's 
board, however, and is a key advisor to the company.
    Fourteen years ago, KeyPoint was founded as Kroll 
Government Services. In 2004, OPM expanded its contractor pool 
from just USIS and KeyPoint was awarded a position on the IDIQ 
contract for background investigations. In May 2009, the 
company was spun off from Kroll and renamed KeyPoint.
    Over time, KeyPoint has built a high-quality, well-trained 
network of experienced investigators and a culture of zero 
tolerance for any lapses of integrity. In large part, 
KeyPoint's success can be attributed to the fact that our 
company's focus was and is providing high-quality, fairly 
priced background investigations to OPM and other Government 
agencies. Today, KeyPoint performs approximately 25 percent of 
the fieldwork conducted by contractors for OPM's background 
investigations and we are working hard to achieve parity with 
our major competitor on the contract.
    As this committee assesses the security clearance process, 
it will compare the performance of private enterprises and the 
Government. We believe this is an important comparison that 
will help to achieve our collective goal of protecting our 
Nation's secrets to the greatest extent possible. Although this 
hearing is highlighting problems with one contractor, and not 
the Government, both have experienced their share of problems 
with a process that requires constant vigilance, integrity, and 
    KeyPoint has collaborated with various Government agencies, 
including OPM, to improve the background investigation process. 
An example of this is our Investigator of the Future initiative 
through which we are working collaboratively with OPM to 
develop a tablet-based tool for collecting field data and 
providing reference resources directly to investigators in the 
field. We believe the tool will increase quality and 
efficiency, and protect the large amounts of personally 
identifiable information that we collect and utilize.
    OPM contract requirements are rigorous and complex, and we 
commit significant resources to ensure that we meet or exceed 
OPM standards. Because of our solid performance on the OPM 
contract, OPM has encouraged KeyPoint to grow its capacity, and 
we have done so. Throughout the years, our primary focus has 
always been on the quality of our case work. We have 
implemented a comprehensive quality review system to ensure 
independent review of each case before submission to OPM. We 
have never wavered from this focus on quality and never intend 
to do so.
    It is our understanding that the primary purpose of this 
hearing is to explore ideas for improving the background 
investigation process. A few key areas where improvements could 
be made include, one, consistency between the requirements set 
by OPM versus those set by agencies with delegated authority; 
two, the use of technology; three, the use of new sources of 
information; four, continuous evaluations; five, the 
contracting process; and, six, increased cooperation from State 
and local authorities. I have provided more details on these 
points in my written testimony.
    In conclusion, I am very proud of the service that KeyPoint 
has provided to the United States Government over the past 14 
years and look forward to continued growth. KeyPoint will 
continue its work to constantly improve the security clearance 
investigation process and will continue our tradition of 
providing the highest quality investigations at fair prices to 
our client agencies and to the taxpayer.
    I appreciate the opportunity to testify before you and 
welcome your questions.
    [Prepared statement of Ms. Ordakowski follows:]

    Chairman Issa. Thank you.
    Mr. Rhodes.


    Mr. Rhodes. Good morning, Chairman Issa, Ranking Member 
Cummings, and members of the committee. Thank you for the 
opportunity to appear before you today. My name is Michael 
Rhodes and I an Executive Vice President with CACI and Manager 
of the Mission Systems and Services Business Group, the 
business unit within CACI responsible for our work with the 
Office of Personnel Management, or OPM.
    I would like to provide you with a brief introduction to 
our company and the work we do to assist OPM in the security 
clearance process.
    CACI is an organization of nearly 16,000 professionals 
working in more than 120 offices worldwide, with a very diverse 
information solutions and services customer base. CACI is one 
of the three contractors currently assisting OPM by conducting 
fieldwork for security clearance investigations. We perform 
approximately 11 percent of OPM's fieldwork assignments, which 
equates to slightly more than 1 percent of our company's 
overall annual business base.
    Having provided mission support services to the Government 
for the past 50 years, we understand that the process of 
conducting background investigations is fundamental to our 
national security. On a daily basis, CACI employees work side-
by-side with those people whose lives depend upon us getting 
the security clearance process right. Like them, our primary 
commitment is to protecting our national security. Quality, 
accuracy, and thoroughness must come first.
    Our business practices and model under the OPM contract 
demonstrate the emphasis we place on quality. CACI 
investigators are expected to conduct their fieldwork in 
accordance with OPM guidelines, and we conduct an robust 
internal review of investigations for quality, accuracy, and 
thoroughness prior to submission to OPM for final review and 
    Now, our business model is based upon four key principles: 
first, our corporate culture, the character of the company and 
its employees, and the importance we place on ethics and 
integrity; second, having the right policies and procedures for 
oversight; third, effective and continual training; and, 
fourth, a constant auditing and monitoring.
    Now, to be clear, we do not grant clearances or make 
recommendations as to who should receive a security clearance. 
Our primary role in the investigation process is fact-finding, 
ensuring that we conduct background investigations in 
accordance with OPM guidelines and contract requirements. We 
provide the results of our investigation to the Government for 
their approval and use in making their final clearance 
    We know firsthand about the importance of an effective 
security clearance process, as more than half of our employees 
hold clearances that are critical to the work they perform for 
our Country. Even though we were not the investigators for 
Snowden or Alexis, we were deeply impacted, most notably by the 
incident at the Navy Yard, where we have a substantial number 
of CACI employees. We collectively mourn with our Nation when 
these tragedies happen.
    We at CACI are committed to best practices and continuous 
improvements in the security clearance process. In this regard, 
we have suggestions in three areas: first, making background 
investigations more efficient; second, more effectively 
capturing information; and, third, strengthening contractor 
    On behalf of my company, and as a former active duty Army 
officer and a security clearance holder for over 30 years 
supporting the intelligence community, I thank you for the 
opportunity to present CACI's input on these matters, and I 
appreciate the courtesies extended to us by you and your staff 
during the course of this inquiry. Thank you for inviting me to 
testify today, and I look forward to your questions.
    [Prepared statement of Mr. Rhodes follows:]

    Chairman Issa. Mr. Phillips.


    Mr. Phillips. Chairman Issa, Ranking Member Cummings, and 
members of the committee, my name is Sterling Phillips, and 
since January of 2013 I have served as CEO of USIS, a Federal 
contractor headquartered in Falls Church, Virginia. As part of 
a wholesale leadership change at the company, I joined USIS 
after more than 30 years in senior management positions with 
Federal contractors.
    I am here today representing more than 6,000 USIS employees 
dedicated to excellence in supporting the missions of our 
Government customers. That number includes 2,000 field 
investigators across the Country who conduct background 
investigations, as well as nearly 400 of their colleagues 
involved in assuring the quality of our work.
    Over the past nine months, the disclosure of classified 
material by Edward Snowden and the Navy Yard tragedy caused by 
Aaron Alexis have caused a great deal to be written and said 
about the security clearance process in general and USIS 
specifically. Much of this public commentary has been factually 
inaccurate. Today I hope to correct these inaccuracies and 
clarify the role contractors like USIS play in the Nation's 
security clearance process so as to provide you with better 
insight as to how this process might be improved.
    In order to understand the process, it is critical to 
recognize that USIS and OPM's other contractors have no role in 
deciding whether an individual actually receives or retains a 
security clearance. We only collect and report information, and 
we do not even make a recommendation. The decision-making 
process is known as adjudication, and that authority lies 
solely with the agency requesting the clearance.
    All OPM background investigations, whether conducted by 
contractors or Federal employees, follow specific procedures 
and protocols established by OPM. Contractors like USIS 
rigorously adhere to the established investigative process and 
have no flexibility in terms of how an investigation is 
    Once an investigation is complete and accepted by the 
Government, our work is done and we have no further role in the 
oversight or monitoring of cleared personnel. In fact, 
contractors are not allowed to maintain any of the case 
materials or information, all of which are returned to OPM.
    Our performance goals for all cases, including Snowden and 
Alexis, are to strictly follow the OPM process and to meet all 
OPM standards for quality in our work. If we ever fail to do 
so, we are promptly notified by OPM with a detailed description 
of any defects. All indications to USIS are that we met all 
standards on each of these two cases.
    Mr. Chairman, in my 13 months at USIS, I have been 
impressed with the dedication and professionalism of our 
investigators and other employees. They understand that they 
are performing a sensitive and vital national security 
function. Many of our investigators came to us from the 
military or law enforcement. They understand their 
responsibilities and take them seriously.
    It is important to note that all investigations are fixed-
price products. USIS has an extensive and costly quality review 
system, and all of our work is subsequently reviewed by OPM and 
the adjudicating agency. At any time, the USIS National Quality 
Team, OPM, or the requesting agency can send the case back for 
additional work at no extra cost to the Government. The cost to 
USIS of quality defects and re-work is high. Both short-and 
long-term, it is in the best financial interest of the company 
to do the job right the first time.
    In any enterprise of this size, however, from time to time 
there are individuals who fail to meet our high standards, but 
I submit to you that in USIS those individuals are an 
aberration, and not the norm.
    When USIS suspects that an individual investigator has 
misrepresented or falsified his or her work product, we 
immediately suspend that investigator and launch an internal 
investigation. If our investigation determines that work has 
been falsified or misrepresented, we proactively report and 
refer those cases to OPM and cooperate with the U.S. Attorney's 
Office for subsequent prosecution.
    As you know, the U.S. Department of Justice has intervened 
in a civil false claims suit against USIS. That matter is 
ongoing and has not been resolved.
    I was not at USIS when the alleged conduct in that case 
occurred, but I can tell you that the allegations in the 
complaint relate to a small group of individuals over a 
specific time period and are inconsistent with our values and 
strong record of customer service. Since learning of these 
allegations nearly two years ago, the company has acted 
decisively to ensure the quality of USIS work and compliance 
with OPM requirements. New leadership has been installed, 
oversight has been enhanced, and internal controls 
strengthened. From the outset, the company has fully cooperated 
with the Government's investigation and will continue to do so.
    Finally, I hope this hearing is helpful to you as you 
assess possible policy changes in America's security clearance 
process. USIS and our 6,000 employees are prepared to assist 
you in any way that we can. Thank you.
    [Prepared statement of Mr. Phillips follows:]

    Chairman Issa. Thank you.
    I will recognize myself.
    Director, we received a list of 450 cities that do not 
cooperate fully, it is part of an OPM list of cities that 
simply will not answer questions, in all or in part, as to 
criminal backgrounds and so on of individuals. We were also 
given a redacted version, which basically takes out all the 
names and is useless. Would you agree that the 450 cities not 
willing to cooperate should be, in the public interest, made 
    Ms. Archuleta. Mr. Chairman, there are about 18,000 
jurisdictions that exist across the United States that are----
    Chairman Issa. Right, there are 18,000, many of which are 
not on this list. You have 450 jurisdictions, including, at the 
time of Aaron Alexis, Seattle, Baltimore, New York, Los 
Angeles, and Washington, D.C. that were not cooperating. Aaron 
Alexis was, in fact, somebody for whom OPM had on the list, to 
our understanding at the time, that Seattle was not going to 
give you that information that ultimately we didn't have as to 
the shooting that Aaron Alexis had already done. My question to 
you is can you give this committee any reason that the names of 
those municipalities should be withheld from the public.
    Ms. Archuleta. Those 450 names have been discussed and 
mentioned, and we would work with you to provide those names of 
the cities that are not in----
    Chairman Issa. Okay, well, we have a list. We would like to 
make it public. We believe that it says--and I am respecting 
the status that was on it--it says ``Sensitive Law Enforcement 
Information for House Use Only'' that was stamped on our copy. 
It is this chairman's opinion that this is information the 
public has a right to know, that their city is not providing 
criminal information when somebody is receiving a security 
clearance, such as Aaron Alexis.
    Ms. Archuleta. Mr. Issa, we would be glad to work with you 
to release those names.
    Chairman Issa. Thank you. I appreciate that. As I 
previously said, obviously, at the time that Aaron Alexis was 
being checked, Seattle wasn't compliant or participating. Is it 
possible that, in fact, the inspector--and I am not trying to 
defend anybody here--the inspector that was doing the sheet 
looked and said this is on the list of cities that are already 
not compliant, it is not reasonable for us to go and ask for 
that record?
    Ms. Archuleta. I couldn't speculate to the mind-set of the 
investigator at that time.
    Chairman Issa. Do you believe this committee should empower 
OPM and the Department of Justice--this question is for Mr. 
Lewis--to have leverage over cities to ensure that if they are 
not going to comply, that Federal funds that help them build 
those very databases be withheld or in some other way use 
Federal clout to ensure that we do get full information when 
trying to clear individuals for sensitive information? Mr. 
    Mr. Lewis. I can't comment on----
    Chairman Issa. Would you like to have tools to see that 
that happens?
    Mr. Lewis. We would like to have access to that 
information, yes, sir.
    Chairman Issa. Okay. Well, it is the committee's intention 
to provide tools to the Executive Branch to encourage that 
    For the director, Ms. Archuleta, what have you done in 
order to reduce the amount of that list. Have you taken, in 
those three months, any material actions that might cause 
cities, other than being on a list that we might publicly 
disclose, to want to cooperate more fully?
    Ms. Archuleta. Most recently, the District of Columbia has 
agreed to provide that information and Mr. Miller, as the 
director of FIS, has been working within the compact to 
continue discussions with some of those major cities who have 
not been providing the information. We will continue to pursue 
that; it is an important relationship and information that 
would be most helpful in our background investigations.
    Chairman Issa. Thank you.
    I have one question that perplexes me a little bit, and it 
is kind of a billion dollar question here. My understanding, 
and, Mr. McFarland, you probably know the case history on it, 
OPM discovered and was working with Department of Justice prior 
to January of 2011, was aware of the dumping that went on at 
Mr. Phillips's company, is that correct?
    Mr. McFarland. I believe that is.
    Chairman Issa. So the United States Government discovered 
dumping prior to the filing in Alabama by Blake Perceval of a 
qui tam case, is that correct?
    Mr. McFarland. Yes, that is correct.
    Chairman Issa. And yet when--I put this in the record 
already, but when the Director of Personnel Manager, OPM 
Director, said that Department of Justice had filed, that 
wasn't true. Department of Justice joined the case in which the 
recipient will be a private individual that will receive large 
amounts of money if, in fact, there is a payment from Mr. 
Phillips's company, is that correct?
    My question to anyone on the panel is is there any good 
reason for the Government to discover that they had been 
wronged by a company and then allow an insider to become a qui 
tam recipient of millions of dollars because the Government 
doesn't act, and then have the Government join the case much 
later with righteous indignation, when in fact, in my review of 
this case filed by Department of Justice against USIS, all they 
have really done is asserted the same things previously 
asserted in the qui tam case. Anyone want to comment on that? 
Because there are a lot of U.S. dollars that are going to go to 
outside lawyers and an individual who, in fact, doesn't appear 
to be the first to discover or have some rights in this case?
    Ms. Archuleta. Mr. Issa, in April of 2011, Mr. Miller and 
his staff noticed an anomaly in the cases that were being sent 
forth from USIS and began a dialogue with USIS to discover why 
that was happening. They had introduced some new automation 
that was indicating to them that the number of cases being 
reviewed were much higher than----
    Chairman Issa. Okay, my time has expired. I just want to 
very quickly say was that discovery based on Blake Perceval's 
    Ms. Archuleta. No, it was not.
    Chairman Issa. So the Government discovered that, in fact, 
it had been wronged, potentially, and yet we have an individual 
with a billion dollar qui tam case that the Government is in 
second position on, is that correct? If I am wrong in any way, 
I would like to understand that.
    Ms. Archuleta. Again, I would reiterate that in April we 
began to uncover that anomaly.
    Chairman Issa. Okay. Well, I am going to take the privilege 
of referring this over to the committee next door, to 
Judiciary, because I am deeply concerned that the Government is 
not, in this case, potentially protecting its own right to get 
a recovery in its entirety and not share it with a third party.
    Mr. Cummings.
    Mr. Cummings. Thank you very much. I want to join with the 
chairman with regard to this whole issue of law enforcement 
officers cooperating with your agency, Ms. Archuleta. I learned 
that there were some in my own district, and I am going to be 
urging them to cooperate. I think this is so very, very 
    I want to go to you, Mr. Phillips. You said something in 
your written statement and I think you said it in your oral 
statement, you said, but I can tell you that the allegations in 
the complaint relate to a small group of individuals over a 
specific time period and are inconsistent with our values and 
strong record of customer service. I can understand that; it 
makes sense. But would you agree that the top people are gone? 
I mean, they have either been fired or they left, right? They 
were the ones who were orchestrating this. Hello?
    Mr. Phillips. The people associated with the allegations 
are gone from the company.
    Mr. Cummings. Yes, they are gone; they have been either 
fired or they left.
    Mr. Phillips. And they were at multiple levels in the 
    Mr. Cummings. Multiple levels. So, you know, when you say 
just a few bad apples, I mean, this is a little bit more than 
that, and we would not have that many people having left. And I 
don't think the Justice Department would be doing what it is 
doing if it were just a few bad apples. Now, I am not talking 
about probably 95 percent of the employees, but when you have 
key people--and from what we have learned they were key--doing 
certain things, making certain decisions, you wonder about 
statements like the one you just made. But we will come back to 
    Director Archuleta, records produced by OPM to this 
committee show that during the period of the alleged fraud OPM 
was paying bonuses to USIS for what you thought was very rapid 
progress in clearing cases. Between 2008 and 2012, OPM paid 
about $16 million to USIS just for bonuses under these 
contracts. Director, if USIS was defrauding OPM to meet its 
revenue targets, and if it met timeliness goals only by not, 
not doing quality reviews 40 percent of the time, what is OPM 
doing to recover those ill-gotten bonuses?
    Ms. Archuleta. The bonuses that were paid to USIS, which 
were last provided in 2010, were bonuses that were provided to 
them under the performance-based standards within the contract. 
The Government attempting to recover those bonuses is part of 
the civil action that has been filed, and no bonuses have been 
awarded to USIS under the current leadership.
    Mr. Cummings. So you are saying Justice is trying to get 
those bonuses back, is that what you are telling me?
    Ms. Archuleta. Yes, as part of the civil action charging 
fraud, that is part of the recovery.
    Mr. Cummings. Would the staff put up the chart for the USIS 
    Mr. Cummings. Director Archuleta, we asked the committee to 
provide us with the bonuses that were paid to employees who 
were involved in the alleged fraud. Now, here is some of what 
they told us. You have the chart there. The CEO received almost 
$500,000 in the first year of the alleged fraud. Director 
Archuleta, OPM does not approve these bonuses to individual 
people at USIS, is that correct?
    Ms. Archuleta. They are performance-based within the 
contract, and not to individuals, but to the company.
    Mr. Cummings. So OPM doesn't decide who gets the check; you 
just basically make sure that they get money, the company gets 
money and then they----
    Ms. Archuleta. Based on its performance.
    Mr. Cummings. All right, so let's ask the company.
    Mr. Phillips, I know you are relatively new at USIS and I 
know you have a tough job. You were brought in to clean up this 
mess. But as the CEO of USIS, you have a boss, do you not?
    Mr. Phillips. Yes, sir.
    Mr. Cummings. And that boss is Altegrity, the privately 
held holding company that owns USIS, is that right?
    Mr. Phillips. Yes, sir.
    Mr. Cummings. Altegrity is a big company, is it not?
    Mr. Phillips. The holding company is a relatively small 
    Mr. Cummings. Well, but through its subsidiaries it has 
received over $2 billion from contracts from a dozen Federal 
agencies. That is pretty big to me, $2 billion. Would you agree 
that is pretty big for the Federal Government?
    Mr. Phillips. Yes.
    Mr. Cummings. And that is what we have tallied. Altegrity 
was also the boss of your predecessor, the president and CEO 
who is alleged to have directed the fraud. Now, he got some big 
bonuses. My staff asked USIS for the company's bonus policies 
during the years of the alleged fraud, and what we got back 
were documents marked ``Altegrity.'' So the bonuses awarded to 
the top officials at USIS during the alleged fraud were made 
according to a formula devised by the parent company, 
Altegrity, is that right?
    Mr. Phillips. Yes, sir.
    Mr. Cummings. According to Altegrity, bonus formula, 
between 20 percent and 25 percent of an executive bonus, was 
dependent upon whether he met his objectives and whether he 
performed well. So if you are the CEO of USIS, Altegrity 
determines your bonus, is that right? They determine yours.
    Mr. Phillips. Yes, they do.
    Mr. Cummings. Who evaluates your performance as the CEO?
    Mr. Phillips. Altegrity and the board of directors.
    Mr. Cummings. And so do we have any names?
    Mr. Phillips. We are in the process of reorganizing 
Altegrity. The board of directors is comprised of principals 
with Providence Equity, the owners of the company. So I report 
directly to the board, today.
    Mr. Cummings. So somebody doesn't call you and check on 
you, the whole board calls you? I mean, how does that work? I 
mean, somebody is going to make sure you get a bonus, and if 
you deserve a bonus, I know you are going to insist that you 
get a bonus. Does that mean you go to the board to ask for the 
bonus or do you answer to someone?
    Mr. Phillips. The board of directors would determine my 
bonus. We have monthly board meetings, so there is currently--
there is no CEO of Altegrity, as there was in the past.
    Mr. Cummings. Okay.
    Mr. Phillips. So the board does, in fact, to your question, 
the board does, in fact, evaluate my performance and determine 
whether I will get a bonus.
    Mr. Cummings. Well, who specifically at Altegrity approved 
the more than $1 million in bonuses for your predecessor, 
former CEO Bill Mixon, who has been accused of directing this 
    Mr. Phillips. Specifically, I do not know who was CEO at 
the time these bonuses were paid. I would have to look at the 
timing. There have been a series of CEOs over the last 10 years 
at Altegrity.
    Mr. Cummings. Well, as I close, let me say this. Mr. 
Chairman, I think that Mr. Phillips's testimony today raises 
the question about whether or not officials at Altegrity knew 
about the alleged fraud and when did they know it, and what, if 
anything, did they do about it. Altegrity is a big Federal 
contractor through its subsidiaries, and the American people 
have a right to know just what kind of people are managing 
those subsidiaries to which the Government gave over $2 billion 
in recent years.
    Now, Mr. Chairman, I would like to put the bonus chart and 
the list of Altegrity contracts in the record. The bonus chart 
is right here.
    Mr. Mica. [Presiding.] Without objection, the bonus chart 
will be part of the record.
    Mr. Cummings. And the contracts of Altegrity.
    Mr. Mica. And the contracts of Altegrity referenced to it.
    Mr. Cummings. Thank you very much
    Mr. Mica. Thank you. Without objection, so ordered.
    Mr. Mica. Okay, let me recognize myself.
    Well, we are here because one of the most horrible and 
failure of some of the systems that we have in place to protect 
us failed and a lot of people died. Just an incredible tragedy. 
Some of it is the result of the failure of adequate contract 
management. We have heard some issues raised about some other 
failures in contract management. We also have a failure of the 
security clearance process, obvious in some way. And then if 
you look at the final action of the depraved individual in this 
case, a failure of our mental health system; someone who was 
troubled obtained a weapon and destroyed the lives of a number 
of people.
    First of all, Mr. Phillips, you said you collect data and 
you give it to OPM, so you are a data collection agent 
    Mr. Phillips. Yes, sir.
    Mr. Mica. Ms. Archuleta, you have about what, 2.3 million 
people you do clearance on? Is that annually or is that just--
    Ms. Archuleta. That is annually, sir.
    Mr. Mica. Annually. So that is a huge amount. Just for the 
record, I was in Congress, actually chaired civil service when 
we created the initial ESOP. We gave the Federal employees the 
right to run that initial company, which evolved into Mr. 
Phillips's company. We now have three companies, private 
companies, that do 70 percent of the work, is that correct?
    Ms. Archuleta. Yes, the----
    Mr. Mica. It would be almost impossible for OPM to do it 
all itself, given 2.3 million, so we rely on contractors and 
contract management to execute those clearances, is that right?
    Ms. Archuleta. That is correct, sir.
    Mr. Mica. Okay, so they are collecting the data. The 
problem is it is sort of garbage in, garbage out, and we have 
flaws in the system. We see Mr. Alexis--and I went back and 
read the report. The 2004 incident he was, really, even if 
Seattle reported, he was never adjudicated with a felony or 
even a misdemeanor; the charges were dropped, is that correct, 
Mr. Phillips?
    Mr. Phillips. That is correct.
    Mr. Mica. Okay, so then the question is the failure of the 
system to periodically review folks. Now, he was in the Navy, 
but he went on to a private contractor, is that correct, too? 
Are you aware of that, Mr. Phillips?
    Mr. Phillips. That is my understanding.
    Mr. Mica. Okay. And I see there is a 5 to maybe 15 year 
review. Do you think that is adequate for these clearances, Ms. 
    Ms. Archuleta. I am very supportive of a continuous 
    Mr. Mica. We should do that. The problem I have is Ms. 
Ordakowski here, she gave us some recommendations. Technology, 
we could easily compare the data coming in. We probably should 
look at some stages, because, again, the ultimate decision, Mr. 
Lewis, is given by the agency for the clearance, is that 
    Mr. Lewis. That----
    Mr. Mica. And you gave that. This individual was a Navy 
person, first got it as a Navy, then he shifted to a contract 
person, where he committed the deed. Is that correct, Mr. 
    Mr. Lewis. That is correct.
    Mr. Mica. Okay. So I think we ought to look at some point 
at which there is a re-review. Certainly what the chairman 
brought up in entities not reporting, again, garbage in, 
garbage out, we won't know, but I think for improvement we need 
to look at if they shift positions, the contractor should do a 
review. It could easily be run through technology, although, 
dear God, I have the greatest reservation about OPM and 
technology now chairing the Government Operations Subcommittee, 
seen $271 million, almost a third of a billion dollar fiasco in 
trying to just keep the records of Federal employees for 
retirement, etcetera. Are now still doing that by hand, ma'am? 
Do you know?
    Ms. Ordakowski. I do not know.
    Mr. Mica. Do you know, Ms. Archuleta? Do you know the 
failure of trying to institute technology for records for 
    Ms. Archuleta. That is why I have instituted an IT 
modernization plan.
    Mr. Mica. Okay, well, we spent hundreds of millions and it 
is a fiasco. This is also back to contract management, the top 
person at OPM in managing contracts. We have three contracts 
for these folks; we have contracts for IT. Certainly, 
technology could give us a better handle on reviewing. You 
know, people are normal today. Look at this panel, they all 
look pretty normal, don't they? But they could flip out on you 
in a few years, particularly some. So we do need some mechanism 
to review people periodically as they take on new roles. 
Wouldn't you say that would be good, Ms. Archuleta?
    Ms. Archuleta. Yes, sir, I would say that.
    Mr. Mica. Mr. Phillips, what do you think?
    Mr. Phillips. I agree.
    Mr. Mica. Don't tie your shoelaces now. What?
    Mr. Phillips. No, I agree.
    Mr. Mica. Okay.
    Mr. Lewis?
    Mr. Lewis. Very much agree.
    Mr. Mica. Okay.
    Mr. McFarland?
    Mr. McFarland. Yes, I agree.
    Mr. Mica. Okay. And then we haven't even talked about the 
failure of mental health. Government employees, be they 
military, private contractors, do not go out and shoot multiple 
people. There is something wrong. Again, this individual had 
incidents of severe mental health problems, and yet obtained a 
weapon. And we have to look at also how you get a sawed-off 
shotgun into a Government facility and then kill people.
    I would like, also, if you could please provide a copy of 
the IT modernization plan to the committee. I guess we will ask 
Ms. Archuleta for that. Can you do that?
    Ms. Archuleta. It is my intent to discuss the IT 
modernization plan with the committee, yes.
    Mr. Mica. I am over slightly, but not as much as Mr. 
    Let me yield next to Ms. Norton, with trepidation. Thank 
you. And joy. Good to see you.
    Ms. Norton. All right. Now that that has been corrected, 
thank you, Mr. Chairman.
    You know, this city was somehow spared in 9/11, and there 
are theories as to how that occurred, yet we were hit very hard 
at the Navy Yard, and we were hit by a deranged man who, as I 
understand it, had the second highest security clearance.
    Mr. Lewis, is that the second highest security clearance 
you can get?
    Mr. Lewis. There is secret and top secret, so, yes.
    Ms. Norton. So he was pretty much up there. As we look back 
over his history, it had some arrests, they weren't reported 
from Seattle. He was arrested in Georgia for disorderly conduct 
the same year that he got his security clearance, apparently; 
and then in 2010 in Texas for firing a gun through the ceiling 
of his downstairs neighbor. And then just a month--and here is 
where the tragedy that we are still feeling in this city is--
just a month before the Navy Yard incident, the Rhode Island 
police were cognizant enough, intelligent enough--I am not sure 
they knew, in fact, I believe they did not know, because they 
were called to the hotel, and here is the hotel who had the 
consciousness, because Alexis had apparently called down saying 
he was hearing voices. So here we have people without security 
clearances that understand there was something wrong with this 
    Now, first, let me ask about Alexis's run-ins with the law 
in Georgia and Texas. Did any part of the Federal Government, 
Mr. Lewis, did you know, did the Government know about either 
of these run-ins with the law in Texas and Georgia?
    Mr. Lewis. Well, because there is a 10-year interval 
between investigations, that information, unless it became 
known to the commander or supervisor of Mr. Alexis, would not 
have been reported to the Department of Defense.
    Ms. Norton. Are you saying it was not reported, then?
    Mr. Lewis. That is correct.
    Ms. Norton. Had it been reported, would those incidents 
have been investigated?
    Mr. Lewis. Upon the receipt of derogatory information, the 
DOD consolidated adjudications facility would have made a 
determination does this clearance need to be suspended or 
revoked; is additional investigation required. So additional 
action would have been taken.
    Ms. Norton. Well, first of all, as you indicated, this man 
had a security clearance that enabled him to go for 10 years 
without review. I can't understand the original set of the 10-
year notion. Even the most stable person has incidents in his 
life in a decade. Where did the 10-year period come from?
    Mr. Lewis. The 10-year period is part of the current 
Federal investigative standards that are in place today. These 
standards are under review, most prominently with the 
suitability and security processes review that is ongoing as we 
    Ms. Norton. You are not telling me where it came from. 
Again, here we have a series of people who have no expertise, 
who understood that this man probably needed help, and yet the 
Government sets a 10-year period during which it doesn't have 
to--I will get to the report in a moment, but it doesn't have 
to investigate to see if there has been any deterioration in 
the person. You don't know where this came from. Would you find 
the paperwork that indicated the rationale for the 10-year 
period and write that within a 30-day period to the chairman of 
this committee?
    The Rhode Island incident is the most troubling because 
Alexis was working as a contractor for a company called 
Experts. Was Experts aware of this erratic behavior?
    Mr. Lewis. Experts did become aware of this information. 
They were required to report it; they failed to do so.
    Ms. Norton. What has happened to Experts in the meantime? 
Is Experts still a contractor with the Federal Government?
    Mr. Lewis. I don't know if they are still a contractor, but 
their security clearance has been adversely impacted. They were 
    Ms. Norton. Ms. Archuleta, do you know if Experts is 
still--excuse me?
    Ms. Archuleta. I apologize. I would rely on Mr. Lewis's 
assessment of that. It seems that their contract has been 
suspended. Is that what I heard, Mr. Lewis?
    Mr. Lewis. Their security clearance has been suspended.
    Ms. Archuleta. Their clearance has been suspended.
    Ms. Norton. So that means they can't do this work any 
    I thank you, Mr. Chairman.
    Mr. Mica. Thank you.
    Ms. Norton. It seems clear that--and that is why I asked 
the report to the chairman--we have to know the basis for the 
10 years and we have to assure that there is continuous 
monitoring of anybody who has a security or a top security 
    Mr. Mica. I thank the gentlelady for an excellent line of 
    Let me yield to the distinguished gentleman from Ohio, Mr. 
    Mr. Turner. I would like to echo what the chair said. I 
think Ms. Norton gave us a great description of what we see as 
the disintegration of the individual and raised two very 
important issues, on the 10-year evaluation process and also 
the issue of failure of reporting requirements or failure to 
report when the requirement existed.
    But I would like to do the follow-on, then, to Ms. Norton's 
line of questioning. I understand that even when you get to the 
10-year period and when you get to the review of someone to 
reaffirm their classified status that there is difficulty with 
the cooperation with State and local government officials. Now, 
I served as a mayor for the City of Dayton. I am also on the 
Armed Services Committee here, in addition to this committee, 
so the issue of clearances, as we look to Snowden and the other 
things that are going on, obviously the issue of the Navy Yard 
is one that gives us a picture of our continuous vulnerability, 
not just this incident.
    But I am concerned that it is my understanding that there 
are also issues of State and local law enforcement sharing 
information with the Federal Government in the security 
process; that although there is a requirement for disclosure 
and for full cooperation, that, in fact, there may be some 
    Ms. Archuleta, if you could please speak on that issue. Do 
you have State and local agencies, governments that do not take 
this issue as seriously and that particular at varying levels, 
and is that an impediment for you?
    Ms. Archuleta. I wouldn't classify it in just one category; 
I would say that there are some that have not provided the 
information, choose not to provide. Others are smaller 
jurisdictions that, in fact, may not have the capability of 
providing that information; others, because of just the small 
size of their jurisdiction, may not have the records that are 
complete records going several years or many years back. So 
there are many reasons why local law enforcement agencies are 
not providing the information, but the most important part here 
is that we must take every step, and I would be supportive of 
looking at how we can work with local law enforcement agencies 
and the courts to provide this information. This is part of the 
President's 120-day PAC review and of the Quality Assessment 
Working Group that is ongoing right now.
    Mr. Turner. Okay, well, even though you sort of side-
stepped it there for a moment, I think your answer is still 
very troubling, so let's back up for a moment and review your 
answer. You said there are jurisdictions that choose not to 
share the information.
    Ms. Archuleta. Yes.
    Mr. Turner. Although you indicated that there are 
jurisdictions that perhaps don't have the resources, that there 
are those who just are not sharing the information with you. 
And I think you would acknowledge to this committee that the 
information is critical, is it not?
    Ms. Archuleta. Yes, that is correct, sir.
    Mr. Turner. And then the issue of resources. Although there 
are communities that would indicate that the period of time of 
the review may be difficult for them for their record-keeping, 
we are talking only--we are in present day; we are talking 10-
year periods, we are not going to the 1800s, correct? I mean, 
these are present records that we are asking for information 
    Ms. Archuleta. I can't comment as to why they believe their 
resources aren't there, sir.
    Mr. Turner. I see. It is troubling for you, though, 
    Ms. Archuleta. Yes, it is.
    Mr. Turner. Are you concerned at all that the amount of 
classified material post-9/11 may be resulting in a 
proliferation of individuals having clearance; the fact that 
the data that we now consider to be classified is so voluminous 
that, in fact, it is pushing the system in providing increased 
classified status to individuals?
    Ms. Archuleta. I know that the director of national 
intelligence is looking at this very serious issue as to the 
standards for granting clearances and also who should receive 
those clearances; it is an ongoing review that he takes very 
seriously and we are working with him in every way.
    Mr. Turner. But you do consider that the amount of 
classified material certainly is a factor that is pushing, a 
driver of the issue of the number of classified status----
    Ms. Archuleta. Who is eligible to receive a clearance is a 
decision of the DNI.
    Mr. Turner. Ms. Archuleta, is there a difference between 
the manner in which contractors and Government employees go 
through the clearance process?
    Ms. Archuleta. No. The same standards for Federal 
investigations or background investigations is the same for 
both contractors and Federal employees.
    Mr. Turner. Going back to the issue of communities that do 
not participate or choose not to participate, what actions do 
you take to try to encourage their participation?
    Ms. Archuleta. We work directly with those jurisdictions 
and also with our counsels and with other Federal agencies to 
persuade and encourage their cooperation with our 
    Mr. Turner. Sorry, Mr. Chairman, if I could just one more.
    It does inhibit, though, the process, does it not?
    Ms. Archuleta. We attempt to get as much information as we 
can, and the records from local law enforcement is very 
important to us, so, as I said before, I am very supportive of 
ways that we can encourage these entities to provide us the 
    Mr. Mica. I thank the gentleman and the witness.
    We will go to Mr. Lynch, the gentleman from Massachusetts.
    Mr. Lynch. Thank you, Mr. Chairman.
    I want to thank the witnesses, as well, for your 
    This was a terrible tragedy and I just want to get at the 
depth of this tragedy. I am going to mention the 12 individuals 
who were killed during this attack.
    Michael Arnold, age 59, had been a pilot with the Navy for 
many years. He had a wife and two grown sons.
    Martin Bodrog, age 54, graduate of the United States Naval 
Academy at Annapolis. He was a surface warfare officer in the 
Navy. He left a wife and three daughters.
    Arthur Daniels, age 51, left a wife and five children.
    Sylvia Frasier, age 53, she had five sisters and a brother. 
She worked at the Naval Sea Systems Command. She also served as 
a deaconess and altar counselor at the Rhema Christian Center 
Church in Washington, D.C. Loved by many.
    Kathleen Gaarde, age 62, she worked as a financial analyst 
at the Navy Yard. She and her husband had an adult son and 
    J.J. Johnson, age 73, he was father to four adult daughters 
and had 11 grandchildren.
    Mary Francis DeLorenzo Knight, age 51, she and her husband 
had two daughters.
    Frank Kohler was only 50 years old, left behind his wife 
and two daughters. He was a big time Rotary Club participant.
    Vishnu Pandit, age 61. Mr. Pandit and his wife, Anjali, had 
become grandparents recently, when one of their two sons had a 
    Kenneth Proctor, age 46, left behind a wife and two teenage 
    Gerald Read, 58, he and his wife, Kathy, have a grown 
daughter, Jessica, and she has three granddaughters. Well, they 
have three granddaughters.
    And Richard Michael Riggell, age 52. Mr. Riggell was 
working as a security officer at the Navy Yard, after having 
worked several years in Iraq on behalf of our Country. His wife 
and his three daughters remember him as a brave man and a great 
    So this process, this current security clearance process 
allowed this to happen. It allowed Mr. Alexis to get in there 
and do what he did.
    I have some legislation that I drew up last night, H.R. 
4022. It is the Security Clearance Reform Act of 2014. It will 
introduce a continuous review of security clearances, rather 
than these period events that we are seeing. It also withholds 
some Federal funding, a penalty, if you will, for jurisdictions 
that do not cooperate with us when somebody from their 
jurisdiction applies for a security clearance from the Federal 
Government. It also gets at a problem that we had with USIS, 
which is there was a conflict there. USIS had two contracts, 
one was an investigative contract and one was a review, another 
contract, a support services contract that allowed USIS to 
review their own work. That is how this was allowed to remain 
hidden for a long period of time, because the USIS reviewers 
that were reviewing USIS investigations basically sandbagged 
the reviews and allowed the dumping to occur. That is a real 
problem. So the legislation that I have, among many other 
things, also gets at that issue, that conflict issue.
    Mr. McFarland, you are a frequent-flyer to this committee. 
Sorry to see you here today, but do you think that this dual 
contract situation, where you have a contractor reviewing its 
own work, does that contribute to the reduced quality of those 
reviews and does it introduce a conflict into the system?
    Mr. McFarland. It is an absolute conflict, no question 
about it.
    Mr. Lynch. Okay.
    Mr. McFarland. It did quite a job on the quality.
    Mr. Lynch. Okay, thank you. I just want to say that I know 
we have a lot of partisan issues before this committee 
sometimes. This is not one of those cases. We have had great 
cooperation from majority staff and minority staff; we have had 
great cooperation between the members on both sides of the 
aisle. This is the way it is supposed to work. We are honestly, 
I think, embarked on an effort to fix this situation and, like 
I say, I have some legislation here, H.R. 4022. I would welcome 
cosponsors from both sides of the aisle and any changes or 
improvements to that bill would be welcome, and I yield back.
    Mr. Bentivolio. [Presiding.] Thank you.
    At this time I will recognize myself.
    I would like to thank the witnesses for appearing today.
    I believe one of the primary tasks of the Federal 
Government is to maintain our national security. As the tragic 
shooting at the Navy Yard clearly shows, the clearance process 
is deeply flawed and the American people have suffered as a 
result. It is essential that we now determine the best way to 
fix the loopholes in this process and prevent a tragedy such as 
this shooting from ever happening again.
    Clearance holders must self-report derogatory information 
that could impact their clearance. In practice, such self-
reporting is rare.
    Mr. Lewis, are security clearance holders required to 
report any derogatory information once they have obtained a 
    Mr. Lewis. Yes, they are required to do such self-
reporting, as well as their supervisors.
    Mr. Bentivolio. What types of information should be 
    Mr. Lewis. An example would be bankruptcy, if they are 
arrested, things of that nature.
    Mr. Bentivolio. Do a clearance holder's commanding officers 
or employers have an obligation to report any derogatory 
    Mr. Lewis. Yes, they do.
    Mr. Bentivolio. How often is such derogatory information 
actually reported? And I want to emphasize actually reported.
    Mr. Lewis. Sir, we have looked at data that is reported 
into the DOD system of record for security clearances, and it 
is in the 50,000 reports a year range. There are many reports 
of derogatory information.
    Mr. Bentivolio. You said 50,000?
    Mr. Lewis. Yes.
    Mr. Bentivolio. What is the Department of Defense doing to 
incentivize reporting of derogatory information? You said 
50,000 actually reported, but how do we determine what wasn't 
    Mr. Lewis. You speak to a fundamental issue, which is 
partially educating commanders and supervisors as to their 
responsibilities; and then the second half of that equation 
would be holding individuals accountable for failure to execute 
their responsibility.
    Mr. Bentivolio. Okay, let's see if I understand this right 
now. Somebody is hired, they have a security clearance. And it 
is reviewed how often?
    Mr. Lewis. Currently, at the top secret level it is a 5-
year reinvestigation process. At the secret and below level it 
is 10 years. That is going to be transitioning to a 5-year 
recurring review. And we do believe that continuous evaluation, 
ongoing reviews of available records should occur as well.
    Mr. Bentivolio. Okay, in the review process are you 
permitted to check the social media, like Facebook, a person's 
Facebook, if they have one? What else? Like what is on them on 
Wikipedia or something?
    Mr. Lewis. Social media is not a tool that is currently 
being used; however, it is being studied. And one of the 
challenges of using social media is validating the information 
that is available on the Web.
    Mr. Bentivolio. Okay. And what do you do with the 
information of a previous investigation that is maybe 10 years 
    Mr. Lewis. Well, as part of the reinvestigation process, 
the previous investigation is looked at for any derogatory 
information there, looking for trends, looking for ongoing 
concerns; and it is all part of a whole person concept where 
you look at what has happened in the person's life, what 
challenges they have faced, whether or not they have had issues 
with credit or alcohol, and that is part of the adjudicative 
    Mr. Bentivolio. Thank you very much.
    The chair now recognizes Mr. Connolly from Virginia.
    Mr. Connolly. I thank the chair.
    Mr. Bentivolio. Oh, I am sorry. I apologize. Ms. Duckworth.
    Ms. Duckworth. Thank you, Mr. Chairman.
    The Justice Department's complaint against USIS alleges 
that between March 2008 and September the company dumped the 
background investigations by submitting them to OPM as complete 
for payment, but without ever completing the quality review. We 
have discussed this, but I am really struck by how massive the 
scale of this fraud is. Approximately 665,000 cases were dumped 
over the four and a half year period.
    The fact that the Justice Department alleges that USIS 
dumped cases knowing that there could potentially be quality 
issues associated with those dumped, we have seen from the 
Aaron Alexis case the damage that one person can inflict.
    Inspector General McFarland, in your prepared remarks you 
express concern about the overall effect of USIS's alleged 
fraud. You stated that you believe that USIS's fraud may have 
caused serious damage to national security. Can you elaborate 
that on and why are you concerned?
    Mr. McFarland. Yes, I would be happy to. The overall 
concern that national security is damaged is sometimes hard to 
find a specific example. I guess a good example that we are 
dealing with today, though, would be the Aaron Alexis case, 
because so often you will see the plaque that says if you see 
something, say something. Well, I think this case is a perfect 
example of people that saw something, but didn't say anything. 
And going back to the police department that refused to give a 
record, even that is awfully hard to understand. I did hear at 
one time that part of their reason was that they felt it was a 
liability to give out something if there was not a conviction. 
Well, I applaud the committee for thinking in the big terms of 
doing something about it, because it is going to take a big 
operation to change all of this.
    The Navy, as an example, they were told that there was an 
arrest, and they were also told that he was not truthful on his 
clearance papers. I would think that that probably should have 
been enough not to give him a secret clearance; at least to 
look into it further.
    There is a lot of wrongdoing going on; nothing more 
stunning, of course, than what USIS did. It is just kind of 
unbelievable to me that somebody can come to work one day and 
basically call in some supervisor that says, well, we are 
really going to put the screws to the people now; let's not do 
this or that, let's just feather our nest. That is just an 
absolute shame today to have to witness something like that.
    Anyway, the bottom line is I hope that the committee can go 
forward. The draft report that they just finished writing, I 
think that pretty much says it all about the conditions of 
    Ms. Duckworth. Can you speak to the fact that USIS also 
performed the quality review for those very same cases that 
they dumped? So basically you have the single contractor both 
performing the investigations and then another branch of the 
same company verifying that they had reviewed. Do you think it 
is a conflict of interest to have the same company conduct a 
background investigation and a final quality review?
    Mr. McFarland. I absolutely do.
    Ms. Duckworth. This is really a very serious concern.
    I would like to provide Director Archuleta the opportunity 
to respond to this. Director Archuleta, do you know whether the 
665,000 that were alleged dumped by USIS underwent sufficient 
quality reviews?
    Ms. Archuleta. Yes. There is a three-stage, there is a 
multilayered process for reviewing a background investigation. 
The contract requires that USIS would conduct its own quality 
review before sending it on for a final quality review either 
conducted by the contractor in the support services or by the 
Federal employee.
    With regard to the Alexis case, I might add that both our 
internal review and the IG's review stated that USIS followed 
the standards that were in place for the background 
investigation. However, this does not negate the outrageous 
behavior that the previous management engaged in during 2008 
through 2012 of the dumping of the cases.
    Let me just add that last week I took steps to federalize 
that process so that now only Federal employees are reviewing 
in that last stage those background investigations.
    Ms. Duckworth. Let's hope you get the resources to do that 
as well.
    I am over time. Mr. Chairman, thank you.
    Mr. Bentivolio. Thank you.
    The chair now recognizes the gentleman from Texas, Mr. 
    Mr. Farenthold. Thank you very much, Mr. Chairman. I have 
two areas I want to hit on.
    Ms. Archuleta, we have heard a lot of questions and 
testimony with respect to local authorities not providing the 
level of information that you guys are needing. Could you tell 
the reasons for that? I understand some may be financial. Are 
there other reasons they are not giving that information?
    Ms. Archuleta. Yes, sir. Sometimes they choose not to; 
other times resources are unavailable for them to do so.
    Mr. Farenthold. As a former member of the Homeland Security 
Committee, we do a lot of grants to local police departments. 
It seems like if they don't want to help us, we might be a 
little bit more reluctant to help them. Would you have a 
problem with us withholding all or some funds to police 
departments that don't cooperate?
    Ms. Archuleta. I am supportive of making sure that we can 
get these records; it is a very important part of our 
background investigations and I know that the work of this 
committee, as well as the President's PAC, is looking at this 
very serious issue.
    Mr. Farenthold. As far as the overall guidelines--and I 
don't mean to rush; I have a limited amount of time. With 
respect to overall guidelines, do you know the date of the 
guidelines for what is done in a background check? When were 
those last reviewed, the procedure and what is checked?
    Ms. Archuleta. I don't know, sir, but I would be glad to 
get that for you.
    Mr. Farenthold. As part of the background check, do you all 
Google the person?
    Ms. Archuleta. The use of social media is a technique that 
is being reviewed right now and recommendations have been 
provided by the DNI and supported by OPM.
    Mr. Farenthold. But currently you don't check----
    Ms. Archuleta. They are under review right now.
    Mr. Farenthold. Or news stories on Google or anything like 
    Ms. Archuleta. I think just making sure that the quality 
and the validation of that information is secure.
    Mr. Farenthold. All right, let's talk a little about the 
ongoing investigations. We have heard several people list some 
of Mr. Alexis's very questionable behavior; shooting out his 
ceiling and an arrest and some other issues there. There is 
nothing in place now, right, to do that? The only way you were 
to find out about it is if he self-reported?
    Ms. Archuleta. That is exactly right, sir.
    Mr. Farenthold. Now, doesn't the FBI get information about 
arrests and convictions, and things like that, automatically? 
Are you aware of that?
    Ms. Archuleta. I am not aware of that, sir. I would be glad 
to find out for you.
    Mr. Farenthold. All right. You know, there is no routine 
ongoing checking somebody's credit score. You get in trouble, 
you are susceptible to corruption by a foreign government or 
whatever. So there is no ongoing as easy as a credit score.
    Ms. Archuleta. There are credit scores, but there is not 
continuous evaluation. So once the first background 
investigation is conducted, in Mr. Alexis's case it would be 10 
years later. But the issue of continuous evaluation is one that 
is very important to me and to the President's PAC, as well as 
the ODNI.
    Mr. Farenthold. It seems like that is something that could, 
at a very simple level, be automated. You have their name, you 
have their date of birth, you have their social security 
number. Okay, after Healthcare.gov, I am questionable about the 
Government's ability to automate anything or compute its way 
out of a paper bag, but that seems like a relatively trivial--
    Mr. Phillips, your company does background checks, albeit 
we had some issues there. But is that something you all could 
easily automate, you think?
    Mr. Phillips. Are you asking about the----
    Mr. Farenthold. Just checking somebody's credit score on a 
regular basis or polling databases to see if somebody's name 
pops up.
    Mr. Phillips. In my view, that would be a fairly 
straightforward application of technology to continuous 
    Mr. Farenthold. Mr. McFarland, you are the IG there, you 
have your hands in the water. You have some other things that 
can really easily and inexpensively be done to do ongoing 
    Mr. McFarland. Well, the point that you just made about 
isn't there someway you can reach out, I think the FBI, they 
collect a tremendous amount of arrest records throughout the 
    Mr. Farenthold. Mr. Lewis, you are with the DOD. The 
holding of a security clearance isn't a right, it is a 
privilege. We don't have to wait until something is finally 
adjudicated, whether you are convicted or not. Shouldn't an 
arrest be enough to just raise a red flag?
    Mr. Lewis. Certainly there is information in arrest records 
that is worthy of consideration for whether or not someone 
should continue to have a clearance.
    Mr. Farenthold. And sometimes between arrest and conviction 
could potentially be years. Meanwhile, that person still has 
access to sensitive information, is that not correct?
    Mr. Lewis. That is a concern, very much so.
    Mr. Farenthold. All right, I see my time has expired, but I 
do want to join with the other side of the aisle and the rest 
of this committee in coming up with a solution to give you guys 
the tools that you need to help keep our Country safe and make 
this process much more streamlined, much more automated, and 
much more responsive to the needs so we avoid another tragedy 
like Navy Yard.
    I yield back.
    Mr. Bentivolio. Thank you.
    The chair now recognizes the gentleman from Virginia, Mr. 
    Mr. Connolly. Thank you, Mr. Chairman, and welcome to our 
    Mr. McFarland, we had a colloquy earlier between Ms. 
Archuleta and the chairman of 450 municipalities or 
jurisdictions that do not exchange information, background 
information with us when we are doing a security check-in. One 
wonders what could go wrong with that. So, for example, if they 
are not exchanging information with the Federal Government on a 
background check, could that mean that arrest records are not 
known at all?
    Mr. McFarland. Yes, that is right.
    Mr. Connolly. Could it mean that somebody is a child 
predator and we don't know that at all?
    Mr. McFarland. That is correct.
    Mr. Connolly. There could be some kind of recorded deviant 
behavior and we wouldn't know that at all.
    Mr. McFarland. That is correct.
    Mr. Connolly. Well, that is an extraordinary hole in the 
system, is it not?
    Mr. McFarland. It truly is.
    Mr. Connolly. I would remind my Republican friends who 
raised the question of maybe we should make certain kinds of 
Federal assistance contingent on their full cooperation, a 
desirable goal, but in light of the Supreme Court ruling in the 
Affordable Care Act on Medicaid, that tactic of encouraging 
cooperation may, in fact, be unconstitutional. So we may have 
to look for other ways to do that.
    Ms. Archuleta, I assume you share Mr. McFarland's concern 
that this is a big hole in the system.
    Ms. Archuleta. Yes. And that discussion, sir, as I 
mentioned before, is happening right now within the President's 
PAC, as well as within the Quality Assessment Working Group 
that includes OPM and the DNI.
    Mr. Connolly. The Democratic staff have done a report I 
have just seen, and I haven't had a chance to go through it 
all, but I guess the question that this raises for me is where 
was OPM, though? It seems to me that one of the things we 
focused on, an admirable goal, was the backlog problem. Do you 
want to remind us what the backlog was?
    Ms. Archuleta. Oh, I am sorry, sir. I wasn't here at the 
time and I don't remember the number.
    Mr. Connolly. Mr. McFarland, do you remember?
    Mr. McFarland. I assume you are speaking of the retirement 
    Mr. Connolly. Well, also just the backlog on security 
clearances. One of the goals of OPM was try to reduce the 
    Mr. McFarland. Yes.
    Mr. Connolly. It was quite considerable.
    Mr. McFarland. I think it was.
    Mr. Connolly. And so maybe we focused so heavily on that 
metric. The ranking member put up the bonus chart for former 
executives of this organization that we had outsourced to, but 
they were getting bonuses because that was the metric they were 
being measured by, was it not? Ms. Archuleta?
    Ms. Archuleta. I am sorry, sir. The metric was timeliness 
and quality.
    Mr. Connolly. But weren't we also pressing heat into that 
    Ms. Archuleta. I am told that it was about half a million 
in the backlog.
    Mr. Connolly. Right.
    Ms. Archuleta. The result of which we were trying to reduce 
that backlog so that Government could continue with employees 
that were seeking that clearance.
    Mr. Connolly. When Ronald Reagan was going to Iceland, he 
invoked a Russian expression, dovre noprovre; trust, but 
verify. It looks to me, in this case, that OPM fell down on the 
job of the verify piece. I mean, if you are going to be looking 
at sort of rapid delivery of security clearances, where is the 
random auditing to make sure they are what they say they are 
supposed to be?
    Ms. Archuleta. I would just mention, sir, that during the 
process, it is a multilayered process, and all of those cases 
that were dumped went through another review; they didn't go 
directly from the contractor to the adjudicator, but there was 
a third and final review, or second and final review was taken.
    Mr. Connolly. But for years we weren't catching the fact 
that people were dumping.
    Ms. Archuleta. The egregious behavior of USIS in hiding 
this is is part of the justification for the civil suit that is 
being conducted right now.
    Mr. Connolly. But irrespective of a civil suit, how are we 
going to correct it, moving forward? What are the measures you 
are putting in place to safeguard the fact that nobody can do 
that again, at least not easily.
    Ms. Archuleta. Well, once we learned that there, in fact, 
had been this behavior, we took immediate steps for 
strengthening our oversight. We now conduct oversight on----
    Mr. Connolly. Ms. Archuleta, my question, though, was what 
was the oversight at the time. It seems like it was pretty 
    Ms. Archuleta. I wasn't here at the time, sir, but I can 
comment, going forward, that I am doing everything I can----
    Mr. Connolly. No, Ms. Archuleta. My question is about what 
went wrong. How are we going to correct it moving forward if we 
don't understand what went wrong, from the Federal Government's 
point of view, from OPM's point of view, or from our point of 
view about OPM? We were relying on OPM to manage this. It is 
not good enough to say I wasn't there, so I can't answer any of 
    Ms. Archuleta. No, I agree with you, sir. But I have to 
take a look at what I can learn from what happened, as you 
mentioned, and, going forward, how I can prevent that from 
happening again.
    Mr. Connolly. Forgive me, Mr. Chairman, just pressing this 
one more time.
    Is it your view, Ms. Archuleta, and I know you are new on 
the job, that something went terribly wrong and that we do need 
to put corrective measures in based on what went wrong----
    Ms. Archuleta. Absolutely, sir, I agree with you.
    Mr. Connolly. Okay. I thank you and I thank the chair.
    Mr. Bentivolio. Thank you.
    The chair now recognizes the gentleman from Georgia, Mr. 
Woodall. No questions?
    Mr. Lankford?
    The chair now recognizes the gentlelady, Ms. Kelly.
    Ms. Kelly. Thank you, Mr. Chair.
    Good morning. The most frequent question that has been 
asked about the Aaron Alexis incident is how this young man 
could have received a security clearance in 2008, given his 
2004 gun-related arrest in Seattle.
    Mr. McFarland, I understand that your office reviewed the 
background investigation conducted on Alexis by USIS and found 
that a copy of the police report was not included in the 
investigation. Can you explain for us why the police report was 
not included in the investigation report?
    Mr. McFarland. Well, my assumption is that the history of 
the Seattle police department to provide that type of 
information was that they would not get it, so OPM or the 
Federal investigative service had created what they referred to 
as a workaround, allowing the investigator to take other 
avenues of approach, such as databank information; and that is 
the reason that they didn't come up with the information on the 
gun. But I also understand that the police department was 
hesitant to give any information out because of liability 
concerns if there wasn't already a conviction attached to it, 
and in this case there was not a conviction at that point.
    Ms. Kelly. And, Mr. Lewis, is it possible that if details 
of the 2004 gun-related arrest had been included in his 
background investigation report, he may not have received a 
secret level clearance?
    Mr. Lewis. That sort of information could have led to the 
denial of his clearance.
    Ms. Kelly. Director Archuleta, is the Seattle police 
department one of a number of State and local jurisdictions 
that does not cooperate with investigative requests for 
criminal history information?
    Ms. Archuleta. Seattle is now cooperating.
    Ms. Kelly. Oh, they are now cooperating?
    Ms. Archuleta. They are now cooperating, since 2011.
    Ms. Kelly. Since 2011. And how many are on that list, what 
was that number?
    Ms. Archuleta. It is about 450.
    Ms. Kelly. And do you see any of the others changing like 
    Ms. Archuleta. As I mentioned, the District of Columbia has 
recently come on board as a cooperating law enforcement 
    Ms. Kelly. That is just one out of many.
    Ms. Archuleta. We are working very closely with others to 
persuade them to participate.
    Ms. Kelly. Okay. How do we address situations like the 
Alexis case, where the workaround apparently did not capture 
some of the very critical information?
    Ms. Archuleta. I think there are two issues that you raise 
here. The first one is with the continuous evaluation, so that 
we are getting this information not once every 10 years, but we 
are continually provided information about anyone who holds a 
secret or top secret clearance. Secondly, I think it is the 
relationships that we have with the local law enforcement 
agencies, and that needs to be strengthened, and I look forward 
to working with this committee in support of that.
    Ms. Kelly. And, panel members in general, there is existing 
Federal law that requires State and local law enforcement 
agencies to comply with a request for criminal history 
information, but there is no enforcement mechanism under that 
law. Ranking Members Lynch and Cummings have introduced 
legislation that would strengthen compliance, or at least 
disincentivize noncompliance. Do you agree that there is need 
for such legislation? Any of you.
    Mr. Rhodes. Yes, we absolutely concur with that.
    Ms. Ordakowski. We do as well.
    Mr. McFarland. Also agree.
    Mr. Lewis. We need to get the information, that is true.
    Ms. Archuleta. I think the Administration, working with 
this committee, would be very interested in reviewing such 
    Mr. Phillips. And we would welcome anything that would 
increase the cooperation with local law enforcement.
    Ms. Kelly. I know we are here today talking about secret 
level clearance and how this person got it and we didn't know 
his background, but I also feel, not to do with you guys, but 
that also speaks to the importance of background checks, 
period. So thank you.
    I yield back.
    Chairman Issa. [Presiding.] I thank the gentlelady.
    We now go to the gentleman from Oklahoma, Mr. Lankford.
    Mr. Lankford. Thank you, Mr. Chairman, and thank you all 
for being here for the long day. You have gone through a lot of 
questioning already.
    I have a couple questions just on insourcing once we get to 
the OPM process. Obviously a lot of this was taken out of OPM 
and moved to private contractors, 70 percent of it back in the 
1990s. Now there is some thought about does it need to move 
back into it. I would like to ask the director what your 
thoughts are about that. Do you believe the Federal security 
clearance background investigations performed by OPM employees, 
do you think they should be performed solely or mostly, I would 
even say, by OPM employees, or do you think the current model 
of outsourcing is a good model still?
    Ms. Archuleta. As I mentioned earlier, sir, the enormity or 
the large numbers of clearances requested and background 
investigations that are conducted by OPM is a very large 
number, and I don't think that right now there is the numbers 
with Federal employees within FIS to conduct those, that is why 
we rely on contractors to assist us.
    Mr. Lankford. So it should continue, in your perspective; 
not what it is now, but that should continue?
    Ms. Archuleta. I believe that with strong quality 
performance standards that we could rely on contractors to help 
    Mr. Lankford. Okay. Have a question as well, again. Before 
OPM sends the background investigation files out to the client 
agencies, there is a final quality review to ensure the file is 
complete, is that correct? I am tracking with that correctly?
    Ms. Archuleta. Yes, that is correct.
    Mr. Lankford. What percentage of those files are returned 
back to OPM by the client agencies because the file is 
    Ms. Archuleta. About one percent.
    Mr. Lankford. Okay. Can you explain just that quality 
review process, how that works, mechanically?
    Ms. Archuleta. Yes. After a background investigation is 
completed, the contractor is required to perform a quality 
review. Once that quality review is completed, it is sent to 
OPM or FIS, and another quality review is conducted. It is sent 
then to the adjudicator, who then reviews all of the 
information, determines whether a clearance will be given.
    Mr. Lankford. Thank you.
    Mr. Lewis, can I ask you that same question? What 
percentage of cases do you estimate that you get from OPM that 
are incomplete?
    Mr. Lewis. There are two layers to that. The cases that get 
rejected back to OPM are about a one percent rate. There are 
cases that come through that are missing information, but they 
are not missing information because OPM failed to carry out a 
complete investigation; they are instances where employers 
refused to talk to the OPM investigator and give information. 
So it is greater than the one percent, but----
    Mr. Lankford. Give me a guess on a percentage there.
    Mr. Lewis. The last number I heard was in the 30 percent 
rate. But, again, these are instances where the failure of a 
source to provide information was adequately documented and we 
were able to continue with----
    Mr. Lankford. So what do you do with that? How do you 
finish that out? Obviously, you have an incomplete file. Can 
you give me an example of something that might be missing from 
that? And then what do you do with it?
    Mr. Lewis. Well, for example, at the top secret level there 
is a requirement for neighborhood checks, and particularly in 
this area people move and there may not be anybody who knew the 
subject of the investigation who is available, so we have given 
guidance to the DOD consolidated adjudication facility, which 
identifies the types of information which may not be available 
and which would still allow the DOD CAF to do their 
    Mr. Lankford. But you are saying right now, once you get it 
over, you are still able to navigate that.
    Mr. Lewis. Yes.
    Mr. Lankford. Okay.
    Mr. Rhodes, can I ask you just a question about OPM 
investigations for a contract investigator if there is a 
misconduct issue? Sometimes that investigation occurs and it is 
my understanding that sometimes you don't even know that a 
person is being investigated that you have contract 
responsibility for. Is that correct or not correct?
    Mr. Rhodes. That is correct.
    Mr. Lankford. Then my understanding is that at some point 
you get a bill, when you find this has occurred; they have done 
an investigation, you get billed for the investigation, there 
is misconduct that has occurred with someone that is under your 
purview as well. I would like to know just how you handle that, 
how you process that as a contractor that is trying to oversee 
people. How would it improve your workflow to be able to be in 
the loop on that?
    Mr. Rhodes. Thank you, sir, for that question. If there is 
a--and typically it will be identified by us, that there may be 
a falsification of data through the rigorous quality processes 
that we have in place within CACI; a series of re-contacts, re-
checks, re-record checks. So if that is suspected, by contract 
terms, we report that to OPM immediately within 24 hours. OPM 
makes the decision what to do with that person. If, in fact, 
there is further investigation that is required, essentially at 
that point, and you are correct, sir, that we basically get the 
bill for the amount of re-work that is required, yet we don't 
have insight into that. We have requested additional details to 
allow us to have insight into what the support data is on that. 
We welcome additional detail on that when we do get those 
    Mr. Lankford. Just the detail of what the cost is, you are 
saying? So not just being in the loop in it, but actually 
getting a detailed here is what I am paying for?
    Mr. Rhodes. Absolutely, yes, sir.
    Mr. Lankford. Okay. Thank you.
    I yield back.
    Chairman Issa. I thank the gentleman.
    We now go to the gentlelady from California, Ms. Speier.
    Ms. Speier. Mr. Chairman, thank you, and thank you to all 
of the witnesses for your participation today.
    Let me start off by asking Mr. McFarland if you would like 
to clarify a statement you made earlier. Did OPM know about the 
fraud before the whistleblower filed their lawsuit?
    Mr. McFarland. Actually, the Government was not aware of 
the extent of the fraud until the qui tam was filed in July of 
2011; and then our office came into that information August of 
    Ms. Speier. So what is really clear to me in general is 
that we have a contractor that had two contracts that created a 
conflict of interest, they knew it created a conflict of 
interest, they used it to their advantage, and the penalty 
imposed upon them is to continue to have a contract with the 
U.S. Government.
    Let me start with you, Director Archuleta. My understanding 
is that they circumvented OPM's oversight of their performance 
in quality review. This is a statement made during the audit: I 
am not splitting hairs, but they knew how we were auditing; 
they knew what kind of reports we generated to oversee that we 
were actually performing the activity, so they circumvented our 
oversight process and they falsified records to help do that.
    Why did OPM allow USIS to hold both contracts?
    Ms. Archuleta. The first contract on the background 
investigations was split between USIS, CACI, and KeyPoint, and 
then the support contract was only bid by USIS.
    I might just mention as well that as soon as we found out 
about the egregious behavior, we took immediate action.
    Ms. Speier. So USIS no longer has the support contract, is 
that correct?
    Ms. Archuleta. I took action last week to federalize that, 
the support contract.
    Ms. Speier. All right. But why would we initially have done 
it in the first place? It is just a fundamental conflict of 
interest. Whether it is acted upon or not, it creates an 
environment so that the kind of activity and the dumping of 40 
percent of these reviews was able to take place for over four 
years. So why would we ever do that?
    Ms. Archuleta. I don't disagree with you and, as I stated, 
I took action to change that.
    Ms. Speier. So can we agree that you will never have a 
support contract being provided to an entity that also has a 
    Ms. Archuleta. I believe that the review of quality has to 
be done by FIS, and I would agree with you on that.
    Ms. Speier. By that you mean by the Federal Government or 
by a third party?
    Ms. Archuleta. By the Federal Government, the Federal 
Investigative Services of OPM.
    Ms. Speier. All right. Has anyone done an analysis--I think 
Mr. Lankford was pursuing a set of questions about continuing 
to privatize some of this function. He and I may disagree a 
little bit, but has anyone done an analysis to see how much we 
spend with private contractors that the market seems ready, 
willing, and able to invest in--private equity is all over USIS 
and others--versus doing it internally? I don't think we pay 
bonuses of $375,000. And this is bonuses the taxpayers of this 
Country paid to these contractors. Let's be really clear about 
it. This isn't money coming out of their pockets, it is money 
coming out of the taxpayers.
    So have you done an analysis to see whether or not it is 
actually cost-effective to continue to privatize some of the 
    Ms. Archuleta. To my knowledge, there hasn't been such an 
    Ms. Speier. So why wouldn't we do that?
    Ms. Archuleta. I would certainly like to discuss that with 
you further.
    Ms. Speier. Mr. Chairman, I think before we continue to 
privatize the function--I think if we ask the American people 
do you think that private contractors should be determining 
whether or not top secret clearances are given to various 
contractors and various Federal employees, they would probably 
be alarmed to know that we privatize that function. But, more 
importantly, at the very least we should determine whether or 
not it is cost-effective.
    Chairman Issa. I agree. If the gentlelady would yield. I 
agree with the gentlelady that we should do a thorough review 
of the history that began, quite frankly, in the Clinton 
Administration, when this was originally outsourced, and I 
would look forwards to working with the lady both on the 
effectiveness and the cost. USIS, as you know, was spun off, 
effectively, from an in-house service, and the idea that we 
should periodically look at a program.
    I also share with the gentlelady that although I do not 
object to a potential contractor doing the review, there needs 
to be real separation between those doing something and those 
auditing something. And the same should be true, as you know, 
in my opinion, when Government entities audit themselves. We 
need to have a level of independence of those auditors.
    Ms. Speier. Thank you, Mr. Chairman. Reclaiming my time.
    I am also concerned that we are wimps in the Federal 
Government, that even when we are taken to the cleaners by 
contractors, we go back for more, and that there aren't any 
penalties that are imposed of any significance.
    So my question to you, director, is has USIS or Experts 
been penalized at all?
    Ms. Archuleta. The civil case against USIS is requesting 
treble damages, up to treble damages.
    Ms. Speier. Are there no administrative actions you can 
take, fines that you can impose?
    Ms. Archuleta. We have withheld all of the bonuses since 
2010 and, as we move forward with this case, we will be working 
closely with DOJ.
    Chairman Issa. The gentlelady's time has expired. I thank 
the gentlelady.
    We now go to the gentleman from Georgia, Mr. Woodall.
    Mr. Woodall. Thank you, Mr. Chairman. I would like to yield 
my time to you, if I may.
    Chairman Issa. I am deeply pleased to accept that.
    Following up on a couple of questions for the director. One 
question is can you fire a Federal employee at will, any time, 
if they did similar failures to perform to what Mr. Phillips's 
employees did?
    Ms. Archuleta. The merit system protects Federal employees 
and there is a process where there is----
    Chairman Issa. Just shortcut it for this committee that is 
familiar with it. Mr. Phillips's 20 people have been fired. 
They could be fired or forced to resign at a moment's notice. 
Isn't it true that every one of his employees, each of these 
contractor's employees you could individually disqualify 
without any lengthy administrative process, thus that, if you 
see wrongdoing by any of these contractor's individual 
employees, you can terminate their ability to work on these 
    Ms. Archuleta. Each of the contractors that were accused of 
this egregious behavior were immediately suspended from the 
    Chairman Issa. I think that is an important thing for Ms. 
Speier, is that the flexibility of your quickly taking somebody 
out who even slightly loses your confidence is something you 
have within the contractor industry where, quite frankly, 
people would be on administrative leave with pay for a long 
period of time, at best, and you would be denied their services 
but still paying, isn't that true?
    Ms. Archuleta. The merit system protects Federal employees, 
as you know, sir.
    Chairman Issa. Okay. I will take that as a yes.
    Mr. McFarland, I want to make sure the record is clear, and 
I think it isn't clear. Ms. Speier asked you a question about 
the investigation in which your answer implied to me that Mr. 
Blake Perceval brought the case before you understood the 
magnitude. Is that correct?
    Mr. McFarland. Yes, before we understood the magnitude, 
    Chairman Issa. Okay. I would like to bring your attention 
to an April 4, 2011 document, and I would ask unanimous consent 
it be placed in the record. It is to the USIS VP Field 
Operations, Mr. Robert Calamia, and it bears Steven Anderson's 
signature, the Branch Manager, Federal Investigation Oversight 
Branch. Are you familiar with that letter?
    Mr. McFarland. No, I am not.
    Chairman Issa. Well, we will have a copy given to you. In a 
nutshell, on April 4, 2011, the United States Office of 
Personnel Management lays out a serious complaint, not 
necessarily all the 650,000 or four years, a serious complaint, 
and you are talking about thousands of these dumpings. And the 
reason that I am so concerned that the Government is getting a 
bad wrap on this qui tam case is one of the cc's is Mr. Blake 
Perceval. So he is cc'd about a major investigation, a deep 
area of concern that OPM has discovered on April 4. Three 
months later he files a billion dollar lawsuit.
    I will give you a copy of that, and I would like to follow 
up after you have had a chance to look at it. But from what I 
can tell, OPM notified the complainant of their deep concern 
and an open investigation. He seized on the magnitude of it 
ahead of time, but not on the basic discovery. Since Abraham 
Lincoln, qui tam cases were intended to discover that which 
would otherwise not be discovered, not simply to amplify, 
prosecute, and benefit financially by it. It is a deep area of 
concern. I have to tell you if Mr. Phillips's company owes us 
$1 billion, I want the billion dollars. But, quite frankly, I 
don't want to share it with somebody who was cc'd on a letter 
three months before they filed the case. At least on the 
surface this kind of thing should be a deep concern to all of 
    Chairman Issa. With that, I have probably only one other 
    Mr. Rhodes, there have been a lot of questions. Mr. 
Phillips's company is in the spotlight, but isn't it true that, 
in fact, the level of flexibility and cost, and the ability to 
up--also for Ms. Ordakowski--your companies can scale up to 
meet demand quicker than the Federal workforce, isn't that 
    Mr. Rhodes. Yes, sir.
    Ms. Ordakowski. Yes, sir.
    Chairman Issa. And if, tomorrow, we were to have a 
reduction in the level of need, you would also lay people off 
immediately, isn't that true?
    Ms. Ordakowski. Yes.
    Mr. Rhodes. Yes, sir, and we have.
    Chairman Issa. During the shutdown, the so-called shutdown 
of the Government, were your people paid?
    Mr. Rhodes. Sir, we typically have a backlog of cases that 
range about two months, so we were pressing down on that and 
coming close to actually having no backlog.
    Chairman Issa. So you continued to work without an 
assurance of being paid, is that correct?
    Mr. Rhodes. Yes, sir, to meet the mission.
    Chairman Issa. And you only got paid for work done. Had we 
not authorized it when we opened back up, you wouldn't have 
been paid.
    Mr. Rhodes. That is correct, sir.
    Chairman Issa. Okay. Did either of your companies, any of 
the three companies lay anyone off?
    Mr. Rhodes. We were close at that time; we were working 
down our backlog. But I do not believe specifically because of 
the shutdown we laid anyone off.
    Chairman Issa. Okay. So I just want to make it clear, if 
you had furloughed anybody, they wouldn't have been paid even 
when we turned back on, because they wouldn't have accomplished 
work. You are only paid for work you do, not for days in which 
people are employees, but laid off.
    Mr. Rhodes. Yes, sir.
    Chairman Issa. True of all your companies?
    Ms. Ordakowski. Yes.
    Mr. Phillips. Yes.
    Chairman Issa. Okay. I want to make that clear because it 
is very, very clear that Federal workers are not an easily 
raised or lower level, and I share with the director the desire 
to make sure that the stable force, the long-term force of 
people auditing and reviewing are inherently governmental. I 
want to be a little careful not to rush to bring everything in-
house when, in fact, we are not very good in the Federal 
Government at increasing or reducing workloads the way your 
companies can be asked to do.
    For the director, is that pretty consistent with your view 
of best case for OPM? You mentioned earlier that you were not 
in a position to take on all the workforce if you were to 
eliminate these contractors.
    Ms. Archuleta. I think there is a critical balance the work 
that the Federal employee can perform, as well as in 
partnership with private contractors.
    Chairman Issa. I thank the gentlelady.
    We now go to the gentlelady from New York.
    Mrs. Maloney. Thank you.
    There are allegations of fraud. This is serious 
allegations. I am wondering are we looking at a case of too big 
to suspend? You have suspended workers, but you haven't 
suspended the company. And I understand that grounds to suspend 
is that the contracting officer could suspend the contract due 
to fraud, and by all indications it appears that fraud is 
there. Would anyone like to answer that? Ms. Archuleta?
    Ms. Archuleta. USIS has taken the steps to remove all those 
individuals who were----
    Mrs. Maloney. I said that, they removed people.
    Ms. Archuleta. They removed them and we----
    Mrs. Maloney. But it was the company and the atmosphere in 
the company that allowed this to happen. May I just read one 
internal email from April 2010? It stated, ``Shelves are as 
clean as they could get. Flushed everything out like a dead 
goldfish.'' Were you aware of this email?
    Ms. Archuleta. No.
    Mrs. Maloney. Was anyone aware of this email?
    Mr. McFarland. I was aware of it.
    Mrs. Maloney. You were aware of it. And seeing that 
evidence today, do you believe that USIS was honest with OPM, 
Mr. McFarland?
    Mr. McFarland. No, I don't believe they were honest at all.
    Mrs. Maloney. Do you think they were honest, Ms. Archuleta?
    Ms. Archuleta. USIS, at that time, was not honest and had 
worked and engaged in fraud.
    Mrs. Maloney. So why in the world are we continuing this 
contract with this company? Is it too big to suspend? Who could 
suspend this, the contracting officer, Mr. McFarland?
    Mr. McFarland. Yes, the contracting officer could do that.
    Mrs. Maloney. Is the contracting officer on the panel?
    Mr. McFarland. No.
    Mrs. Maloney. Well, is there a concrete standard that we 
have that would point out when something could be suspended?
    Ms. Archuleta. The procurement officer and the design of 
the contract holds the contractor accountable, and that is why 
we were able to remove the individuals who conducted this 
egregious behavior and why we have been able to take immediate 
steps to----
    Mrs. Maloney. Well, I would say the contracting law, as I 
remember it, says contracts can go to responsible bidders. Does 
anyone think that USIS has been a responsible bidder in this? 
Does anyone think they have been a responsible bidder in any 
way, shape, or form?
    Mr. Phillips. May I respond to that?
    Mrs. Maloney. Sounds like they were defrauding the 
    I just have another question. I want to make sure I get my 
questions in before yielding to you, Mr. Phillips.
    There is a system, actually, I wrote the law, called 
VENDEX, where you have to check the performance of contractors 
before you award a contract; and in that is whether or not they 
meet the contract criteria, whether or not they get the 
contracts done on time, whether they have cost overruns 
repeatedly, if they have a track record. I wrote this after a 
$25 million contract was given to a company that didn't exist 
when I was on the city council in New York. I am not kidding. 
So it just basically looks at the performance.
    And at the very least, Mr. Chairman, we should have part of 
the VENDEX file whether or not they defrauded the Government. I 
would say that this is a grounds of not being a responsible 
    Now, I understand that this is a big company; you spun off 
from the Government. So my basic question is do you think that 
they are too big to be suspended, Mr. McFarland.
    Mr. McFarland. No, I don't think that they are too big to 
be suspended; I think they could be suspended and others would 
take over. But there would be an interim of a problem area, for 
sure. But I don't know that that would be enough to suggest 
that they shouldn't be suspended.
    Mrs. Maloney. Well, they created a national security 
    Mr. McFarland. Yes, I agree.
    Mrs. Maloney. Absolutely created a national--I would call 
that very serious.
    Mr. McFarland. It is very serious.
    Mrs. Maloney. Extremely serious. And I think at the very 
least this performance should be tagged on their VENDEX review 
and that anybody who gives them a contract has to expressly say 
why in the world are they giving it to someone who defrauded 
the Government and created a national security threat to our 
    Anyone else like to comment on this?
    Mr. Phillips?
    Mr. Phillips. Thank you. When these allegations--and, by 
the way, they are just allegations at this point, we have not 
had our day in court. When these allegations first came to the 
company's attention in January of 2012, the company moved 
aggressively to cooperate with the investigation, which was 
initially led by the OPM IG, subsequently joined by DOJ. Any 
employees who were found to have any responsibility related to 
those allegations were quickly separated from the company. Over 
the past two years the company has taken aggressive and 
effective action to increase controls, enhance procedures, 
place new leadership in place, and today USIS is a strong, 
responsible contractor providing a cost-effective and high-
quality service for OPM; and that is after two years of hard 
work, including separating of anybody who had any 
responsibility for the behavior alleged in the complaint.
    Chairman Issa. I just want to make sure, before I go to Ms. 
Grisham, the director, you said something I think you want to 
correct the record. You said they committed fraud. Do you want 
to correct that to----
    Ms. Archuleta. Yes. I actually did say afterwards, but I 
didn't say it loud enough, an allegation of fraud. Thank you, 
    Chairman Issa. Okay. Thank you.
    The gentlelady from New Mexico.
    Ms. Lujan Grisham. Thank you, Mr. Chairman.
    Director Archuleta, welcome. Point of personal privilege, 
Director Archuleta is from my district, sort of, and definitely 
from my home State.
    Chairman Issa. She very proudly told me that in our one-on-
one meeting, so she does not make it a secret one bit that she 
is in a much colder and less hospitable climate here.
    Ms. Lujan Grisham. Sometimes. In any event, Mr. Chairman, 
thank you for that.
    And congratulations on your job. By virtue of the content 
and the discussion in this hearing, it is an important role 
with many, many challenges that do not go unaddressed; we 
continue to have these significant and serious threats and 
issues to our security, so I appreciate very much your high 
level attention and your willingness to tackle the issues that 
have been presented today, and others.
    I want to take a different tact, and I don't want anyone to 
assume that I don't agree with many of the statements by my 
colleagues on both sides of the aisle about focusing in on 
improving practices and minimizing all of our security breaches 
and threats, and getting our criminal background checks and 
related issues on track, and safeguarding that information and 
making sure that we have actors on behalf of the Federal 
Government that are able to do that job, and that we feel 
safeguarded by virtue of having that information vetted and 
dealt with appropriately.
    But in the context of mental health, there is an 
interesting and I think a very difficult balance, and I want to 
talk about it for a minute, and that is that we want folks to 
disclose, we want folks to disclose prior to a criminal 
background screening, and we want them to disclose after. Some 
emotional illnesses or emotional problems are not a specific 
diagnosis and have something to do with what happens in your 
environment, in your life later, after a security clearance; 
and I would guess that most people aren't going to disclose 
that because you lose your security clearance for reasons that 
I think aren't easy to talk about. But if people get the right 
kind of help, they may not be a security threat and might get 
the kind of help that they need. So it is a very delicate 
    We don't want to create any more problems where people fall 
through the cracks and we create these problems and security 
threats and loss of life. They are absolutely unacceptable. But 
I am interested in where we draw some of these balances and how 
we can do a much better job screening and getting folks to want 
to participate in that screening.
    Are you wrestling with these issues currently?
    Ms. Archuleta. Yes. These very serious issues are being 
discussed right now, and I appreciate your comments and would 
seek to have further discussions with you. Issues of balancing 
privacy and national security are very difficult, but the 
issues of mental health are also and play an important role in 
our background investigations and the granting of security 
clearances. So I would appreciate the opportunity to have 
further discussions with you as these ongoing issues are being 
reviewed by both OPM and ODNI through the Quality Assessment 
Working Group.
    Ms. Lujan Grisham. Thank you. Maybe in that Quality 
Assessment Working Group how do we today, notwithstanding that 
I hope that these processes get greatly improved, how do you 
ensure that employees who reach out now about mental health or 
mental health-related issues, that they are actually getting 
the assistance that they need? And it is really a two-part 
issue, because, one, you want to make sure that you are 
responding correctly in balancing those privacy issues, but 
then if there is a treatment course, you want to make sure that 
that employee is, to the highest degree possible, 
notwithstanding their own legal protections, that they are 
adhering to those, because if not then you have to minimize, 
potentially, any of those threats internally or externally that 
you are required to eliminate or mitigate to the highest 
    Ms. Archuleta. Certainly the support of OPM for any 
employee around mental health issues is there, and offering not 
only whatever support we can as employers, but also helping to 
refer those individuals to doctors or other practitioners who 
can help.
    Ms. Lujan Grisham. And I am assuming also that with your 
agency's involvement, that the inspector general, that all 
related players would be weighing in on trying to strike that 
very delicate balance.
    Ms. Archuleta. I know they already are, and I appreciate 
your support for this issue and would look forward to further 
discussions with you.
    Ms. Lujan Grisham. Thank you.
    I am out of time, so I do hope, Mr. Chairman, that we can 
continue to have these kinds of discussions, because the best 
possible practice isn't going to get at all of these issues, 
and even in law enforcement--I know I am taking up time I don't 
have, so I appreciate your patience with me--there are the 
screening tools that are prepared by mental health 
professionals, and it depends on the jurisdiction about how 
effective those tools are at screening people in or out 
appropriately, or inappropriately, and I don't think it is an 
area that we have been all that effective at. And given what 
has tragically occurred, we have to do something about it 
    Chairman Issa. Well, for the gentlelady, one advantage of 
going last is you are unlikely to see a heavy, quick gavel on 
your time. But I join with the gentlelady in recognizing that 
mental health after somebody is an employee is critical. Part 
of what we are concerned about here today, of course, is Aaron 
Alexis was somebody whose mental health should have made them 
not an employee, as it turns out. But I share with you that 
sort of screening desire and treatment as appropriate.
    Ms. Lujan Grisham. Thank you, Mr. Chairman.
    Chairman Issa. Thank you.
    The gentlelady from the District of Columbia has one final 
    Ms. Norton. Mr. Chairman, I just want to clear up what 
seems to be a circular process here, but I do want to say I 
think this may be the first hearing, I may be wrong, in the 
House on the Navy Yard shooting, and I want to thank you very 
much for this hearing. I am certain I speak not only for my own 
district. There were people from--they have had to rename the 
building, this was such a tragic occurrence.
    But I was puzzled, really, that apparently OPM barred the 
president of USIS investigative division from working on 
contracts. You can understand OPM is doing that, though. But 
then USIS protests, essentially implicating OPM in the fact 
that the man was promoted in the first place. I have no idea 
whether or not, perhaps Ms. Archuleta, OPM reconsidered its 
decision. All we know is that the committee was informed that 
this man has resigned.
    Perhaps I should go to Mr. McFarland. Do you think he 
should have been suspended? Should OPM have been implicated in 
his promotion, as apparently USIS says and was shocked that the 
implication was so deep that OPM would then bar him from 
working on the contract?
    Mr. McFarland. I am not familiar with that aspect that you 
are talking about right now.
    Ms. Norton. Ms. Archuleta, you are aware that this man has 
resigned now. Was OPM involved, as USIS says, in promoting him 
to president?
    Ms. Archuleta. No, we weren't. I think he may be talking 
about the process of uncovering who was involved in the alleged 
fraud, and the individuals were removed over a sequence of 
time, and as we learned of----
    Ms. Norton. All I am trying to find out is do you have any 
say on who gets promoted or not promoted.
    Ms. Archuleta. No.
    Ms. Norton. So you didn't have anything to do with that, 
with the resignation. How did the resignation come about? Now 
he is gone. You tried to make him gone, now he is gone. Did you 
request his resignation?
    Ms. Archuleta. We suspended him from the contract. What he 
did afterwards was up to the company itself.
    Ms. Norton. I just want to suggest that this--if you have 
such a close relationship, Mr. McFarland, maybe this is 
inherently a governmental matter. It looks like they are in 
bed, virtually, with USIS, and if they are in bed with them, it 
may be that it involves secure matters, and that they can't 
really separate themselves from the company. So one wonders 
whether this is appropriately given to a contractor.
    Mr. McFarland. Are you saying that the suggestion is that 
that person was in bed with OPM hierarchy?
    Ms. Norton. I am suggesting that the company may be in bed 
with OPM, because it worked so closely and apparently has to 
work so closely because it is inherently governmental work 
because it involves secure matters, and despite the mistakes 
that have been made here, it looks like they are going to be 
working even more closely with the company. One wonders whether 
there is a distinction between the Government and the company 
    Thank you, Mr. Chairman.
    Chairman Issa. I thank the gentlelady.
    We now will go to the ranking member for his closing.
    Mr. Cummings. Mr. Chairman, I again want to thank you for 
this hearing. To the panel, I want to thank you too.
    Just a few years ago I chaired a subcommittee in the 
Transportation Committee, and that committee was called Coast 
Guard and Maritime Matters, and we had a situation there where 
literally the Government was purchasing boats that didn't 
float, literally. You know, when I listen to the testimony here 
and I hear things like 665,000 dumped files, Mr. McFarland, it 
is shocking to the conscience, it really is. You know, 
sometimes I think that when people do these things, they need 
to understand that there are consequences. They may not live 
long enough to see the consequences, they may not ever hear 
about them, they may never be brought to justice, but there are 
consequences. And when we, as entities and individuals, create 
a--and doing our individual jobs that we are supposed to do--
move to a culture of mediocrity or negligence or pure fraud and 
greed, it causes all kinds of problems. And we have to put in, 
unfortunately, we have to put in the mechanisms to protect 
ourselves from ourselves. And I am hoping that there are a lot 
of lessons learned here.
    We cannot bring back those individuals who were killed, but 
hopefully we can put things in place, and I know we are 
continuing to do it, Ms. Archuleta and others, I know we are 
trying to do that, but we need to kind of make sure it happens 
fast. And nobody, and I know the chairman will agree with me, 
nobody is trying to put a negative light on all the folks who 
work for these various companies. No. It only takes a few, but 
the few can do mighty damage.
    Mr. Phillips, as I said to you a little bit earlier, you 
have a tough job. You really do. And maybe it has been made 
easier by a lot of people taking the exit ramp and getting out 
of the company for one reason or another. But surely many of 
them will be brought to justice. And as I sat here, I could not 
think that the chairman and I were just talking about our 
various districts and I think about the people on my block. I 
live not too far from the Ravens Stadium in Baltimore, and I 
have said this many times, if somebody in my block, and there 
are people there who, if they stole a bike, they get a record 
for a lifetime. If they steal a bike, $150 bike. Record, 
lifetime, where they may won't be able to get jobs, won't be 
able to live in certain places, won't be able to get certain 
education opportunities like scholarships and whatever.
    And then when I look at stuff like this, where people are 
not doing their jobs and I am sure the investigation will 
reveal what it will reveal, but I am sure there are some 
criminal activity here. You know, I want to make sure that we 
get to that, and I am sure the Justice Department will, because 
I think not only must we do it to make sure that these 
incidents don't happen again, but one of the things that the 
chairman talks about in his statement when he gives the purpose 
of the committee, he talks about trust in Government and making 
sure that tax dollars are spent properly and making sure that 
people feel good, feel that we are making sure that their tax 
dollars are spent effectively and efficiently. So this is a 
bipartisan effort because this is about making sure that those 
people who are given clearances deserve them. After all, we 
don't come up with this concept of clearances just to be doing 
it; there is a purpose for this.
    So, again, I want to thank all of you for what you have 
    I know I went a little longer than I expected to, Mr. 
Chairman, but I think this is just so very, very important 
because there are consequences. Thank you very much.
    Chairman Issa. I thank the gentleman.
    In closing, a couple of things. First of all, Mr. Phillips, 
Mr. Rhodes, and Ms. Ordakowski, we are going to be looking at 
your companies on an ongoing basis. This committee has the 
primary jurisdiction for the Federal workforce and their 
contractors, and it is an area of interest that we are going to 
do on an ongoing basis. We certainly want to make sure that 
what Mr. Phillips says has been straightened out at his 
organization has been. We also are going to want to make sure 
that best practices continue to evolve at both of yours.
    I am of the opinion that Government does best what it 
checks somebody else doing, and does worse what it does in-
house and then tries to hold itself accountable. That has been 
a problem of Government for a long time, is are we an honest 
broker of what works and what doesn't.
    Director, you are the honest broker, and it is extremely 
important that, in fact, first, we see if the systems that 
failed us, including the software that wasn't in place for many 
years, that ultimately discovered that case files were being 
opened and quickly closed, now dubbed dumping, that kind of 
work, that kind of IT forward-leaning, something that the 
ranking member and I have been working on trying to modernize 
Federal IT procurement so that you can have those systems, we 
need to work with you to make sure you have it, those 
management tools, because we think it is important.
    I think here, on both sides of the aisle today, we became 
very aware that there are two problems we are dealing with. One 
has to do with how security clearances occur, and for which 
there are some legal changes that this committee is going to 
have to work on. But, director, there is something that I am 
more concerned about, and that is that it is a policy not to 
look at the Internet as an investigative tool. This is an area 
within your jurisdiction that I strongly encourage you make 
your best effort, recognizing that there are some questions of 
whether you will be sued for doing it and so on, that both in 
the case of security clearances you free up your in-house 
people and these contractors to at least begin looking at this 
tool for what could be important information that would then 
lead to further investigation that would not necessarily be on 
the Internet.
    And, secondly, that you ask the question from a standpoint 
of the entire Federal workforce, is it wise in this day and age 
not to at least look at the Internet before each and every 
person is hired; that some sort of a pro forma that is done 
objectively not occur, because I think that it is important 
that we say we have done due diligence on every person that 
comes to work for the Federal Government so that if they have 
an anger management problem, like shooting tires out, that we 
don't wait and ask did they get a clearance wrong, but we ask 
should this individual, Aaron Alexis, ever been hired to work 
for any Federal work organization or contractor. And we could 
have gotten into Snowden and had a similar discussion about 
    Lastly, Mr. Lynch dropped a bill the other day. The 
committee has been working on a completely bipartisan basis. 
Most of what is in his bill and some other items are items that 
we have brought to the attention both of OPM and Department of 
Defense, and we have gotten unofficial answers and some 
comments. At this point, based on your discussion today, we 
would ask that you work with committee staff, both majority and 
minority, on all aspects to give us, if you will, final answers 
on the proposals we are making so that we can draw up a 
comprehensive bipartisan bill. The majority did not offer a 
bill, figuring that it was much better to have this hearing and 
then get your final comments, but I think it is now appropriate 
to do so.
    Lastly, I meant it deadly seriously, I believe in qui tam. 
I believe that whistleblowers bringing us new information where 
the Government is being wronged is critical. I also believe 
that, whenever possible, the Federal Government should find its 
own problems, correct them, and any amount owed to the Federal 
Government flows to us, without an outside piece of litigation. 
For that reason, I am deeply concerned that the evidence in the 
case of this particular lawsuit appears on its face to be an 
individual filing a case months after he was cc'd on what I 
would have considered to be the smoking gun; and I would ask 
that you be aware of that. We will be making an additional 
referral to Judiciary Committee and to Department of Justice, 
asking them to at least give us a legal evaluation of whether 
or not this qui tam may, in fact, be inappropriate, not the 
suit, but the qui tam.
    If you have any final questions or statements, I would be 
happy to take them now; otherwise, we are concluded. Seeing 
none, I thank you all for your presence. We are adjourned.
    [Whereupon, at 12:51 p.m., the committee was adjourned.]



               Material Submitted for the Hearing Record