Thursday, June 15, 2017

Booz Allen Hamilton Says It Is Under Federal Investigation

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Booz Allen Hamilton’s headquarters in McLean, Va. CreditKevin Lamarque/Reuters
Booz Allen Hamilton, the vast United States contractor at the center of recent high-profile disclosures of classified information, said Thursday that it was under criminal and civil investigation for possible billing irregularities.
The consulting company said on its website that the Justice Department had informed the firm on June 7 that investigators were reviewing “certain elements of the company’s cost accounting and indirect cost charging practices with the U.S. government.” Booz Allen, considered the most profitable spy organization in the world, has lucrative contracts with the federal government that account for 97 percent of the company’s business.
After the announcement, the company’s stock price dropped more than 13 percent in after-hours trading.
Consulting firms charge the federal government for direct costs, which include a contractor’s salary, and indirect costs, such as equipment, marketing expenses and office space. Booz Allen said the investigation involved indirect costs but did not say whether it pertained to a specific government contract.
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“To date, our internal and external audit processes have not identified any significant deficiencies or material weaknesses, or identified any significant erroneous cost charging,” the firm said. “The company is cooperating with the government in these matters and expects to bring them to an appropriate resolution.”
A Booz Allen spokesman declined to comment beyond the company’s statement. The Justice Department did not respond to a request for comment.
Government contractors like Booz Allen must follow strict accounting rules and submit annual cost reports to federal auditors. It is not uncommon for the government to dispute some costs, but those disagreements are most often worked out without involving the Justice Department.
Booz Allen, which employs about 23,300 people and is based in McLean, Va., has contracts throughout the federal government. About three-quarters of Booz Allen’s total revenue comes from defense and intelligence contracts. It earned $5.8 billion in its previous fiscal year, which ended in March, up from $5.4 billion the year prior.
Booz Allen contractors have worked alongside federal employees for decades, offering technical and analytical expertise for intelligence agencies and every branch of the military. In some parts of the United States government, contractors from Booz Allen and other companies outnumber federal employees, contributing to the increasingly hazy line between government work and private enterprise.
Some contractors for Booz Allen have access to highly sensitive intelligence and classified documents. In recent years, two of its former employees — Harold T. Martin III and Edward J. Snowden — have been accused of stealing troves of classified information from the National Security Agency.
In 2013, Mr. Snowden leaked classified material that exposed the government’s expansive surveillance programs. In August last year, federal agents raided the Maryland home of Mr. Martin, who was indicted in February on charges of stealing an estimated 50 terabytes of confidential files, including sensitive counterterrorism materials. Mr. Martin was not charged with sharing any information.
While it is rare, the federal government can bar a contractor from receiving federal contracts. In 2012, a Booz Allen office in San Antonio, Tex., was temporarily barred over allegations that a retired Air Force officer had given the group confidential information.

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