A onetime giant in government background checks that was accused of defrauding the federal government has settled with the Justice Department, according to a new court filing.
Altegrity and its subsidiary USIS used to run most of the government’s security clearance background checks. But it lost those contracts last year and was forced to file for bankruptcy protection in the wake of a data breach and earlier accusations from a whistleblower.
The company and the federal government had filed competing claims in the fallout, each potentially worth tens of millions of dollars.
Altegrity billed the government $44 million for work it did winding down its contract with the Office of Personnel Management. Meanwhile, the government joined a whistleblower lawsuit filed by Blake Percival, a former employee, that alleges the contractor was rushing investigations in order to hit revenue targets. The government argued earlier this year that it should be able to collect damages despite the company’s bankruptcy protection.
Each of those claims will be dropped under the settlement proposed Monday. The proposal will have to be approved by a bankruptcy judge; a hearing is scheduled Friday in Delaware.
The Justice Department and Altegrity declined to comment on the settlement.
“The settlement comes after a long investigation period and difficult negotiations,” Altegrity wrote in the filing, adding that the deal “sets the stage” for the company to emerge from bankruptcy.
The settlement doesn’t affect a separate federal probe of Altegrity. The Department of Labor has been investigating the company for possible violations in its employee retirement and health-care plans. A previous filing disclosing the investigation didn’t elaborate on its scope, and the department didn’t return a request for comment.