Officials at the Office of Personnel Management claim that their system was breached using credentials that were stolen from KeyPoint Government Solutions, a government contractor that provides background checks.
The hack, which exposed personal information for potentionally tens of millions of Americans, has drawn scrutiny to KeyPoint’s security practices, with one senior lawmaker even calling for OPM to cease use of outside contractors.
But for KeyPoint’s parent company, Veritas Capital, a private equity firm based in New York City, the hack is only the latest incident in a long history of controversial government contracting.
Founded in 1992 by the late investment banker Robert McKeon, Veritas Capital grew quickly by buying up government contractors and forming close ties with former senior government officials. Of the many defense-related investments made by the company, the most famous has been the 2005 purchase of DynCorp International, a scandal-plagued company that played a pivotal role in the wars in Iraq and Afghanistan.
Though DynCorp prospered under Veritas ownership, the special inspector general for Iraq reconstruction found that DynCorp benefited from lax oversight and frequently billed the government for work that was never requested. In Afghanistan, Wikileaks cables revealed that DynCorp workers paid for young “dancing boys” to entertain policemen. In 2010, Veritas sold its stake in DynCorp.
Other Veritas-backed firms have faced scrutiny for billing practices. In 2008, Veritas and another investment fund purchased Global Tel-Link, a telecommunications company that provides telephone services for prison systems. Under Veritas control, Global Tel-Link charged as much as $5 for a 10-minute call to inmates, a charge criticized as “basically a surtax on inmates and their families.”
The firm also acquired MZM Inc., an intelligence contractor, after the firm’s founder was investigated for providing bribes to Rep. Duke Cunningham, R-Calif., in exchange for help obtaining Pentagon contracts. MZM under Veritas was renamed Athena Innovative Solutions, and as Bloomberg reported, the Pentagon later approved Athena’s takeover of all of MZM’s contracts.
Throughout its history, Veritas has fostered close ties to government officials. Campaign finance records show executives at the investment firm have given over $100,000 to various politicians, mostly Republicans. In 2014, Veritas paid Bill Clinton $250,000 for a speech.
Veritas used its cash to develop close ties to military and foreign policy officials. In September of 2001, the firm brought on a paid advisory board of military officials, including retired generals Anthony Zinni, Barry McCaffrey and Richard Hawley. Former deputy Secretary of State Richard Armitage also served as a Veritas advisory board member. In addition, the company is a sponsor of the Potomac Officers Club, a professional group for business executives and military leaders.
The New York Times reported that McCaffrey earned at least $500,000 from Veritas as the former general used his ties to the Pentagon and frequent appearances in the media to boost Veritas-owned military contractors, including DynCorp.
For KeyPoint, Veritas again leveraged its relationship with a former official. Shortly after KeyPoint became a Veritas portfolio company in 2009, Veritas brought on former Secretary of Homeland Security Michael Chertoff to serve on its board of directors. “I look forward to working with Jeff, and the KeyPoint and Veritas teams on broadening the critical services KeyPoint provides to the government,” Chertoff said in a statement released by the company.
During a House Oversight Committee hearing today about the OPM hack, KeyPoint chief executive Eric Hess disclosed that his company failed to produce documents that were requested by the committee in January. Chairman Rep. Jason Chaffetz, R-Ut., said that he may subpoena KeyPoint after Hess refused to say when his firm will produce the documents requested by the committee.
Veritas and KeyPoint did not respond to a request for comment.
(This post is from our blog: Unofficial Sources.)
Photo: Officials appear before during a House Oversight and Government Reform Committee on June 24, 2015 (Mark Wilson/Getty Images)