Despite Allegations of Fraud, TSA Lets Scanner Maker Keep Nearly $300M
January 18, 2013 2:00 PM
Secure 1000s will be removed, replaced by another lobbyist-backed firm, L-3
After months of dragging its feet, the
U.S. Transportation Safety Administration
(TSA) has finally caved to
and agreed to remove airport imaging devices which
digitally declothed passengers
in the name of "fighting terrorism".
I. Dirt at Every Turn: OSI's Nude Scanner Push
The scanners in question come from a company called OSI Systems Inc. (
). The device is named the Secure 1000 and is produced by the Rapiscan unit. A number of issues have been raised regarding the scanner. First, while the company insists the backscatter X-rays used are safe, some health experts have suggested that frequent exposure
could cause DNA damage
in frequent fliers, which could in turn lead to cancers.
Then there's the cost and allegations of special interests.
In the wake of Umar Farouk Abdulmutallab's Christmas 2009 failed attempt to blow up a plane in which he used explosive hidden in his underwear, there was a cry to beef up security at U.S. airports.
The infamous "underwear bomber" triggered the call for body-scanners.
[Image Source: NYP (left), MLive (right)]
In 2010, Congress handed out
a number of large contracts
to scanner manufacturers, with OSI receiving the largest one (a gleaming $173M USD contract to purchase Secure 1000 scanners). You could say OSI had an inside track -- it employed Susan Carr as one of its lobbyists. And Susan Carr had formerly served as a senior legislative aide to Rep. David Price, D-N.C., chairman of the Homeland Security Subcommittee. Rep. Price, involved with planning the security budget, was pivotal for pushing Rapiscan's large contract.
OSI also contracted former
U.S. Department of Homeland Security
(DHS) chief Michael Chertoff as a lobbyist. Mr. Chertoff had formerly pushed for trial deployments of the scanner in 2005, at the start of his four-year tenure with the DHS, which concluded in 2009.
Ex-DHS chief Michael Chertoff accepted payments from Rapiscan, even as he was promoting paying the contractor millions of dollars in body scanner contracts. [Image Source: DHS]
Without initially disclosing The Chertoff's Group's contractual relationship with OSI, Mr. Chertoff masqueraded as an independent, unbiased expert putting forth a number of radio interviews in late 2009 and even
writing an op-ed
The Washington Post
. Between Mr. Chertoff and Ms. Carr, OSI had the high profile help it needed to woo Congress.
In addition to the base contract, Congress also awarded Rapiscan with
[PDF] in stimulus funding. It used that money to create a whopping 84 jobs, at a cost of roughly $1.4M USD per job, according to an analysis by
The Huffington Post
of disclosed government records.
Rapiscan was getting a lot of money, but wasn't producing many jobs, but was it at least securing the nation's airports?
Not really, according to numerous government reports. The DHS's own Inspector General in 2010 called training on how to properly use the machines
rushed and poorly supervised
[PDF]. That same year, the
Government Accountability Office
[PDF], "It remains unclear whether [the scanners] would have been able to detect the weapon Mr. Abdulmutallab used."
Backscatter body scanners rely solely on contrast -- making them useless if the weapon or bomb-making supply is held off the body, tests have shown. [Image Source: TSA]
Independent observers also have discussed
how easy it is to trick
the poorly designed instruments.
So if OSI's machines weren't creating jobs, had questionable lobbying ties, were creating potential health risks, and weren't even providing quantifiable increases in security, were they at least protect citizens' privacy?
There were reports of TSA agents making fun of passengers, based on their naked scans, and even a report of a TSA agent assaulting their supervisor after the supervisor began to
joke about their underling's reportedly small genatalia
, which he observed during a training exercise with the scanners.
II. Despite Allegations of Fraud OSI Settles Scanner Matter Quietly
Congress in 2010 ordered OSI to deliver a software update to mask genatalia and breasts in the images. OSI was even paid another $5M USD to perform the update. But at the end of the day, taxpayers got nothing as OSI complained it would be unable to devise an algorithm to properly mask the images until 2014.
Representative Mike Rogers
(R-Alab.), then chairman of the House Transportation Security subcommittee, received a tip that OSI had also faked tests that seemed to show it making some progress with the software. In a letter to TSA Administrator John Pistole, he writes, "[OSI] may have attempted to defraud the government by knowingly manipulating an operational test."
Despite allegedly attempting to defraud taxpayers, OSI was let off the hook, allowed to keep its lucrative contract earnings. [Image Source: Reuters]
In the wake of that report, the TSA began to quietly remove the Secure 1000 scanners from airports. 76 units were shuffled out last year. Now the remaining 174 units will be sent out to pasture as well.
For OSI, which hasn't been able to sell a scanner to the government in two years, the news was actually positive and triggered a jump in share prices. Some had feared that Rep. Rogers' might be able to launch a full-blown fraud probe into the company's testing. While the government decision closes the door on the Secure 1000, OSI gets to pocket the nearly $300M USD the federal government handed it, while facing no threat of fraud charges for its questionable behavior.
Comments Timothy Quillin, a technology analyst with Stephens Inc. in Little Rock, Arkansas,
, "They [OSI] hadn’t really intended to sell more body scanners to airports. To have a resolution to just cancel the contract on the privacy software development is a positive outcome."
John Sanders, the TSA’s assistant administrator for security capabilities even went to bat for OSI, telling
, "We are not pulling them out because they haven’t been effective, and we are not pulling them out for safety reasons. We’re pulling them out because there’s a congressional mandate."
III. No More Scanners? Not While Lobbyists Are Kicking
The DHS insists the scanners are optional and will be allowing
to go through metal detectors instead, to allow for faster processing. Many security experts have suggested that metal detectors, combined with basic pat-downs, are actually better at detecting weapons and explosives than the full body scanners.
But the airports are still expected to feature plenty of scanners from OSI's two major competitors -- American Science and Engineering Inc. (
) and L-3 Communications Holdings Inc. (
). ASE uses backscatter (like Rapiscan), while L-3 uses the newer and supposedly safer millimeter wave technology.
One piece of good news on the privacy front is that while OSI claimed a masking algorithm was impossible, L-3 did deliver a timely masking algorithm for its machines in 2011. This is expected to reduce the embarrassment factor in the scans.
However, questions remain regarding the underlying efficacy of the machines, as does the same question of few jobs in return for huge investments.
And then there's that old dog, special interests. L-3 employs at least three lobbying firms full of D.C. insiders. Among them is
, run by former Sen. Al D'Amato (R-N.Y). Sen. D'Amato served on the President's Commission on Aviation Security and Terrorism in 1989 after being appointed by President George H. W. Bush.
L-3 know how to convince both federal parties to work together to shower it with taxpayer money -- feed the PACs and campaign funds on both sides of the aisle. [Image Source: Anthony Freda]
Showing its tight grip on both sides of the aisle, the company also employs
, wife of former Sen. Tom Daschle (D-S.D.). Mrs. Daschle reportedly received over $100,000 for her lobbying work for the company. The company is estimated to have poured over $1.4M USD since 2004 into PACs and candidate campaign funds, in exchange for guarantees of Congressional support.
L-3 received a $163M USD contract from Congress, along with several smaller contracts.
It appears as The Who famously sang, "Meet the new boss / Same as the old boss."
“We do believe we have a moral responsibility to keep porn off the iPhone.” -- Steve Jobs
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