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Two consulting companies, Guidehouse Inc. and Nan McKay and Associates, have agreed to pay $11.3 million to resolve allegations of failing to meet cybersecurity requirements.
Guidehouse Inc., headquartered in McLean, Virginia, will pay $7.6 million, while Nan McKay and Associates, based in El Cajon, California, will pay $3.7 million.
The allegations stem from violations of the False Claims Act related to contracts intended to ensure a secure environment for low-income New Yorkers to apply online for federal rental assistance during the COVID-19 pandemic.
Cybersecurity Failures and Data Breach
In early 2021, Congress established the Emergency Rental Assistance Program (ERAP) to assist eligible low-income households with rent and other housing-related expenses during the COVID-19 pandemic.
The New York Office of Temporary and Disability Assistance (OTDA) administered the state’s ERAP.
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Guidehouse, as the prime contractor, and Nan McKay, as the subcontractor, were tasked with ensuring the cybersecurity of the ERAP technology.
However, both companies admitted to failing to conduct the required pre-production cybersecurity testing.
As a result, when the ERAP website went live on June 1, 2021, it was shut down just 12 hours after a data breach compromised applicants’ personally identifiable information (PII).
The companies acknowledged that proper cybersecurity testing could have prevented the breach.
Additionally, Guidehouse admitted using a third-party data cloud software program to store PII without obtaining OTDA’s permission, further violating their contract.
Government Response and Legal Actions
Principal Deputy Assistant Attorney General Brian M. Boynton emphasized the importance of cybersecurity obligations tied to federal funding, stating, “The Justice Department will continue to pursue knowing violations of material cybersecurity requirements aimed at protecting sensitive personal information.
” U.S. Attorney Carla B. Freedman for the Northern District of New York echoed this sentiment, highlighting the need for contractors to take their cybersecurity obligations seriously.
A whistleblower lawsuit filed under the False Claims Act by Elevation 33 LLC, owned by a former Guidehouse employee, prompted the investigation.
The whistleblower will receive a $1,949,250 share of the settlement amount.
The settlements underscore the government’s commitment to holding entities accountable for cybersecurity failures.
Acting Inspector General Richard K. Delmar of the Department of the Treasury and New York State Comptroller Thomas P. DiNapoli stressed the importance of safeguarding personal information and maintaining the integrity of vital government programs.
The case, captioned United States ex rel. Elevation 33, LLC v. Guidehouse Inc. et al., Case No. 1:22-cv-206 (N.D.N.Y.), was handled by Trial Attorney J. Jennifer Koh and Assistant U.S.
Attorney Adam J. Katz, with assistance from the Department of the Treasury OIG and the Office of the New York State Comptroller.
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