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Federal Probe Smacks Unisys

The company allegedly overbilled on a government contract.

Shares of


(UIS) - Get Free Report

sank Monday on news of a federal probe regarding overbilling in a $1 billion technology contract with the Transportation Security Administration.

Unisys stock plummeted $1.10, or 19.8%, to $4.45 in recent trading.

On Sunday,

The Washington Post

reported that federal auditors found in two reviews last year that Unisys overbilled for as much as 171,000 hours of labor and overtime work in a contract for the transportation agency. The Blue Bell, Pa., IT services firm allegedly charged some of the highest rates possible by labeling lower-level employees as experts in their fields, according to the


, which acquired copies of the audits.

The contract in question called for Unisys to create a computer network linking thousands of federal employees at the nation's airports to the TSA's high-tech centers.

Although less than halfway through the seven-year contract, Unisys already has billed the government $940 million, according to the


. The paper cited sources saying the initial $1 billion price tag on the contract, awarded in 2002, was always expected to rise.

In a press release Monday, Unisys said the transportation agency requested the Defense Contract Audit Agency to review contract performance, which resulted in some government contracting issues being raised.

"Working collaboratively over the past few months, Unisys believes most of the issues are being addressed," the company said in a statement. The company has not received a copy of the full audit report cited in the


article and said it could not comment on it.

In the article, Tom Conaway, managing partner of homeland security for Unisys, who is overseeing the contract, said there was no attempt to commit any type of misdeed. But he acknowledged Unisys had problems with internal financial controls. He said employees miscoded time sheets and mistakes were not caught until months later, because the company was pushing to meet the demands of the contract.

Conaway also disputed audit findings on overtime. He said costs soared partially because the transportation agency and Homeland Security Department added more work to the contract. The TSA is negotiating a new contract with Unisys, according to the