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Already Fearing Sequestration, Contractors Could Feel Impact from Leaks

The NSA leaker wanted to impact how the federal government conducts surveillance on U.S. citizens, but Edward Snowden may make the government rethink how it does business with the mammoth network of defense and national security contractors.

With the federal government lacking resources from foreign language experts to tech specialists and having to procure equipment ranging from surveillance systems to tanks, the network of federal contractors has longed feared taking a financial hit from sequestration. The top 100 defense contractors pulled in $414.3 billion in revenue in 2011.

Now the contractors could face an administration wary of leaks.

Contractors hiring for clearance jobs — confidential, secret or top secret — recruit employees at comfortable salaries who have already attained clearance; Snowden previously worked for the CIA in IT security. Snowden, like more than 483,000 other contractors, had top secret clearance and made $200,000 per year on an NSA contract with Booz Allen Hamilton. Another 582,000 contractors have confidential or secret clearance, according to a 2012 report from the Office of the Director of National Intelligence.

Half of the more than 18,000 Booz Allen employees with security clearances have top-secret ones. DNI James Clapper is a former Booz Allen executive.

Booz Allen’s website went down for maintenance for a short time over the weekend after the news broke that an employee of the McLean, Va.-based firm had come out as the source of the leaks.

“Booz Allen can confirm that Edward Snowden, 29, has been an employee of our firm for less than 3 months, assigned to a team in Hawaii. News reports that this individual has claimed to have leaked classified information are shocking, and if accurate, this action represents a grave violation of the code of conduct and core values of our firm,” the company said in a Sunday statement. “We will work closely with our clients and authorities in their investigation of this matter.”

And when trading opened Monday, the company’s stock fell the most in four months, recovering a bit before closing the day on the New York Stock Exchange.

It’s not the only high-profile hit that contractors have taken this year.

Benjamin Pierce Bishop, working at U.S. Pacific Command for small defense contractor Referentia Systems Incorporated, was arrested in March and accused of espionage.

Bishop, 59, a former Army officer, met his 27-year-old girlfriend, a Chinese national who was in the country on a student visa, at an international military defense conference. The Chinese woman “may have been at the conference in order to target individuals such as Bishop who work with and have access to U.S. classified information,” an FBI agent wrote in the affidavit, and the pair were intimate since June 2011. He allegedly began passing information to her the following year.

Bishop had a top-secret security clearance and did not, as required, report his relationship with a foreigner.

The secrets he fed to his lover during this time included information on U.S. nuclear weapons, war plans, communications with U.S. allies and early-warning radar missile detection deployment.

“The arrest of Mr. Bishop is just the first step in what is going to be a long process, and we are actively continuing the investigation to determine the roles of all those involved in this case,” U.S. Attorney Florence Nakakuni said at the time of the arrest.

In 2011, Noshir Gowadia, a onetime design engineer for Northrop Grumman, was sentenced to 32 years in prison for selling “some of our country’s most sensitive weapons-related designs” to China, according to the Justice Department.

Republicans on the Hill who were mixed about what Snowden leaked zeroed in on where he fled as a key point of concern. On Monday, Snowden reportedly checked out of a hotel in Hong Kong.

“This person is dangerous to the country,” Rep. Peter King (R-N.Y.) said on CNN. “He had, I think, real questions as to why he left the CIA. The fact he’s in China right now, or Hong Kong, which is a sub-state of China. He knows who our intelligence assets, who our intelligence agents are around the world. The fact he has allowed our enemy to know our sources and methods is extremely dangerous. I believe we should prosecute him to the fullest extent of the law. I consider him right now to be a defector.”

House Majority Leader Eric Cantor (R-Va.) said this morning on CBS that the question of how Snowden had the clearance he did is one of the questions for which “we need answers.”

“There’s no question about that. You have a contractor that has been hired, who is then hired, this 29-year-old, who’s now holed up in some hotel room in Hong Kong, claiming to be the defender of democracy somehow in the people’s Republic of China. We don’t know the answers right now,” Cantor said.

“…There are two things going on here. One is the program itself. And two, what exactly this individual Mr. Snowden has done with this information?” he continued. “…It seems to me that he chose a route to go to a reporter, yet holed up in some room in Hong Kong. And that ought to tell you something, as well.”

Hong Kong’s asylum law, in a system independent from China, could keep Snowden there for months to years even if a U.S. effort to extradite him is successful.

“We should begin extradition proceedings as soon as possible. We do have an extradition treaty with Hong Kong,” King said. “My concern is that in the meantime, China could be holding him and getting information as to what he knows about our assets around the world.”

Rep. Luke Messer (R-Ind.) told MSNBC that weighing the information leaked versus the actual act of leaking itself is “a difficult ethical dilemma.”

“Our system of security can’t work if folks who have access to classified information are allowed willy-nilly on their own to decide what to leak, so the young man’s going to have to be prosecuted,” Messer said. “And then we as policy makers are going to have to respond to the information we now have.”