Los Angeles Business Journal

OSI Expects Debarment Notice From DHS

By Ryan Faughnder Monday, May 20, 2013

Shares of OSI Systems Inc. fell Monday after the company said its Rapiscan security unit expects to receive a debarment notice from the Department of Homeland Security related to its airport scanner software.

It’s the latest development in a long-running controversy over the company’s airport scanners. The Hawthorne company said the notice is related to the “show-cause” letter it received from the TSA in November seeking information about the testing of its software.

The Transportation Security Administration in January ended its contract with Rapiscan for its full-body scanner machines, which many passengers complained were too revealing.

The administration is investigating allegations that the company falsified test data. The company has denied those accusations. Government agencies send show-cause letters when officials think a company has violated terms of a contract.

The company said the notice from DHS would mark the first step in formal proceedings and will allow Rapiscan to communicate directly with Homeland Security officials. The company has not yet received the actual notice.

Deepak Chopra, chief executive of OSI Systems, said the company has complied with all obligations to the TSA.

“We look forward to having the opportunity to present our views to DHS and working with the agency to achieve a mutually satisfactory outcome,” he said in a statement.

The company said the notice restricts its ability to seek new government contracts, but that it will continue to fulfill its current contracts.

Shares of OSI closed down 7.6 percent to $61.27 on the Nasdaq, after falling as much as 17 percent earlier in the day.