Full Breakdown
State Department Contract to Oxygen Forensics Raises Security Concerns
By Drooid · · How we work
Contract Award Amid Alleged Russian Ownership
In late August, the State Department awarded a $50,000 contract—administered through the U.S. Embassy in Zagreb, Croatia—to Oxygen Forensics for software supporting a Justice Department program that trains foreign law-enforcement agencies. The deal, which runs without competition until 2027, was granted despite earlier warnings that the firm was owned and controlled by Russian nationals. Federal procurement data show the contract was issued the same day Oxygen filed a lawsuit seeking more than $1.85 million in damages against a former employee who had publicly alleged the company’s Russian ties.
Prior Government Engagements
Oxygen Forensics had previously supplied phone-hacking and digital-forensics tools to multiple U.S. agencies, including the Department of Defense, the Secret Service, Homeland Security Investigations, and the National Computer Forensics Institute. A separate contract worth $180,000 was awarded by the State Department in May of the previous year. Federal records had already classified the firm as foreign-owned, identifying a Cyprus-based holding company as its immediate owner.
Legal Actions and Arrests
The Justice Department announced charges that Oxygen’s CEO, Lee Reiber, concealed the firm’s Russian ownership from U.S. agencies. Prosecutors allege a conspiracy to commit wire fraud involving the Defense Department and several Homeland Security components. In late September, authorities detained Reiber in Idaho and a Russian national, Sergeyevich Davydov, at London Heathrow. Both face the same wire-fraud charges, and the United States is expected to request Davydov’s extradition. The DOJ, under Todd Blanche, plans to prosecute two additional Oxygen executives for similar false statements.
Implications for Procurement Security
The episode highlights vulnerabilities in federal contracting when firms with foreign ownership are engaged without competitive bidding. It raises questions about the adequacy of inter-agency communication regarding security risks and may prompt tighter oversight of contracts involving technology that accesses sensitive data.