Photo: Diego M. Radzinschi/ALM.

A Booz Allen Hamilton shareholder on Monday filed derivative litigation against members of the government contractor's board, after the company announced in June that the U.S. Department of Justice had begun probing its accounting and cost-charging practices.

The 88-page complaint, filed in the U.S. District Court for the District of Delaware, accused the Booz Allen directors of failing to maintain internal controls over the company's billing practices, which are at the center of the DOJ investigation.

Investor Celine Thum said in the filing that Booz Allen had long-standing issues with its billing, but the company's brass allowed the problems to fester, resulting in widespread fraud and inflated stock prices. According to the complaint, the discrepancy in Booz Allen's stock price caused the company to overpay by $7.8 million for stock repurchases between January and May 2017.

Meanwhile, Thum said, three directors engaged in “lucrative insider sales” during the same period, netting more than $10.9 million in proceeds.

“The individual defendants caused Booz Allen to engage in a series of misconduct that has either subjected the company to penalties or caused the company to be threatened by penalties, which put the individual defendants on notice of violations at the company and the likelihood of future violations, including those currently being investigated by the DOJ, and that such violations would jeopardize the company's future revenue,” Thum's attorneys said in the complaint.

The filing alleges that multiple audits and even Booz Allen's own employees had alerted the board to the deficient practices, but the directors still failed to disclose the problems to its investors. Thum also detailed a long list of “fraudulent conduct” dating back to 2006 that should have put the board on notice, if not for member's “reckless or willful lack of oversight.”

Thum said she did not make a demand that the board initiate its own litigation, citing a lack of independence and a substantial likelihood of liability for a majority of the company's directors.

The company announced in a June 15 regulatory filing that the DOJ was conducting a civil and criminal investigation cost-accounting and indirect cost-charging practices with the U.S. government, which accounts for 97 percent of the company's revenue. That investigation is still ongoing, and the company is also facing a securities class action in the U.S. District Court for the Eastern District of Virginia, stemming from similar alleged misconduct.

All told, Thum said she expects the DOJ probe and the securities litigation to cost the company “many millions of dollars” going forward.

“The company has been substantially damaged as a result of the individual defendants' knowing or highly reckless breaches of fiduciary duty and other misconduct,” she said.

A spokeswoman for Booz Allen did not immediately respond Tuesday to a call seeking comment on the lawsuit.

Thum is represented by attorneys from the Rosen Law Firm, the Brown Law Firm and Farnan LLP.

The case is captioned Thum v. Rozanski.