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Whistleblowers Expose R&D Fraud

Some entities defraud and otherwise overcharge taxpayers tens of millions of dollars each year.

Do you suspect fraud?

Each year, the federal government awards billions in research and development (R&D) contracts ($47.8 billion in 2020, for example), and even larger amounts in R&D grants. Recipients of federal R&D funds include universities, nonprofit research institutions, and for-profit companies.

While most of these recipients comply with the terms of their contracts and grants and provide the American people with crucial information and technology, others do not. That’s where the False Claims Act (FCA) comes into play.

What is research and development fraud?

R&D fraud includes:

Misrepresenting or covering up conflicts of interest

Falsified information in grant applications and contract bids

Falsified results, description of methods, and other documentation

Failure to comply with safety and other regulations that apply to the R&D

Falsified purchase orders for material used in the R&D

Misuse of grant money for unrelated research or personal expenses

What qualifies as R&D fraud?

When we use the word “fraud” on this page, we are referring to any type of false information that is provided to the government in support of an R&D contract bid, grant application, or in reporting that is required by the contract or grant.

How do organizations and universities falsify grant applications and purchase orders?

A grant application or contract bid contains a wide variety of information, typically including information about proposed research methods. If any of this information is false, and if the false information played into the government’s decision to award the grant or contract, then the applicant may have violated the FCA.

Duke University researchers’ alleged involvement in research fraud and its consequences

In 2019, Duke University agreed to pay the government $112.5 million to resolve allegations that two of its researchers provided falsified or fabricated information to the National Institutes of Health (NIH) and the Environmental Protection Agency (EPA) in connection with at least 38 grants for research between 2006 and 2018.3 The researchers allegedly falsified data related to the physiology of lungs and air passages and their response to airborne pollutants, causing the NIH and EPA to pay out millions of dollars in grant money they otherwise would not have.

The lawsuit was initially filed in 2013 by a Duke laboratory analyst under the FCA’s qui tam provisions. The FCA entitled him to – and a court awarded him – $33,750,000 for his role in the successful litigation.1 The settlement did not entail an explicit admission of wrongdoing by Duke.

Columbia University allegedly falsifies the research locations for higher reimbursement rates

Some R&D grants and contracts entail federal reimbursement for R&D expenses whose amounts are not yet precisely known when the grant or contract is awarded. To substantiate the expenses, the contractor or grant recipient obtains reimbursement after submitting records of payment to the government, in the form of purchase orders or invoices, for example. Fabricating an entire purchase order would violate the FCA, but most real-world examples are more subtle.

Between 2003 and 2015, researchers at Columbia University in New York allegedly submitted false claims for reimbursement under a variety of 423 research grants by misrepresenting where the research was conducted. Under the terms of the grants, Columbia was entitled to higher reimbursement rates for facilities costs when research was conducted on campus and lower reimbursement rates when research was conducted off-campus. Columbia agreed in 2016 to pay $9.5 million to resolve a lawsuit brought by an unnamed relator and joined by the federal government.3

Scripps Research Institute allegedly charges grant funds for administrative tasks

Research and development fraud can also be seemingly clear-cut misappropriation. In September 2020, the Scripps Research Institute, which is based in San Diego, agreed to pay $10 million to settle FCA allegations that it charged grant funds for time that its researchers spent teaching and conducting administrative activities rather than conducting research for grants it had been awarded.3

Where else does research and development fraud occur?

While many of the more obvious examples involve research at universities, research at defense contractors could also be a source of fraud. Many companies perform research into weapons systems, targeting, communications, and other technologies requested by the government or military. These entities are not immune to fraudulent behavior.

In a Department of Defense (DoD) report to Congress, released in 2019, the department revealed that between 2013 and 2017 it had entered more than 15 million contracts with contractors who had been indicted, fined, and/or convicted of fraud, or who reached settlement agreements. While procurement fraud is more common, research and development fraud certainly occurs.

Nine contractors named in the report were debarred or suspended from federal contracting based on a criminal conviction for fraud. Those nine firms were responsible for 469 contract actions, resulting in the loss of more than $1.5 billion.

How can research and development fraud be stopped?

No fraud occurs in a vacuum. Any organization depends on honest and courageous employees refusing to participate in fraud. Organizations also have internal accounting controls and various types of audits that can uncover irregularities that may reflect fraud.

Ultimately, though, senior managers in the organization have to be willing to act on tips and audit results. The Duke lawsuit alleged that Duke discovered the two researchers’ fraud in late 2012 or early 2013 after first discovering that one had been embezzling money from the university. But Duke allegedly covered up the research fraud while continuing to obtain grants based on the falsified studies.

Is a lawsuit necessary?

An FCA lawsuit may be the only way to redress R&D fraud when internal checks and balances break down. That does not necessarily mean, however, that you should delay action until the internal procedures have played out. A whistleblower who is first to file a False Claims Act case is in the best position to recover a possible award.

If you are aware of R&D fraud within your organization, an experienced whistleblower attorney can help you investigate the situation and file litigation on an appropriate timetable.

How much can a research and development whistleblower be awarded?

Like other qui tam plaintiffs, a whistleblower who pursues an FCA lawsuit to a successful conclusion and recovery is generally entitled to up to 30% of the government’s recovery, subject to court approval. The total amount subject to recovery includes up to three times the amount of the overcharging or fraud and civil penalties of between $12,537 and $25,076 for each false claim for payment. That said, most successful cases are settled rather than decided by a trial in court.

Talk to a whistleblower attorney

With hundreds of billions of R&D dollars at stake, it can be very difficult to monitor improprieties among researchers who may play fast and loose with government funds. That is why the government relies on courageous whistleblowers to help stem the rising tide of fraud.

While the federal government recovered $24.8 billion between 2011 and 2020 through FCA lawsuits – including $21.9 billion in lawsuits initiated by whistleblowers1 – the vast majority of fraud is believed to go undetected. The federal government is estimated to have made $144 billion in “improper payments” in fiscal 2016 alone. That amount includes payments based on false claims as well as those made on mistakes and for other reasons.

If you suspect fraud against the federal or state government, let’s talk. We want to put you at ease as we try to help you determine — confidentially and discreetly — if you should move forward with a whistleblower/qui tam claim. We appreciate the struggle you may be facing. That is why we have a You-First policy in place. We can fight for your protection regardless of your involvement.

Contact us or call 1-888-292-8852.

If we decide to take your case and you don’t get a reward for reporting fraud, you don’t owe us a fee, guaranteed.2

Awards we’ve won

For standards of inclusion for awards listed, visit bestlawyers.com, thenationaltriallawyers.org, superlawyers.com, farrin.com/business-nc-power-list, and millondollaradvocates.com. National Trial Lawyers Top 100 designation is for 2022. Regarding the Million Dollar Advocates Forum, we do not represent that similar results will be achieved in your case. Each case is different and must be evaluated separately. Firm award is for the Law Offices of James Scott Farrin. Attorney awards are for attorneys with the Law Offices of James Scott Farrin.

Contact the Carolina
Whistleblower Attorneys

If you’re wondering if it’s a good idea to speak with a whistleblower lawyer about what you know, let us set the record straight.

  • Corporate ethics hotlines can be risky and may lead to termination. If you’ve already done this, call us immediately.
  • Your coworkers could be aware of the fraud – or complicit in it – and you should not talk to them about it.
  • The first claim to be filed under the False Claims Act can proceed – if you’re not first, you’re at a serious disadvantage and may get nothing (another reason not to speak to your coworkers about it).
  • A confidential discussion costs you a few minutes, but could save you time, stress, and money.

1-888-292-8852

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