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Grant Fraud: Rice and Duke Universities Pay Millions to Resolve False Claims Act Cases

May 7, 2020

Last month, Rice University settled claims that it engaged in grant fraud involving National Science Foundation (NSF) funds. The Department of Justice (DOJ) announced that Rice would pay over $3.7 million to resolve allegations that it had submitted improper charges to NSF awards.

Last year, Duke University agreed to pay a whopping $112.5 million to resolve research grant fraud allegations. In that case, a whistleblower claimed that a Duke researcher had falsified data to secure and retain government grants.

NSF Research and Development Awards

As DOJ noted, Congress created the NSF in 1950 “to promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense …” NSF grants support nearly a quarter of all federally-funded basic research that U.S. colleges and universities conduct.

University recipients of these grants must comply with NSF rules and regulations. Importantly, for expenses to be charged to a grant, they must be necessary, reasonable, and properly allocable to the award. Each time an awardee requests payment or submits a proposal under an NSF grant, it must certify that it is complying with the award’s terms and conditions.

Rice’s Improper Use of NSF Funds

In 2016, authorities began investigating Rice for suspected misuse of NSF grant funds. The investigation revealed that, from November 2006 through September 2018, Rice knowingly and improperly charged various graduate student stipends and expenses to NSF awards. In short, Rice submitted charges for items that did not relate to the grants. Instead, it included charges for time the graduate students spent performing unrelated teaching duties. Knowingly including improper charges violated the terms and conditions of the NSF awards. By doing so, Rice also violated the False Claims Act (FCA).

The NSF Office of Inspector General conducted the investigation that uncovered Rice’s fraud. As we have previously written, Inspectors General serve a vital role in uncovering fraud and protecting agency resources. This case exemplifies that important mission.

Blowing the Whistle on Duke University Grant Fraud

In contrast to the Rice case, where the inspector general’s office uncovered the fraud, a whistleblower revealed the problems at Duke. The whistleblower asserted that a Duke researched falsified data to obtain grant funds from the National Institutes of Health (NIH) and the Environmental Protection Agency (EPA). In announcing the FCA settlement, the United States Attorney for the Middle District of North Carolina stated:

Taxpayers expect and deserve that federal grant dollars will be used efficiently and honestly. Individuals and institutions that receive research funding from the federal government must be scrupulous in conducting research for the common good and rigorous in rooting out fraud. May this serve as a lesson that the use of false or fabricated data in grant applications or reports is completely unacceptable.

In the Duke case, the whistleblower was a former lab analyst at the university. After DOJ declined to intervene, he and his attorneys went forward on behalf of the United States and pursued his qui tam case on their own. As a result of their efforts, the whistleblower received $33.75 million from the settlement. Significantly, that amount represented 30 percent of the overall recovery, the maximum award allowed under the FCA.

Different Paths Result in Successful Grant Fraud Outcomes Under the FCA

As previously noted, the NHS Inspector General discovered and investigated the Rice University fraud. The Duke investigation took a different path. In that case, a whistleblower disclosed the fraud and took on the burden – along with his attorneys – of litigating the case on the government’s behalf. Both cases resulted in FCA recoveries for taxpayers and sent a strong message that the government will not tolerate fraud when it funds research.

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