The federal government awarded $47.8 billion in research and development (“R&D”) contracts in fiscal 2020, and even larger amounts in R&D grants.1 Recipients of federal R&D funds include universities, nonprofit research institutions, and for-profit companies. While most of these entities comply with the terms of their contracts and grants and provide the American people with crucial information and technology, others defraud and otherwise overcharge taxpayers tens of millions of dollars each year.
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, descriptions 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
Is research misconduct a crime?
Research misconduct can be criminal in certain limited circumstances. The federal False Claims Act (“FCA”) allows for criminal prosecution for especially egregious fraud and other misconduct that induces the government to pay more than it otherwise would have.2 Criminal conviction requires proving that the defendant presented the federal government with a false claim for payment and knew that the claim was false or fraudulent.3
Much more common are civil lawsuits under the False Claims Act.4 The U.S. government sometimes initiates such a lawsuit, but FCA lawsuits are typically brought on the government’s behalf by a “qui tam” (whistleblower) plaintiff.5 An FCA lawsuit can be successful even where the fraud or research misconduct does not amount to crime. Similarly, the FCA covers types of false reporting that would not necessarily amount to “fraud” in other legal contexts.
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.6
Duke University researchers’ 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 thirty-eight grants for research between 2006 and 2018. The researchers allegedly faked data related to the physiology of lungs and air passages and their response to airborne pollutants.7 This caused 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. The settlement did not entail an explicit admission of wrongdoing by Duke.
Boston hospitals allegedly falsify research data for continued grant money
Falsification of research results can violate the FCA without being as clear-cut and egregious as the fabricated data in Duke’s pulmonary research. Between 1995 and 1999, researchers at two hospitals in Boston altered diagrams of brain scans in research that sought to predict the onset of Alzheimer’s Disease.8 Such alterations would have been appropriate if they had been made according to consistent criteria by a researcher who was screened off (“blinded”) from information about the identities and medical conditions of the test subjects whose brains were scanned.
A whistleblower at one of the hospitals sued the hospitals on behalf of the federal government, alleging that the researcher who redrew the diagrams was not appropriately blinded and that this failure compromised the final results’ validity. This whistleblower had reported the alleged misconduct internally, and the hospitals ordered a review of the research, but the reviewer assigned to the review had a personal stake in the outcome. The whistleblower’s lawsuit alleged that the hospitals received NIH grant money for years based on the Alzheimer’s research results.
After review of expert witnesses’ reports, a federal appellate court ruled that the whistleblower had put forth sufficient evidence for the case to go to trial.
Columbia University 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 obviously violate the FCA, but most real-world examples are more subtle.
Between 2003 and 2015, researchers at Columbia University in New York submitted false claims for reimbursement under a variety of 423 research grants by misrepresenting where the research was conducted.9 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 be an unnamed relator and joined by the federal government.10
Scripps Research Institute allegedly charges grant funds for administrative tasks
Research and development fraud can also be relatively 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.11
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.12 But Duke allegedly covered up the research fraud while continuing to obtain grants based on the faked studies and on legitimate studies that drew from the faked studies.13
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. Timing an FCA lawsuit is a delicate balance: On one hand, a research institution’s liability depends on its leadership knowing or having reason to know of the false claims for grant money or contractual payment;14 on the other hand, a whistleblower must be an “original source” of the information about the false claims rather than learning of the situation through public disclosure or a different whistleblower who has already filed a lawsuit.15
If you are aware of R&D fraud within your organization, an experienced whistleblower attorney can help you balance these risks to 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 is entitled to 15% to 30% of the government’s recovery, subject to court approval.16 The total amount subject to recovery includes up to three times the amount of the overcharging or fraud, plus civil penalties of $11,665 to $23,331 for each false claim for payment.17 That said, most successful cases are settled rather than decided by a trial in court.