Reporting Fraud

Reporting Fraud

The DOE OIG promotes the effective, efficient, and economical operation of DOE’s programs and operations through audits, inspections, investigations, and other reviews.

THE DOE OIG investigates any fraudulent acts involving DOE, its contractors or subcontractors, or any crime affecting the programs, operations, Government funds, or employees of those entities.

Combating Fraud

What types of fraud are found in the SBIR/STTR Programs?

  • During Application Process:
    • Submitting a plagiarized proposal
    • Providing false information regarding the company, the Principal Investigator or work to be performed
    • Seeking funding for work that has already been completed
  • During Award:
    • Using award funds for personal use or for any use other than the proposed activities
    • Submitting plagiarized reports or reports falsely claiming work has been completed
    • Claiming results for an award that were funded by a different source

Knowing the Rules

Which SBIR rules should you be particularly familiar with?

  • Duplicate or overlapping proposals may not be submitted to multiple agencies without full disclosure to all agencies.
  • The company must meet SBA’s requirements for a small business, including being
    majority American owned and have 500 employees or fewer.
  • For SBIR: The Principal Investigator’s primary employment must be with the company
    during the grant period and he or she may not be employed full time elsewhere.
  • For SBIR: For Phase I, a minimum of two thirds of the research effort must be performed by the grantee company; for Phase II, a minimum of one-half of the research effort must be performed by the grantee company. Work performed by a university research lab is NOT work completed by the grantee company.
  • University employees participating on an SBIR award should disclose their involvement to the university as well as their use of university facilities.
  • R&D must be performed in the United States.


Consequences

What happens if you break the rules?

  • If you commit fraud or other wrongdoing in applying for or carrying out an
    SBIR/STTR award, DOE will investigate.
  • DOE refers violations of civil or criminal law to the Department of Justice (DOJ). If DOJ prosecutes you for fraud or false statements, you may be sentenced to prison and required to pay full restitution.
  • If DOJ pursues a civil action under the False Claims Act, you may have to pay treble damages and $11,000 for each false claim.
  • DOE may terminate your awards and debar you from receiving grants or contracts from any federal agency.


2015 SBIR Fraud Case

Scientists Sentenced To Prison For Defrauding The Small Business Innovation Research Program

Tampa, Florida – U.S. District Judge Virginia Hernandez Covington has sentenced Mahmoud Aldissi (a/k/a Matt) and Anastassia Bogomolova (a/k/a Anastasia) for conspiracy to commit wire fraud, wire fraud, aggravated identity theft, and falsification of records.  Aldissi was sentenced to 15 years in federal prison and Bogomolova was sentenced to a term of 13 years.  As part of their sentences, the court entered a money judgment in the amount of $10.6 million, representing the proceeds of the crime, and ordered them to pay $10.6 million in restitution. Aldissi and Bogomolova were found guilty on March 20, 2015.

According to testimony and evidence presented during the month-long trial, through their two companies, Fractal Systems, Inc., and Smart Polymers Research Corp., Aldissi and Bogomolova fraudulently obtained approximately $10.5 million of small business research awards from the federal government. In order to be awarded contracts, they submitted proposals using the stolen identities of real people to create false endorsements of and for their proposed contracts. In the proposals, they also lied about their facilities, costs, the principal investigator on some of the contracts, and certifications in the proposals.

Source:  https://www.justice.gov/usao-mdfl/pr/scientists-sentenced-prison-defrauding-small-business-innovation-research-program

2018 SBIR Fraud Case

Executive Wallace Tang and Three Corporations Plead Guilty to Defrauding NASA, National Science Foundation, and Energy Department

Sioux Falls, South Dakota - United States Attorney Ron Parsons announced today that Wallace Tang, age 55, of Alamo, California, appeared in federal court in Sioux Falls, South Dakota, and pleaded guilty to Wire Fraud before U.S. District Judge Karen E. Schreier. Three Bay Area corporations also appeared in federal court before Judge Schreier and pleaded guilty to Conspiracy to Commit Wire Fraud. Laserlith Corporation, Black Hills Nanosystems Corporation, and Blue Sky Engineering, Incorporated, entered their guilty pleas by and through Tang, Gina Kim, and Sine Chao, respectively, who are the corporate representatives. As part of the plea agreements filed with the Court, the defendants also paid restitution totaling $1,084,418.60. The restitution was paid before the time each defendant appeared to plead guilty. The amount of criminal restitution represents the monies derived from the defendants’ fraudulent conduct perpetrated against the National Aeronautics and Space Administration (“NASA”), the National Science Foundation (“NSF”), and the Department of Energy (“DoE”).

Beginning in approximately 2012, and continuing through 2016, within the State and District of South Dakota and elsewhere, Blue Sky Engineering, Black Hills Nanosystems, and Laserlith unlawfully and knowingly conspired and agreed together to devise a scheme to defraud and obtain money and property from NASA, NSF, and DoE. The defendants defrauded these federal agencies through false and fraudulent representations and by sending electronic wire communications in interstate and foreign commerce. The purpose of the corporate-defendants’ conspiracy was to obtain federally-funded projects by and through material misrepresentations, statements, and omissions, thereby depriving the United States the ability to fund other small businesses and resulting in the enrichment of Blue Sky Engineering, Black Hills Nanosystems, Laserlith, and Tang.

Source: https://www.justice.gov/usao-sd/pr/executive-wallace-tang-and-three-corporations-plead-guilty-defrauding-nasa-national

Husband and Wife Plead Guilty in Scheme to Defraud United States

ROCHESTER, N.Y. - U.S. Attorney James P. Kennedy, Jr. announced today that Bin “Ben” Wen, 46, and Peng “Jessica” Zhang, 45, both formerly of Horseheads, NY, pleaded guilty for their roles in a scheme to defraud the United States before U.S. District Judge Elizabeth A. Wolford. Wen pleaded guilty to conspiracy to commit wire fraud which is punishable by a maximum penalty of 20 years in prison and a $250,000 fine. Zhang pleaded guilty to conspiracy to defraud the United States and faces a maximum sentence of five years in prison and a $250,000 fine. As part of the plea, the defendants agreed to forfeit nearly $5,000,000 in assets derived from their criminal activity.

Wen and Zhang submitted false and fraudulent information in Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) applications by:

  • fabricating letters of support and investment;
  • providing false information in research grant proposals and reports regarding business entities, business employees, business/research facilities, matching funds and investments; and
  • providing falsified reports and emails regarding how federal research funds were expended.

Source:  http://media.socastsrm.com/wordpress/wp-content/blogs.dir/1057/files/2018/02/Wen-Zhang-pleas.pdf

Additional SBIR/STTR fraud convictions can be found here:  https://www.sbir.gov/fraud-waste-abuse