ENFORCEMENT INITIATIVES RELATING TO FEDERAL RESEARCH GRANTS

Transcription

1 American Health Lawyers Association Legal Issues Affecting Academic Medical Centers and Other Teaching Institutions ENFORCEMENT INITIATIVES RELATING TO FEDERAL RESEARCH GRANTS Paul W. Shaw K&L Gates LLP Boston, MA 1 BACKGROUND In FY 2010, NIH awarded $22.2 billion for research grants. In FY 2012, NSF awarded $7 billion for research. Federal research dollars are increasingly being scrutinized. An enforcement priority by the funding agencies and Department of Justice Increased focus by whistleblowers bringing qui tam actions under the False Claims Act 2 1

2 AREAS OF CONCERN: CRIMINAL FRAUD Falsely certifying eligibility requirements for award program Making false statements in grant applications: Support of a key organization in proposal Collaboration with another institution/scientist Making false statements in progress reports 3 AREAS OF CONCERN: CRIMINAL FRAUD Embezzlement/theft of grant funds Using grant funds to pay personal expenses Falsely certifying cost-sharing False financial reporting 4 2

3 AREAS OF CONCERN: CIVIL FRAUD FALSE CLAIMS Claiming reimbursement for grant funds not spent on funded project Drawing down federal funds for unallowable expenses Failing to account for expenditure of federal funds 5 AREAS OF CONCERN: CIVIL FRAUD MISMANAGEMENT OF FEDERAL FUNDS Transferring costs from overdrawn project accounts Charging one grant for expenditures of another Expending funds after award expiration date Failing to know, follow, or care about applicable rules 6 3

4 ADVERSE CONSEQUENCES FROM ADMINISTRATIVE, CIVIL AND CRIMINAL INVESTIGATIONS Reputational harm from adverse publicity surrounding enforcement action Loss of funding and drawn down privileges Costs of investigation and settlement Potential fines and penalties 7 POTENTIAL ADMINISTRATIVE SANCTIONS Suspension/termination of funding University of Puerto Rico: Pervasive non-compliance with NSF time and effort reporting requirements NSF suspended $52.2 million, and at risk is a total of $92 million, and sanctions by other agencies Caused many prominent professors to leave University 8 4

5 POTENTIAL ADMINISTRATIVE SANCTIONS Suspension/termination of funding John Hopkins: In 2001, federal funding for medical research on humans was suspended for 4 days At the time, John Hopkins received more federal research funding than any other institution in the United States. 9 POTENTIAL ADMINISTRATIVE SANCTIONS Debarment of Principal Investigators NSF and HHS have taken action against a number of PIs for misuse of grant funds or the submission of false or fraudulent reports 10 5

6 POTENTIAL ADMINISTRATIVE SANCTIONS Fines/Penalties Agencies also have the ability to assess fines and penalties for misconduct Yale: $7.6 million settlement for failure to comply with time and effort reporting and related issues. The investigation, which began in 2006, covered $3 billion in 6,000 grants from 30 federal agencies. 11 POTENTIAL ADMINISTRATIVE SANCTIONS GOVERNMENT-WIDE SUSPENSIONS AND DEBARMENTS Consequences: Inclusion on GSA Excluded Parties List Applies to all prospective grants and contracts over $25,000 If one agency imposes suspension, barred from ALL federal funds Recent trend: Fact-based suspensions imposed during ongoing investigations 12 6

7 FEDERAL CIVIL FALSE CLAIMS ACT Imposes civil liability for knowingly making a false claim to the government Damages under the FCA are the full amounts of grants awarded based on any false statements made in connection with the grant application or subsequent progress reports. 13 FEDERAL CIVIL FALSE CLAIMS ACT Under the FCA, knowing and knowingly defined not only as actual knowledge but also either: deliberate ignorance of the truth or falsity of information (also known as willful blindness ), the reckless disregard of the truth or falsity of the information The statute does not require proof of a specific intent to defraud. 14 7

8 FEDERAL CIVIL FALSE CLAIMS ACT There have been numerous referrals by NSF and HHS to the Department of Justice for cases involving the submission of false or fraudulent time and effort reports, progress reports, and similar documents. Cornell: $4.3 million settlement for charging salaries of multiple employees to grant where employees performed no grant work. Univ. of Minnesota: $32 million settlement for charging salaries to grant in excess of effort expended. 15 FEDERAL CIVIL FALSE CLAIMS ACT Northwestern: $5.5 million settlement for misrepresentation of time spent on NIH grants, and noncompliance with effort reporting. UConn: $2.5 million settlement for inappropriate apportionment of salaries charged to a grant. Case involved a review of 500 federal grants ( ) and numerous OIGs. 16 8

9 FEDERAL CIVIL FALSE CLAIMS ACT Univ. of Alabama: $3.39 million settlement for falsely billing Medicare for clinical research trials that were also billed to the sponsor of the research grants. Mayo Foundation: $6.5 million settlement for improper cost transfers from overspent grants to underspent grants, improper charging for costs unrelated to research sponsored by the grant 17 FEDERAL CIVIL FALSE CLAIMS ACT But see University of Medicine & Dentistry of New Jersey Whistleblower alleged that data submitted in grant application to NIH was fabricated. Court determined that the whistleblower failed to produce evidence that defendant knowingly submitted false information in its grant application. Court ruled that because expressions of opinion, scientific judgments or statements as to the conclusions which reasonable minds may differ can not be false, and therefor can not be an FCA violation. 18 9

10 FEDERAL CIVIL FALSE CLAIMS ACT Apart from actual FCA settlements that are filed in federal court, DOJ has negotiated contractual settlements outside the court process. Dependent on the underlying facts Harvard/Beth Israel Deaconess Medical Center: $2.4 million settlement for improper billing of 4 NIH grants over a five year period, including: Inappropriately paying salaries of researchers who did not work on the grants. Supply and equipment expenses unrelated to grants 19 CRIMINAL LIABILITY Potential criminal liability for the submission of false or fraudulent time and effort reports, progress reports, and similar filings. Primary statutes: Making a false statement to a Government Agency (18 U.S.C. 1001) Making a false claim to the United States (18 U.S.C. 287) Mail and wire fraud (18 U.S.C. 1341, 1343) 20 10

11 CRIMINAL LIABILITY Falsifying a grant application Falsifying or fabricating research data and results Using grant money for unrelated research Falsifying progress reports and other documentation 21 CRIMINAL LIABILITY Luk Van Parijs: Associate Professor at MIT Prosecuted for falsifying and fabricating information on NIH grant application related to an autoimmune disease Roy Victor: CFO of Institute for Cancer Prevention Prosecuted for obstruction of justice for lying to federal agents concerning false statements used by the Institute to obtain federal research grants

12 CRIMINAL LIABILITY Eric Poehlman: Professor of Medicine at the University of Vermont Medical School Conducted research related to exercise physiology funded by grants from NIH, the Department of Defense and U.S. Department of Agriculture. Fabricated certain research data that was incorporated into grant applications. 23 RESEARCH GRANT ISSUES AND RISK AREAS TARGETED BY HHS OIG 24 12

13 OIG DRAFT COMPLIANCE PROGRAM GUIDANCE FOR RECIPIENTS OF PHS RESEARCH AWARDS (2005) Apart from providing an overview on developing an effective compliance program, provides guidance on several risk areas for recipients of extramural research grants from NIH and other HHS agencies. 25 OIG DRAFT COMPLIANCE PROGRAM GUIDANCE FOR RECIPIENTS OF PHS RESEARCH AWARDS (2005) Time and effort reporting Example: reporting to three agencies that researcher will devote 50% effort on each grant Allocating charges to awards Example: transferring direct costs from overspent awards to underspent awards, in order to maximize federal reimbursement and/or avoiding refunding the unused grant funds Failing to accurately report financial support from other sources 26 13

14 HHS OIG FOCUS ON RESEARCH GRANTS OIG WORK PLAN RE NIH (FY 2013) Review Colleges and Universities Compliance with Cost Principles OMB Circular A-21, Cost Principles for Educational Institutions Inappropriate Salary Draws from Multiple Universities Equipment Claims by Grantees OMB Circular A-81, Cost Principals for Educational Institutions 27 HHS OIG FOCUS ON RESEARCH GRANTS OIG WORK PLAN RE NIH (FY 2013) Extra Service Compensation Payments Made by Educational Institutions Cost Sharing Claimed by Universities OMB Circular A-110, Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Non-Profit Organizations 28 14

15 HHS OIG FOCUS ON RESEARCH GRANTS OIG WORK PLAN RE NIH (FY 2013) Extramural Construction Grants at NIH Grantees Review of Recovery Act funding for construction Equipment Claims by Grantees OMB Circular A-81, Cost Principals for Educational Institutions 29 FOCUS OF ENFORCEMENT IN SPONSORED RESEARCH Mischarging federal awards and grants Effort Reporting OMB requires certification of the effort and salary that are directly and indirectly allocated to a given project Cost Transfers After-the fact reallocation of costs, either labor or nonlabor, to a federally funded award/grant Direct Charging Recording expenses identified with a particular sponsored project, or expenses that can be directly assigned 30 15

16 FOCUS OF ENFORCEMENT IN SPONSORED RESEARCH Facilities and Administration (F&A) Rates Synonymous with indirect costs or overhead Cost Sharing When a university (either voluntarily or involuntarily) uses its own funds to supplement the grant Subrecipient Monitoring Subrecipient is any entity that receives federal assistance passed through from the primary grantee 31 FOOD FOR THOUGHT- EFFORT REPORTING How do you know... : Your employees have actually spent the time on the project that is being charged to the government? Your researchers are not charging time to an underspent project? Professor Smith, who is charging 100% of his time to the project, is not working on other medical center activities? 32 16

17 FOOD FOR THOUGHT- F&A How do you know... : The furniture for the lab was not already included in the negotiated F&A rate? The invoice for computer equipment was for the research project and not related to another department? Whether it is okay to start allocating electric cost based on occupancy, even though you have always allocated based on full time employees? 33 FOOD FOR THOUGHT- Subrecipient Monitoring How do you know... : Your sub-recipient is actually spending the time on the project that is being charged under your grant? The lunches your sub-recipient is submitting for reimbursement are allowable under your grant? 34 17