The National Institutes of Health describes itself as “the nation’s medical research agency—supporting scientific studies that turn discovery into health.”
Discovery into Waste, Fraud and Abuse
Unfortunately, the NIH recently made a discovery that places the health of the reputation of those who receive grant funding at risk. When it comes to research fraud the old adage “one bad apple can spoil the whole bunch” rings true with respect the public’s trust. NIH funds are generated via tax dollars and the public wants to know that their money is being spent on research that benefits the public – not line researcher’s pockets. Many, if not most, consider recent government funded “corporate bail outs” akin to being “robbed” by formerly well-respected companies. Certainly researchers do not want to join their ranks.
“He seemed like such a nice guy”
Case in point: recent charges brought against former Pennsylvania State University Electrical Engineering Professor Craig Grimes. The professor was well known in his field, receiving many accolades including being cited by Science Watch in 2011 as 25th on a list of the world’s top 100 materials scientists. Grimes work was also noteworthy for his 2009 research discovery of an innovative new energy resource.
“Even nice guys can get greedy”
However, the counts against Grimes sound like those of a mafia boss rather than a world renowned scientist. The United States Attorney’s Office charges include wire fraud, making false statements, and money laundering. Furthermore, the allegations against Grimes are reported to have taken place over the course of a five year period of time.
Over $1 Million dollars misappropriated!
It is alleged that between June 30, 2006 and February 1, 2011 that Professor Grimes misappropriated a $1,196,359 grant awarded to his company Sentech Biomed for the purpose of research measuring blood gasses to detect necrotizing enterocolitis with $509,274 of the award to be used to conduct clinical trials that were never performed.
Additionally, Grimes is charged with making false statements to the U.S. Department of Energy within a grant application requesting $1,908,732 for the purpose of conducting research and development of new energy technologies. The grant process requires applicants to report any other funding resources. Professor Grimes denied any other funding although he had previously received a grant from the National Science Foundation.
Really, it gets worse?
Grimes’s company appears to have been shut down and the company’s website is no longer available online. All told, Grimes is charged with defrauding the NIH and the U.S. Department of Energy (not to mention the tax payers who fund these agencies) of approximately 3 million dollars. Should the professor be convicted on all counts he could be sentenced up to 35 years in prison as well as a fine of $750,000.
3 key points:
This story makes you wonder how this could happen! We don’t know all the facts at this point, but you have to wonder about 3 key points related to oversight:
Best practices include:
1) Review of the grant application by several levels of managers
Did this happen?
2) Strong oversight and review by an independent body such as peer review or Board of Directors
Often when “superstar” personalities run the show, oversight by others becomes “unpopular” or perceived as “not being part of the team.” This dynamic should be a “red flag” to increase oversight, not reduce it.
3) Segregation of duties as part of a system of checks and balances
No one person should be responsible for authorizing transactions, having custody of assets (including access to cash) and recording or reporting related transactions.
Quite simply this means that controls should be in place so a Principal Investigator can’t funnel money to their personal companies for work that was never done.
It’s up to all of us to make sure these types of waste, fraud and abuse are detected and stopped.
Lucy Morgan CPA, MBA