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SBIR/STTR GRANTS: VULNERABILITIES AND FRAUD INDICATORS Leslie “Les” Hollie

SBIR/STTR GRANTS: VULNERABILITIES AND FRAUD INDICATORS Leslie “Les” Hollie Assistant Inspector General for Investigations U.S. Department of Health & Human Services Office of Inspector General Office of Investigations. The OI Mission.

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SBIR/STTR GRANTS: VULNERABILITIES AND FRAUD INDICATORS Leslie “Les” Hollie

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  1. SBIR/STTR GRANTS: VULNERABILITIES AND FRAUD INDICATORS Leslie “Les” Hollie Assistant Inspector General for Investigations U.S. Department of Health & Human Services Office of Inspector General Office of Investigations

  2. The OI Mission Office of Investigations (OI) Conducts criminal, civil and administrative investigations of fraud and misconduct related to HHS programs, operations and beneficiaries. • OAS • OEI, • IO • OCIG • OMP

  3. The IG Act of 1978, (Public Law 94-505), provides four primary criteria: • an independent and objective OIG • direct /unrestricted access to agency records & information • subpoena authority for information and documents outside the agency • semiannual reporting to Congress

  4. Why should you care about Fraud, Waste, and Abuse? • Without understanding what fraud, waste, or abuse “looks” like, you may inadvertently overlook fraud indicators • Fraudsters utilize SBIR funds that may otherwise be given to legitimate awardees, so in essence they are stealing from everyone in this room

  5. New OIG Recommendations for the SBIR/STTR Programs • Establish fraud detection indicators • Review agency regulations and operating procedures • Coordinate information sharing between agencies • Improve the education and training of SBIR administrators, applicants, and awardees

  6. OEI Report to HHS • Methodology • Reviewed HHS policies and procedures for ensuring that • Awardees are eligible • Awards are not duplicative • The program is meeting is goals • Verified the eligibility of a sample of SBIR awardees • Available online: https://oig.hhs.gov/oei/reports/oei-04-11-00530.asp

  7. Common Eligibility Issues Identified • PI Employment • The awardee must be the PI’s primary employer • We found indications that PIs had full-time employment at other companies • Example: A PI listed 3 other positions on LinkedIn, including a full-time position with a university

  8. Common Eligibility Issues Identified • Awardee company size • Awardee must have fewer than 500 awardees, including its affiliates • We found indications that companies were affiliated with very large organizations • Example: One awardee company was owned by a larger company with over 7,000 employees

  9. OEI Recommendations to HHS • Alerted HHS to issues in oversight of the program and made recommendations to: • Collect information to track and assess the commercialization of projects • Ensure compliance with eligibility requirements • Improve procedures to check for duplicative awards

  10. Common Sense Use the grant money for what you said it would be used for – no more, no less - and there won’t be a problem.

  11. Fraud in the SBIR Program • Specific examples of what NOT to do: • Operate out of your residence • Use grant funds for personal expenses • Pay others to do ALL of the proposed research • NOT pay institutions who did do the proposed work but still draw down the grant funds • Lie to the awarding entity – including on your biosketch

  12. Investigative Avenues

  13. Criminal Embezzlement and Theft of Public Money • 18 USC 641 • Knowingly converting funds or items to your use without authority to do so • Federal grant money is still the property of the U.S. government, even after it has been deposited in the grantee’s bank account • The government must prove it is an intentional act • Criminal Penalties – Prison, Fines, Restitution

  14. Civil False Claims Act • 31 USC 3729 • Causing false claim for payment • Triple Damages plus between $5,500 to $11,000 per offense • Actual Knowledge, Reckless disregard for the truth or deliberate ignorance • Government does not need to prove fraudulent intent • Preponderance of Evidence

  15. Administrative Remedies • Suspension • A temporary exclusion from new awards pending an ongoing investigation or admin action • Debarment • Action taken at the completion of proceedings that renders an entity/person ineligible from receiving awards for specific period of time – usually 3 years

  16. Protection of Program Funds • IG contact in most instances is an effort to gather evidence in furtherance of the investigation • Communication with the subject or target is normally the last step in the investigation

  17. We cannot arrest/prosecute our way out of the issue of fraud in our programs

  18. QUESTIONS

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