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Alleged Non-disclosure of Foreign Grants at the Center of $5.5 Million False Claims Act Settlement

Van Andel Research Institute (VARI) located in Grand Rapids, MI, recently paid $5.5 million to the Department of Justice to settle allegations that VARI violated the False Claims Act by failing to disclose receiving Chinese government grants to obtain and maintain federal grants from the National Institutes of Health (NIH).

Obtaining federal research funding is highly competitive. In an attempt to standardize the evaluation process, the NIH requires full financial disclosure as part of both the application and the maintenance of the grants. Applicants must disclose all financial resources, including other research grants, that are available to researchers in support of their respective projects. Additionally, applicants must make Foreign Component disclosures if any of the research conducted is inside or outside of the United States. Failure to disclose or false statements do not only tip the scales of competition, but they also constitute fraud.

VARI received grants from NIH for two researchers between January 1, 2012, and August 31, 2019. In applications and progress reports submitted to NIH, VARI did not make any foreign component disclosures or report any foreign funding. However, the Department of Justice alleged that between January 1, 2019, and December 2018 that one of the researchers received both funding and research support from several Chinese sources, including the People’s Republic of China’s Thousand Talents Program.

The government further alleged that VARI knew of foreign support. VARI had received from a Chinese institution referring to the “generous support” the researcher was receiving from the Chinese Thousand Talents Program. Furthermore, in June 2018, VARI reviewed a press release for a publication of the researcher which referenced the Chinese grants received. Rather than disclosing the foreign funding to the NIH, the government alleged that VARI had the funding attribution edited out of the press release. Later that summer, the Director of the NIH sent VARI a letter with a reminder that full financial disclosure including that from foreign entities, was required. VARI took no action. Then, in November 2018, VARI received an email from NIH referencing specific non-disclosure concerns. The government claims that VARI made no disclosures even after receipt of the email.

 “It’s unfair to other grant applicants and the NIH for any institution to withhold requested information about whether the research that an institution wants the NIH to support may be getting funding from outside sources, specifically including foreign governments,” said Andrew Birge, U.S. Attorney for the Western District of Michigan. “False Claims Act penalties are harsh by design. I sincerely hope the word gets out on the importance of full disclosure with the government.”

Birge added that, per Department of Justice policy, individuals and institutions that are concerned about prior disclosures, or lack thereof, on grant applications “will receive credit during the resolution of a False Claims Act case” so long as the self-disclosure is “proactive, timely, and voluntary.”

© 2020 by Tycko & Zavareei LLP

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Jonathan K. Tycko leads the Whistleblower Practice Group of Tycko & Zavareei LLP

In recent years, the laws of the United States have undergone a whistleblower revolution. Federal and state governments now offer substantial monetary awards to individuals who come forward with information about fraud on government programs, tax fraud, securities fraud, and fraud involving the banking industry. Whistleblowers also now have important legal protections, designed to prevent retaliation and blacklisting.

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