Federal Grant Fraud Defense: Nonprofit and Research Grants
You run a research lab at a university. Or you direct a nonprofit that receives federal funding. Maybe you've spent twenty years building a career on NIH grants, NSF awards, Department of Energy contracts. You know the rules. You follow the procedures. If something went wrong - a budget discrepancy, a misclassified expense, a progress report that overstated results - you figured the worst case was losing future funding.
That's not the worst case. The worst case is federal prison.
The federal government treats grant fraud like organized crime. Professors with terminal degrees are going to federal prison - 57 months, 37 months, 27 months. Academic credentials offer zero protection. An institution receiving just $10,000 in federal funds per year subjects everyone connected to it to prosecution under 18 USC 666. Wire fraud charges stack at 20 years per electronic submission. The same statutes that jail healthcare fraudsters are now being used against NIH grant recipients who made mistakes on progress reports.
Welcome to Spodek Law Group. We defend researchers, professors, nonprofit executives, and organizations facing federal grant fraud investigations. If you've received an inquiry from an Inspector General's office, if federal agents have contacted your institution, or if you're concerned about past grant activities - this article explains exactly what you're facing and what options might exist.
The Professors Going to Federal Prison
Dong Pyou Han was an Iowa State University biomedical researcher. He falsified results in HIV vaccine studies. He thought he was advancing science. The federal government thought differently.
He got 57 months in federal prison. Almost five years. He was also ordered to repay $7.2 million to the National Institutes of Health.
Song Guo Zheng was an Ohio State professor and rheumatology researcher. He lied on NIH grant applications about his ties to China - specifically, he was using $4.1 million in federal grants to develop China's expertise in immunology. When federal agents closed in, he tried to flee. He was arrested at an Alaska airport boarding a charter flight to China, carrying three large bags, two laptops, several USB drives, silver bars, and property deeds for Chinese real estate.
He got 37 months. Plus $3.4 million in restitution to NIH. Plus $413,000 to Ohio State.
Gary Grajales-Reyes was an assistant professor at Washington University School of Medicine. He embezzeled $412,163. Submitted 73 false requisition requests. Bought collectible trading cards with grant money. Federal agents seized the cards from his laboratory.
27 months federal prison.
These aren't administrators who didn't understand the rules. These are PhDs. Tenured professors. Terminal degrees. It dosent matter.
Hoau-Yan Wang is currently facing charges. He's 67 years old, a tenured medical professor, accused of defrauding NIH of aproximately $16 million by fabricating Alzheimer's research data. He's charged with major fraud against the United States, two counts of wire fraud, and false statements. His theoretical exposure exceeds 55 years in prison.
And its not about the amount. Geoffrey Girnun, a Stony Brook University professor, got 366 days in federal prison for stealing cancer research funds. He used government money for mortgage payments and tuition. He forfeited $225,000.
The amount dosent protect you. The degree dosent protect you. The prestige of your institution dosent protect you.
How One Grant Application Becomes Multiple Felonies
Most grant applications get submitted online. Progress reports are emailed. Budget justifications are uploaded. Every electronic transmission creates potential liability.
Wire fraud - 18 USC 1343 - carries 20 years per count. Each email. Each submission. Each uploaded document.
Heres how the charges stack:
- Wire Fraud - 20 years per count
- Major Fraud Against the United States (18 USC 1031) - 10 years
- Theft from Programs Receiving Federal Funds (18 USC 666) - 10 years
- False Statements (18 USC 1001) - 5 years per count
- False Claims Act civil liability - treble damages plus up to $28,619 per false claim
That professor facing $16 million in alleged NIH fraud? Two wire fraud counts (40 years) plus major fraud (10 years) plus false statements (5 years). Thats 55+ years of theoretical exposure. From grant applications.
And the threshold for federal prosecution is shockingly low.
Under 18 USC 666, any organization recieving just $10,000 in federal funds per year subjects its employees to federal prosecution for theft exceeding $5,000. The Supreme Court confirmed in Sabri v. United States that the embezzled money dosent even need to be federal funds - the statute only requires that the organization receives federal money.
Think about what that means.
Every university. Every nonprofit hospital. Every research institution. Every social service organization. If your employer recieves $10,000 or more in federal grants, contracts, or subsidies - you are exposed to federal prosecution for misuse of any funds exceeding $5,000.
And the False Claims Act adds civil liability on top. The government can recover three times its damages. Plus $28,619 per false claim - and every grant application, every progress report, every expense certification is potentially a separate claim. A researcher who inflated budget lines on 10 reports could face $286,190 in per-claim penalties before you even calculate treble damages on the grant amount.
The Investigation You Wont See Coming
Multiple federal agencies have Inspector General offices that investigate grant fraud. HHS OIG handles NIH grants. NSF OIG handles National Science Foundation awards. DOE OIG handles Department of Energy research grants.
These investigators are skilled. There trained to build cases. And they have a powerful tool most people dont think about.
The False Claims Act allows whistleblowers to bring cases on behalf of the government. Its called a qui tam action. And the whistleblower receives 15-30% of whatever the government recovers.
Your disgruntled postdoc. Your former lab manager. Your ex-spouse who knows about the grants. They have a financial incentive to report you. Government recovery equals whistleblower payday.
And the statute of limitations is longer then you think.
False Claims Act cases must be filed within six years of the fraud, or within three years of when the government should have known about it - but never more then ten years after the violation. That old grant application from 2018? Still potentially actionable in 2028.
But the consequences extend far beyond money and prison.
A federal conviction for grant fraud means:
- Debarment from receiving future federal funding. For a researcher, thats career death. You cant be a principal investigator on NIH grants. You cant conduct NSF-funded research. Universities wont hire you because you cant bring in grant money.
- Licensure board actions. If you're a physician, your medical license is at risk. Other professional licenses - nursing, pharmacy, psychology - same problem.
- Immigration consequences. For non-citizens, a federal fraud conviction can mean deportation, denial of naturalization, or bars to reentry.
This isnt just about prison. Its about everything you've built.
What to Do If Your Under Investigation
The single most important rule:
Never speak to OIG investigators without a lawyer present.
Song Guo Zheng made false statements to federal authorities during their investigation. Those false statements became additional charges. He was already in trouble - and then made it worse.
The investigators seem friendly. They seem reasonable. They say they just want to understand what happened. But everything you say is being documented. Everything you explain becomes potential evidence. Without counsel, your good-faith explanations become the basis for additional charges.
If you've received an OIG inquiry, a subpoena, or a letter from federal investigators:
- Don't speak to investigators alone. Ever. Even if you believe you've done nothing wrong.
- Don't alter, delete, or destroy any documents. Document destruction becomes its own charge.
- Don't discuss the matter with colleagues who may be involved. Those conversations can be used against you.
- Contact a federal defense attorney immediatly. The earlier you act, the more options exist.
Todd Spodek has handled federal grant fraud cases involving NIH, NSF, and other federal funding agencies. He understands the difference between OIG-stage investigations where resolution may still be possible, and DOJ-referral cases where full criminal defense is the priority.
When Your Ready
If you've received contact from a federal Inspector General's office - or if you're concerned about past grant activities - Spodek Law Group can help you understand where you stand.
The consultation is free. There's no obligation.
What you'll get is an honest assessment. Is this still at the OIG inquiry stage? Has it been referred to DOJ? What are realistic outcomes - not best-case fantasies, but actual possibilities based on how these cases unfold in federal court?
Call us at 888-997-4071. The statute of limitations on False Claims Act cases extends up to ten years. That means grants from years ago can still create liability today. If there's a problem, you want to know now - before federal agents show up at your laboratory or your office.
We're here when you need us.
