Saturday, January 9, 2016

Former UCSD Professor's Tech Company That Applied for Government Grants and Contracts Admits and Pleads Guilty to Wire Fraud, Agrees to Forfeit $180,000. False Statements in Government Applications Carry Exposure. Owner Gets "Deferred Prosecution Agreement."

False statements in any documents submitted to the government for payment can result in fraud charges. During the 1990s, government qui tam and criminal contracting fraud cases were common. We are seeing an increased number of companies being investigated for government contract fraud. These are usually handled by the Office of Inspector General (OIG) 

In an unusual case involving government grants and contracts, Dr. Homayoun Karimabadi, a former research professor at the University of California, San Diego (“UCSD”) and the Chief Executive Officer for SciberQuest, Inc., was charged in federal court last week with fraudulently obtaining government grants and contracts.

Dr. Karimabadi and SciberQuest, Inc., the corporation run by Dr. Karimabadi, both waived indictment and were arraigned on an information charging them with felony wire fraud and criminal forfeiture.  SciberQuest entered a guilty plea before U.S. Magistrate Judge Karen S. Crawford. Additionally, Dr. Karimabadi and SciberQuest jointly agreed to forfeit $180,000 as money that was improperly received as a result of the alleged fraud, in addition to a fine that will be imposed on the corporation at sentencing. 

In a favorable resolution for Dr. Karimabadi, he is scheduled to enter into a "deferred prosecution agreement" on January 15, 2016 at 8:30 a.m. before Judge Gonzalo P. Curiel. A deferred prosecution agreement is an agreement between a criminal defendant and the United States Attorney’s Office where the defendant admits to the facts constituting a criminal offense, but the United States agrees to suspend the entry of judgment for a period of time and agrees to dismiss the charges if, during that period, the defendant complies with certain conditions set forth in the agreement.These are not easy to obtain and show that either there were weaknesses in the government's case against Dr. Karimabadi or that fairness supported this result.  

According to court records, Dr. Karimabadi was the Chief Executive Officer and Chief Technology Officer at SciberQuest and at the same time was employed as a research professor at UCSD where, among other things, he served as the group leader of the space physics plasma simulation group.

According to the corporation’s plea agreement, from January 2005 to June 2013, Dr. Karimabadi, who has a Ph.D. in Plasma Astrophysics, applied for and received grants or contracts from the National Science Foundation (“NSF”), United States Air Force (“USAF”) and National Aeronautics and Space Administration (“NASA”) both through SciberQuest and UCSD.  

SciberQuest was awarded around $6.4 million under 22 separate grants or contracts.  Of those, eight were Small Business Innovation Research (“SBIR”) grants with a value of about $1,760,000.  The SBIR Program was enacted by Congress to strengthen the role of innovative small business concerns in federal-funded research and development in order to stimulate technological innovation, foster and encourage participation by socially and economically disadvantaged small business concerns, and increase private sector commercialization of innovations derived from federal research and development, thereby increasing competition, productivity and economic growth.

To obtain the SciberQuest grants or contracts, Dr. Karimabadi admitted he made false statements to government officials.  Specifically, in award proposals, Dr. Karimabadi failed to disclose all of his and SciberQuest’s current and pending grants or contracts, thereby overstating the time he and SciberQuest could devote to the projects he was applying to receive.  In one example, Dr. Karimabadi only disclosed to NSF four current and eleven pending grants, and knowingly failed to disclose an additional ten current and five pending grants.  In all, Dr. Karimabadi disclosed to NSF only about three months per year of work that he was committed to, when in fact, he had already committed to various agencies over nineteen months per year of work. 

The government also alleged that Dr. Karimabadi also falsely certified in SBIR award proposals submitted to NASA and USAF that he was primarily employed by SciberQuest. He was employed full-time at UCSD both at the time of the award submission and during the performance of the grant.  One of the issues in the case is whether would have been awarded the grants or contracts if they had disclosed all the facts.  From 2005 to 2013, Dr. Karimabadi received over $1.9 million in salary from SciberQuest due, in part, to the alleged fraudulently obtained grants or contracts. 

SciberQuest will be sentenced on March 18, 2016 at 8:30 a.m. before U.S. District Judge Gonzalo P. Curiel. Dr. Karmabadi was placed on bond and ordered to return to court on January 15, 2016, for further proceedings to enter a Deferred Prosecution Agreement for his role in the matter.  

Posted by Tracy Green, Esq.
Office: 213-233-2260


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