* * J1 I 4 NATIONAL SCIENCE FOUNDATION OFFICE OF INSPECTOR GENERAL OFFICE OF INVESTIGATIONS CLOSEOUT MEMORANDUM TO: AIGI File Number: I95010001 Date: 16 May 2002 Subject: Closeout Memo Page 1 of 1 There was no closeout written at the time this case was closed. The following information was extracted from the file in conformance with standard closeout documents. Our office conducted an investigation and concluded that the subject' conducted no research with the funds his company received under a Small Business Innovation Research (SBIR) Phase I1 grant from NSF. The subject was convicted of three counts of wire fraud and three counts of false statements based on three forms he submitted to NSF seeking advances of grant funds. On the basis of this conviction, NSF debarred the subject. On appeal the subject's conviction was reversed. To receive the advance payments under the grant, the subject had submitted a standard form usable for requests for advances or reimbursements, and each time he signed a statement certifying that the data on the form was correct and that expenditures of grant funds complied with the grant conditions. The appellate court determined that the certification about expenditures applied only when the form was used to obtain reimbursement, which required filling in a box concerning grant expenditures to date. Thus, in the court's view, because he used the form only for advances, the subject made no certification as to what had actually been spent or how it had been spent. Following the decision of the court of appeals, NSF notified the subject that his debarment was terminated. This case is closed. Page 1 1 of 1 DOCUMENT UNITED STATES OF AMERICA, Plaintiff-Appellee, v. WILLIAM L. HODGE, Defendant-Appellant. No. 97-10245 UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT 150 F.3d 1148; 1998 U.S. App. LEXIS 18172; 98 Cal. Daily Op. Service 6180; 98 Daily Journal DAR 8562 July 17, 1998, Argued, Submitted, San Francisco, California August 6, 1998, Filed PRIOR HISTORY: [**1] Appeal from the United Hodge is an atomic physicist with over seventeen States District Court for the Northern District of Califor- years experience in atomic physics, laser physics, plasma nia. D.C. No. CR-95-40202-SBA. Saundra B. physics, and electro-optical instrument design. He has Armstrong, District Judge, Presiding. designed soft x-ray instrumentation at John Hopkins University, has taken part in plasma spectroscopy [**2] DISPOSITION: REVERSED. experiments at Massachusetts Institute of Technology (MIT) and at the Princeton Plasma Physics Laboratory, and has been a consultant at Sandia National Laboratory COUNSEL: Mark D. Flanagan, Wilson Sonsini Goo- on x-ray lasers. He is the author of over forty scientific drich & Rosati, Palo Alto, California, for the defen- articles in these fields. He was the owner and president dant-appellant. of High Energy Laser Associates (HELA) in Oakland, California, founded in 1987. On December 21, 1989, Albert S. Glenn, Charles B. Burch, Assistant United HELA submitted a grant proposal to the NSF under States Attorneys, Oakland, California, for the plain- NSF's Small Business Innovation Research program. tiff-appellee. HELA proposed to develop "a neodymium-like soft x-ray laser." The principal investigator was listed as JUDGES: Before: Stephen Reinhardt, John T. Noonan, Hodge himself. Spectroscopic experiments were to be and David R. Thompson, Circuit Judges. Opinion by performed at the Janus laser facility, Lawrence Liver- Judge Noonan; Concurrence by Judge Reinhardt. more National Laboratory, Livermore, California and at MIT. Peter Hagelstein of the Electrical Engineering and OPINION BY: JOHN T. NOONAN Computer Science Department at MIT was to be consul- tant and subcontractor; Hagelstein's group at MIT was OPINION constructing a slab amplifier that would be used in the [*1149] OPINION project. Michael Finkenthal of Johns Hopkins University and Hebrew University was to consult in the area of NOONAN, Circuit Judge: spectroscopic line identification. The grant request was William L. Hodge appeals his conviction of wire for $ 287,275 for the project, which was to be completed fraud in violation of 18 U.S.C. § 1343 and of false state- in two years. ments in violation of 18 U.S.C. § 1001 by filing certain On [**3] August 31, 1990 the NSF awarded a certifications to the National Science Foundation (NSF) grant of $ 250,994, which included an "MIT subcontract as an NSF grantee. budget dated August 27, 1990," to HELA for the pro- posed project. This grant, the relevant one here, was a FACTS sequel to an earlier proposal by HELA for Phase I of the Page 2 150 F.3d 1148, *; 1998 U.S. App. LEXIS 18172, **; 98 Cal. Daily Op. Service 6180; 98 Daily Journal DAR 8562 same project, which had been funded by the NSF in De- On November 16, 1995, Hodge was indicted on six cember 1988 and successfully completed by Hodge in charges of wire fraud in violation of 18 U.S.C. § 1343 November 1989. The new award was effective Septem- and six charges of false statements to a government ber 1, 1990 and expired February 28, 1993. The first agency in violation of 18 U.S.C. § 1001. The wire fraud installment of the grant, $ 66,338, was applied for by charges alleged that Hodge had devised a scheme to de- Hodge on August 31, 1990. To obtain it, he executed a fraud the NSF and carried it out by false statements to NSF form headed [*1150] "Request for Advance Or the NSF that the grant funds provided to HELA "were Reimbursement." He checked both the Advance and being used solely in accordance with the grant condi- Reimbursement boxes. Under the subheading, "Compu- tions"; the wire transfers were those made by the NSF in tation Of Amount Of Reimbursements/Advances Re- payment of the grant beginning with the payment of De- quested," there was a column containing as its first item cember 3, 1990. The false statement charges were that, "Total program outlays to date." No sum was entered beginning with [**6] the certificate of November 27, here. Item "i" was "Federal share now requested." $ 1990, Hodge had falsely certified that "all outlays were 66,338 was entered. A separate heading read "Alternate made in accordance with the grant conditions or other Computation For Advances Only." Nothing was filled in agreement." here. The next heading was "Certification." Under it in The jury acquitted Hodge on the counts charging print the following appeared: "I certify that to the best of false statements made on November 27, 1990, February my knowledge and belief the data above are correct 21, 1991 and April 5, 1991 and on the related wire fraud [**4] and that all outlays were made in accordance with counts. The jury convicted him of wire fraud and false the grant conditions or other agreement and that payment statements on the basis of the certificates of September is due and has not been previously requested." Opposite 12, 1991, January 21, 1992, and March 12, 1992. this statement was a place for the "certifying official" to sign. Hodge signed. Hodge appeals. On November 27, 1990, Hodge signed an identical ANALYSIS form, checking both Advance and Reimbursement boxes and requesting $ 39,503. On February 21, 1991, he did Each certification which is the center of this case the same, checking only the Advance box and requesting cannot be read in isolation from the single page docu- $ 20,000. On April 5, 1991, he did the same, checking ment, "Request For Advance Or Reimbursement," of the Advance box and asking for $ 75,700. Again on Sep- which the certification is a subordinate part. As the title tember 12, 1991, on January 21, 1992, and on March 12, of the document indicates, the form is a request for either 1992, he checked only "Advance", requesting, respec- an advance or a reimbursement. On each of the docu- tively, $ 35,000, $ 14,000, and $ 453. ments resulting in a conviction Hodge checked the box titled "Advance." The term "outlays", of which the certi- To carry out his project Hodge needed access to the fication speaks, refers to "Total program outlays to date," laser at Lawrence Livermore. He had had such access for item "a" under "Computation Of Amount Of Reim- Phase I, and access had been tentatively approved for bursements/Advances Requested." On none of the forms Phrase II. For reasons that can only be guessed from the [*1151] signed by Hodge was any amount entered un- record, the Lawrence Livermore committee that sche- der "Total program outlays to date." Hodge made no duled access did not grant it to him although Hodge per- [**7] representation to the NSF as to what these outlays sistently sought access from August 1990 until February had been. Hodge did not ask reimbursement for any out- 1991. By mid-1991, again for reasons not in the record, lays made. In the documents resulting in convictions, Hodge's badge, permitting him to be at the Janus facility, Hodge sought only advances. [**5] was revoked. He continued to discuss his project with Dr. Michael Finkenthal between September 1990 That Hodge sadly failed to carry out the research he and February 1992. In August 1991, Hodge indicated to proposed is evident. That Hodge had a moral obligation Finkenthal that he was moving his project to MIT; how- not to take the grant money and a moral obligation to ever, he did not do so. According to Finkenthal, there return what he took does not need demonstration. That was "something wrong" with Hodge. Hodge was under the government could have sued Hodge civilly for unjust stress related to his marriage. At one point Finkenthal enrichment is undisputable. That Hodge presented a case found himself being driven by Hodge in the opposite where the government could show how tough the gov- direction from the conference they were trying to attend. ernment can be with a nonperforming grantee is clear. Hodge made no report to the NSF on what he had done. What is not evident is Hodge's crime or crimes. The first certificate executed by Hodge, the day be- PROCEEDINGS fore the grant became effective, was not charged by the government as a false statement or as giving rise to wire Page 3 150 F.3d 1148, *; 1998 U.S. App. LEXIS 18172, **; 98 Cal. Daily Op. Service 6180; 98 Daily Journal DAR 8562 fraud. This request was for $ 66,338 as reimbursement Hodge was convicted of falsely signing made any false and advance. All outlays were certified as made in ac- statement to the NSF. cordance with the grant although no program outlays REVERSED. were recorded. The "Alternative Computation For Ad- vances Only" was not filled out. It is apparent from this CONCUR BY: STEPHEN REINHARDT first certification that the form required by the NSF was simply a convenient way for a grantee to pull [**8] CONCUR down portions of the grant on schedule. Perfunctory compliance with the form's specifications was the rule. REINHARDT, Circuit Judge, concurring separately. Nothing was significant except the amount asked for. Only this amount and the Advance/Reimbursement box- I concur fully [**9] in Judge Noonan's opinion for the court. This case simply represents an instance of an es were filled in by the grantee. The request form as over-zealous prosecution and the misuse of the criminal written and as used was not intended as a report by the laws where at most a civil remedy would have been ap- grantee to the government of what the grantee had ac- propriate. I write this separate concurrence, however, to tually done or expended. point out another problem that is not limited to this case All the subsequent requests were like the first. No alone. The defendant who, it turns out, did not commit a outlays of funds were reported. No certification was criminal offense after all, completed service of his period made as to what had actually been spent on the project. of incarceration before his appeal was heard. It is a sen- The forms used in the counts of conviction were clearly tence he should never have served. The injury he suf- labelled as requests for advances. No representation was fered cannot ever be undone - by our reversal of his im- made that reimbursement was sought for any outlay proper conviction, or otherwise. made. Procedures exist under which, in many instances, Grantees dealing with the government must turn incarceration can be delayed until after an appeal is de- square corners. But the government must turn square cided. That process also does not always work properly. corners when it employs the heavy engine of the criminal It is initially up to defense counsel, and then to the judi- law. The government here has failed to prove that any cial system, to see that it does, within the limits that reasonable person could find that the three certificates Congress has permitted. Unfortunately, for the defen- dant, that did not happen here.
Published by the National Science Foundation, Office of Inspector General on 1997-05-22.
Below is a raw (and likely hideous) rendition of the original report. (PDF)