oversight

SBIR

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)

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                                               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.