Grant Fraud Federal Charges.

• Federal prosecutors often assemble cases based on multiple different statutes.
• For example, an individual or company accused of federal grant fraud could face the following charges:
• Wire fraud, Conspiracy, and/or False statements or representations
• Each of these allegations could be paired with a civil or criminal (or both) enforcement action.
• While there is no single overarching “Grant Fraud” criminal statute, a case charging grant fraud will usually include a specific allegation concerning:
• The application to receive a federal grant
• The grant award
• A report (or failure to report) that is due under the grant’s terms
• An invoice, billing, or request for disbursement that is submitted under the grant
• An application for reimbursement from the grant
• A certified or sworn statement made under the grant
• An uncertified or unsworn statement made under the grant
• Use of grant funds for unauthorized, illegal, or non-reimbursable purposes
• Federal criminal cases are prosecuted by the U.S. Attorney’s Office on behalf of the U.S. Department of Justice. Grant fraud is a type of federal program fraud, and there are several agencies that have an Office of Inspector General responsible for investigating suspected fraud involving their respective agencies’ grant programs. For example, the Department of Health and Human Services is responsible for the HHS Office of Inspector General, while the Department of Justice is responsible for the DOJ Office of Inspector General. The U.S. Department of Justice has several other U.S. Attorney’s Offices and federal law enforcement offices that work closely with other OIGs such as HHS-OIG. These agencies’ OIGs will conduct investigations, and if they find evidence of criminal conduct, they refer the case to the U.S. Department of Justice.

When Does a Grant Compliance Mistake Become a Federal Fraud Case?

Grant compliance is a complex area of the law, and grant recipients can make mistakes. Even when grant recipients take precautions to comply, errors will happen. However, if an entity or individual receives a federal grant through fraudulent means, or if an entity or individual fraudulently uses federal grant funds, this will have the potential to lead to federal criminal charges and a federal civil enforcement action. While there are many ways to falsely obtain or misuse a federal grant, some of the most common examples include:

Using False Eligibility Information to Obtain a Federal Grant

Providing false eligibility information during the federal grant application process can support allegations that you fraudulently obtained a grant for which you were not otherwise eligible.

Using Federal Grant Funds for Unauthorized, Illegal, or Non-Reimbursable Expenses

Using federal grant funds to pay for expenses that are not authorized or permitted by the grant program, and that are not otherwise reimbursable under the terms of the grant, can trigger an investigation and criminal prosecution for misuse of grant funds. This includes using federal grant funds for personal purposes.

Charging Identical Salary or Expenses to Multiple Federal Grant Awards (Double Billing)

Charging identical salary and expenses to two (or more) different federal grant awards, including identical salary and expenses charged to different federal grant awards under the same federal agency, can support allegations of double billing and fraudulent use of federal grant funds.

Billing for Unperformed Work or Other False Expenses

Claiming reimbursement for work or expenses that were not actually incurred, including but not limited to billing for unperformed work, and non-existent travel, can support a variety of allegations, including billing fraud, making false claims, and other forms of fraud.

Other forms of Alleged Grant Fraud

Along with the examples above, other examples of alleged grant fraud include attempting to circumvent federal grant funding restrictions, manipulating data, and any other scheme designed to falsely obtain or misuse federal grant funding.

None of these examples, however, are limited to the federal level. If you have a state grant, such as from the state of California, that you are allegedly using for fraudulent purposes, this could lead to state criminal charges, as well.

Which Federal Statutes Are Commonly Used for Grant Fraud Charges?

While the U.S. Attorney’s Office can use several different federal statutes to prosecute grant fraud, 18 U.S.C. §§ 287, 371, 1001, 1341, and 1343 are relied on principally for fraud against the Government. Under 18 U.S.C. §1001, it is a federal crime to make “makes any materially false, fictitious, or fraudulent statement or representation” in a matter that falls within the jurisdiction of the U.S. federal government. Specifically, this includes all matters that are within the jurisdiction of the executive, legislative, and judicial branches.

To pursue a criminal prosecution under 18 U.S.C. §1001, federal prosecutors must be able to prove that:

(i) the defendant acted knowingly and willfully; (ii) the defendant falsified, concealed, or covered up a material fact, made a materially false, fictitious, or fraudulent statement or representation, or made or used a materially false, fictitious, or fraudulent writing or document; and (iii) the matter was within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States.

Because federal grant programs fall within the jurisdiction of the U.S. federal government, prosecutors can use 18 U.S.C. §1001 to charge defendants who make materially false statements or representations during any part of the federal grant process. This includes, but is not limited to:

• Applications
• Reports
• Bills
• Invoices and other documents
• Certification, sworn, and unsworn statements

Wire fraud (18 U.S.C. §1343) is another statute commonly used to prosecute grant fraud. Wire fraud applies to schemes that target federal grant funds and utilize electronic communication, including the Internet, phone lines, and wireless communication, to commit the fraud. A similar statute, mail fraud (18 U.S.C. §1341), applies to schemes that involve the mailing of fraudulent documents in order to solicit or misuse federal grant funding.

Theft and bribery involving federal grant funds can also lead to prosecution under 18 U.S.C. §666. This statute applies to theft or bribery involving an organization, government, or agency that receives federal-program benefits when the statutory conditions are met:

(i) The organization, government, or agency receives, in any one-year period, benefits in excess of $10,000 under a Federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance, and,

(ii) The organization or individual meets the statutory monetary-value requirement (i.e., the organization or individual received more than $10,000 in U.S. federal government aid in a one-year period).

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How Can a Civil False Claims Act Case Differ from Criminal Grant Charges?

While the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733, provides for federal civil liability, it is most commonly associated with government contract fraud, and the Act’s subject matter extends to include grant fraud. Under the FCA, individuals and organizations can face civil liability for:

• Presenting false or fraudulent claims for payment to the U.S. federal government, and,
• Making materially false statements or records that are used by the U.S. federal government to make payment decisions (i.e., payment of funds).

The FCA’s scienter standard requires that the defendant knew the claim was false or fraudulent, or acted in deliberate ignorance of or reckless disregard for the truth or falsity of the information; a false record or statement must also be material to a false or fraudulent claim.

• Actual Knowledge: The defendant knew of the false record, statement, or claim; or,
• Deliberate Ignorance: The defendant deliberately ignored the possibility of the false record, statement, or claim; or,
• Reckless Disregard: The defendant exhibited a reckless disregard for the truth and falsity of the record, statement, or claim.

Unlike the fraud charges brought under 18 U.S.C. §1001, wire fraud, and mail fraud statutes, the False Claims Act does not require proof of the defendant’s specific intent to defraud. Instead, defendants can face civil liability if they acted with actual knowledge, deliberate ignorance, or reckless disregard.

Civil FCA cases can involve the presentation of false claims for payment to the U.S. federal government under various circumstances, including those where a grant recipient erroneously certifies compliance with the grant program’s terms and conditions.

• False Certification: Seeking reimbursement or another payment under a federal grant in which the grant recipient has falsely certified compliance with the grant’s terms and conditions, whether by misrepresentation, omission, or failure to disclose, can be grounds for a False Claims Act lawsuit.

While criminal grant fraud cases require proof of the defendant’s intent to defraud (scienter), and often proof that the defendant’s fraudulent conduct caused the government to incur financial losses (materiality), FCA cases only require proof that the defendant knowingly presented a false or fraudulent claim for payment to the U.S. federal government.

How Does an OIG or FBI Inquiry Move Toward Indictment, Plea, or Dismissal?

Once OIG or FBI agents hand off the investigation to a U.S. Attorney, that U.S. Attorney’s Office will determine whether or not to seek criminal charges. If the U.S. Attorney’s Office believes that there is evidence that supports a criminal grant fraud case, it will convene a federal grand jury.

Federal grand jury proceedings are conducted in secret; and, if a grand jury returns an indictment for grant fraud, this is the point at which the federal charges become public.

1. Constitutional Rights

Despite the secrecy of grand jury proceedings, individuals and entities under investigation for grant fraud still retain their constitutional rights. This includes the constitutional privilege against self-incrimination; counsel generally may be consulted outside the grand-jury room but may not be present during the witness’s testimony. As a result, before an individual or organization is indicted for grant fraud, these constitutional protections will apply throughout the federal grand jury process.

2. Guilty Plea

Federal fraud cases, including grant fraud cases, are resolved in a number of ways. These include, but are not limited to, the following:

• Guilty Plea: The vast majority of federal fraud cases are resolved through negotiated guilty pleas. With this, the defendant agrees to plead guilty to one or more of the charges against them in order to avoid the risk and uncertainty of a trial.

3. Declination

While the majority of federal cases end in either a guilty plea or a dismissal, U.S. Attorneys’ Offices will occasionally decline to seek charges if they believe the evidence is not sufficient to support an indictment.

• Declination: Prosecutors can decline to pursue federal charges if they believe that they cannot prove the case in court. This may happen before an indictment is handed down.

4. Dismissal

Prosecutors can also dismiss federal criminal charges, and these dismissals can occur in a number of different ways. For example, prosecutors can seek dismissal by:

• Filing a Motion to Dismiss: Prosecutors can seek dismissal of the criminal case through a court filing, or motion.
• Withdrawal of Charges: A prosecutor may seek dismissal of a criminal complaint, subject to leave of court under Fed. R. Crim. P. 48(a).
• Approval under Fed. R. Crim. P. 48(a): A prosecutor may dismiss an indictment, information, or complaint only with leave of court, as required by Fed. R. Crim. P. 48(a).

Contact a Federal Criminal Defense Attorney

Nothing here is legal advice, and the details of your case matter. Todd Spodek and Spodek Law Group take federal criminal and white collar cases nationwide, from offices in New York, Brooklyn, Queens and Los Angeles. You can reach the firm at 888 348 8028.