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Multi-Agency Investigation Delivers $1M in Restitution for Wire Fraud Scheme

Tech industry exec and three companies plead guilty to defrauding three agencies to win small-business science grants.

In a display of teamwork by inspectors general, the government last week won guilty pleas and more than $1 million in restitution from a tech industry executive and three firms who committed wire fraud to win small-business science grants.

The Justice Department on Sept. 5 announced that NASA, the Energy Department and the National Science Foundation had been victimized by Alamo, Calif.-based tech executive Wallace Tang, along with Laserlith Corp., Black Hills Nanosystems Corp. and Blue Sky Engineering.

All pleaded guilty to wire fraud in U.S. district court in Sioux Falls, S.D., after paying nearly $1.1 million in restitution.

“Since its inception, the space program has been a symbol of American hope and progress,” said U.S. Attorney Ron Parsons. “When these defendants defrauded NASA and other governmental departments committed to the advancement of scientific knowledge, they were not only ripping off the American taxpayer, they were stealing a part of our future.”

Allison Lerner, NSF’s inspector general, commended prosecutors for the multi-year investigation, saying, “The Small Business Innovation Research Program and Small Business Transfer Technology Research Program are valuable tools in advancing NSF’s mission to promote the progress of science by increasing opportunities for small businesses to undertake cutting-edge scientific research, and it is essential to protect the integrity of this program.”

Acting Energy watchdog April Stephenson said the pleas serve as a reminder that fraud won’t be tolerated in what is “an essential Department of Energy program that supports scientific excellence and technological innovation.”

NASA IG Paul Martin said his office “will aggressively investigate any attempt to defraud NASA grants, contracts, and operations.”

From 2012-2016, investigators found, the companies obtained federal grant and contract funds electronically from the Treasury Department to accounts in South Dakota. “The defendants defrauded these federal agencies through false and fraudulent representations and by sending electronic wire communications in interstate and foreign commerce,” the Justice Department wrote. “The purpose of the corporate-defendants’ conspiracy was to obtain federally funded projects by and through material misrepresentations, statements, and omissions, thereby depriving the United States the ability to fund other small businesses and resulting in the enrichment of Blue Sky Engineering, Black Hills Nanosystems, Laserlith, and Tang.”

The corporate defendants applied for federal awards for essentially equivalent work, or portions of a contract while “concealing the existence of the awards and the relationships between related companies from the awarding agencies,” Justice said. “During the application process, the corporate-defendants misrepresented the existence and use of distinct company facilities, equipment, and operations in South Dakota and North Dakota, and elsewhere outside of California. These representations and statements were false in that all of the companies were co-located in a common facility in Richmond, Calif.” called MicroAssembly Technologies Inc. 

Tang, who will be sentenced in December, faces as much as 20 years in prison and a $250,000 fine. The corporations face as much as $500,000 in fines and a $400 special assessment to the Victim’s Assistance Fund.

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