MANCHESTER BUSINESSES AGREE TO PAY
$436,050 TO RESOLVE CIVIL FRAUD ALLEGATIONS
David B. Fein, United States Attorney for the District of Connecticut, today announced that four related Connecticut businesses – The Nano Group, Inc., Inframat Corporation, U.S. Nanocorp, Inc. and Inframat Advanced Materials, LLC (the “Companies”) – have entered into a civil settlement agreement with the government in which the Companies will pay $436,050 to resolve allegations that they violated the False Claims Act and the common law in the management of federally-funded research grants and contracts awarded to the Companies between 2000 and 2009. The grant and contract awards were made by the Department of Defense, the Department of Health and Human Services, and the National Science Foundation.
“Regulations applicable to federally-funded research grants and contracts must be strictly adhered to, and the U.S. Attorney’ Office and our federal investigative partners will hold accountable any company that mismanages government funds,” stated U.S. Attorney Fein.
U.S. Attorney Fein explained that the Department of Defense (“DOD”), through its component the United States Air Force, awarded a contract to the Inframat Corporation in 2004 that was ultimately valued at almost $1.5 million. At various times during the term of the contract, Inframat Corporation fraudulently billed the contract for work associated with an unrelated contract and for work that had been previously billed to the Air Force contract. In addition, Inframat Corporation billed the Air Force contract for subcontractor costs that were never paid to the subcontractor, and the funds received were instead retained by Inframat Corporation.
From 2000 to 2006, Inframat Corporation was awarded four National Institutes of Health (“NIH”) research grants of approximately $2 million. The NIH is part of the Department of Health and Human Services (“HHS”). From 2002 through 2005, U.S. Nanocorp, Inc. was awarded a NIH research grant of approximately $650,000. From September 2002 through August 2006, government funds received by Inframat Corporation and U.S. Nanocorp for the five NIH grants were improperly commingled in a bank account, and the funds were used to pay the immediate needs of Inframat Corporation and U.S. Nanocorp, regardless of whether the expenses were related to a particular government grant.
In February 2009, Inframat Corporation submitted a grant proposal to the National Science Foundation (“NSF”). In May of that year, the Department of the Army issued a notice of proposed debarment under the Federal Acquisition Regulations to Inframat Corporation, U.S. Nanocorp, Inc. and Inframat Advanced Materials, LLC, which made the companies ineligible to receive federal funds, and the Army placed the companies on the government’s “Excluded Parties List System” (“EPLS”). Inframat Corporation failed to inform the NSF that it had been placed on the EPLS, as it was required to do. In June 2009, NSF awarded Inframat Corporation funds in connection with its February 2009 proposal and, despite being ineligible, Inframat Corporation accepted the award and requested and received a substantial amount of the awarded funds. NSF has since terminated the grant award and this settlement will resolve all issues between the Companies and NSF as to the disbursed funds.
Based in Manchester, Conn., The Nano Group, Inc. is purely a holding company and it does not do any business. Both Inframat Corporation (the parent corporation of Inframat Advanced Materials, LLC) and U.S. Nanocorp, Inc. primarily do sponsored research for the United States government, plus some commercial work. Inframat Advanced Materials, LLC, does not do any sponsored research; instead, it manufactures, imports, or resells a variety of materials.
In addition, the $436,050 total settlement amount also includes $10,739 that the Companies have already paid to the private administrator of their 401(k) plan as the result of an investigation by the Department of Labor’s Office of the Inspector General and the Employee Benefits Security Administration. The investigation concluded that from 2003 through 2006, the Companies failed to forward $10,739 in contributions that had been withheld from the paychecks of the Companies’ participants in the 401(k) plan. The Companies also agreed to replace the individual who was the trustee of the plan during the time period in question, and a new trustee was named in March 2011. As part of the settlement terms, the Companies have neither admitted nor denied any wrongdoing as to the failure to forward the $10,739 in 401(k) plan contributions.
The False Claims Act provides for up to treble damages and penalties of $5,500 to $11,000 per false claim submitted to the Government.
The remaining settlement amount of $425,311, plus interest, will be paid in scheduled installments and a final balloon payment over a five-year period.
U.S. Attorney Fein also noted that the Companies cooperated fully in the government’s investigation, which began with the service of multiple investigative subpoenas on the Companies. Throughout the investigative period, the Companies also made extensive efforts to significantly improve their management of federal grants and contracts. Those efforts have included the execution of administrative compliance agreements with the DOD’s Department of the Army, the HHS and the NSF. In addition, the Army’s notice of proposed debarment is no longer in effect and the Companies are no longer ineligible to receive federal funds.
As a result of the settlement, there will be no lawsuit filed against the Companies regarding the grants and contracts covered by the settlement agreement. In entering into the settlement, the Companies conceded that the claims made by the HHS, the DOD, and the NSF are well founded.
The settlement resulted after a lengthy investigation conducted by the Department of Health and Human Services, Office of the Inspector General; the Defense Criminal Investigative Service; the Department of the Army, Criminal Investigation Command; the Defense Contract Audit Agency; the National Science Foundation, Office of the Inspector General; and the Department of Labor’s Office of the Inspector General and the agency’s Employee Benefits Security Administration.
The matter was handled within the U.S. Attorney’s Office by Assistant U.S. Attorney William A. Collier and Auditor Susan N. Spiegel.
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