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Justice News

Department of Justice
U.S. Attorney’s Office
District of South Dakota

FOR IMMEDIATE RELEASE
Wednesday, January 30, 2019

Executive Wallace Tang and Three Corporations Sentenced for Defrauding NASA, National Science Foundation, and Energy Department Matter

Nearly $1.1 Million Paid in Criminal Restitution Prior to Sentencing

United States Attorney Ron Parsons announced that multiple corporate defendants convicted of Conspiracy to Commit Wire Fraud and one individual defendant convicted of Wire Fraud were sentenced on January 14, 2019, by U.S. District Judge Karen E. Schreier. 

Wallace Tang, age 55, of Alamo, California, was sentenced to 2 years of probation and ordered to pay $1,084,418.60 in restitution jointly with three Bay Area corporations.  Tang was also ordered to pay $100 to the Federal Crime Victims Fund.  Laserlith Corporation, Black Hills Nanosystems Corporation, and Blue Sky Engineering Inc., were also sentenced by and through Tang, Gina Kim, and Sine Chao, respectively, who were the corporate representatives. 

As part of the plea agreements filed with the Court, the defendants paid restitution totaling $1,084,418.60.  The restitution was paid at the time each defendant appeared to plead guilty.  All of the corporations, as a result of the successful investigation and prosecution, are now defunct and no longer operational.  The amount of criminal restitution represents the monies derived from the defendants’ fraudulent conduct perpetrated against the National Aeronautics and Space Administration (“NASA”), the National Science Foundation (“NSF”), and the Department of Energy (“DoE”).

“Since its inception, the space program has been a symbol of American hope and progress,” said U.S. Attorney 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.”

“The NASA Office of Inspector General (“OIG”) will aggressively investigate any attempt to defraud NASA grants, contracts, and operations,” said NASA Inspector General Paul Martin. “The NASA OIG appreciates the cooperative efforts of the entire investigative and prosecution team during this multi-year investigation.”

“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,” commented Allison Lerner, the Inspector General for NSF.  “The NSF Office of Inspector General is committed to vigorously pursuing oversight of these taxpayer funds and I commend the U.S. Attorney’s Office and our investigative partners for their strong support in this effort.”

“The SBIR Program is an essential Department of Energy program that supports scientific excellence and technological innovation,” stated Teri Donaldson, Department of Energy Inspector General.  “These sentencings serve as a reminder that fraud in the SBIR Program will not be tolerated.  The Office of Inspector General remains committed to ensuring the integrity of our programs by holding accountable those who attempt to hide behind sophisticated schemes.  We appreciate the efforts of the DOJ in pursuing this matter and will continue to work aggressively with our investigative partners to pursue those who seek to defraud government programs.”

At the times relevant to this case, NASA, NSF, and DoE participated in the Small Business Innovation Research (“SBIR”) Program and Small Business Transfer Technology Research (“STTR”) Program through which Defendants sought and obtained federal funds.  Federal SBIR and STTR grant and contract award payments were electronically transferred from the associated federal agency, through the U.S. Department of the Treasury, and then wired to a business bank account identified by the defendants.  The defendants also used wires to transmit interstate communications to and from South Dakota.

Beginning in approximately 2012, and continuing through 2016, within the State and District of South Dakota and elsewhere, Blue Sky Engineering Inc., Black Hills Nanosystems, and Laserlith unlawfully and knowingly conspired and agreed together to devise a scheme to defraud and obtain money and property from NASA, NSF, and DoE.  The defendants defrauded these federal agencies through false and fraudulent representations and by sending electronic wire communications in interstate and foreign commerce.  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 Inc., Black Hills Nanosystems, Laserlith, and Tang.

According to the parties’ plea agreements, the corporate-defendants committed the following acts, as well as others, in South Dakota and elsewhere:

-        The corporate-defendants applied for and received federal awards for essentially equivalent work, or portions thereof, concealing the existence of the awards and the relationships between related companies from the awarding agencies.

-        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, California, sharing the same resources and performing essentially equivalent work, or portions thereof.

-        The corporate-defendants’ fraudulent conduct included the preparation and submission of proposals for awards under the NSF, NASA, and DOE programs, specifically involving costs, employees, the eligibility of principal investigators, suitability of facilities, location of facilities, subcontractors, consultants, letters of support, and certifications submitted to NSF, NASA, and DOE.  As a result of the corporate-defendants’ conduct, fraudulently-obtained NSF, NASA, and DOE contracts were awarded, totaling $1,084,418.60 between Blue Sky Engineering Inc., Black Hills Nanosystems, Laserlith, and others.

As to Tang’s individual guilty plea, on January 28, 2015, Tang executed the aforementioned scheme to defraud the United States and its agencies and to obtain money and property by means of false representations, and promises relating to material facts. Specifically, Tang knowingly sent a wire communications in interstate or foreign commerce as follows: a wire communication from MicroAssembly, by and through Defendant Blue Sky Engineering Inc., as general contract, and with Black Hills Nano serving as subcontractor, containing NASA proposal numbered H8.03-8999, entitled “Low Cost Multi-Junction Photovoltaic Panels.”  This proposal was fraudulent and contained material representations in that it contained “essentially equivalent work,” or a portion thereof, to proposals submitted as part of the conspiracy, as set forth above and as alleged in the Information, between Defendants Blue Sky Engineering Inc., MicroAssembly, Laserlith, and Black Hills Nano.  After transmitting this wire containing fraudulent and material representations, Defendant Tang withdrew the proposal from NASA.  Although NASA proposal numbered H8.03-8999 was later withdrawn, Defendant Tang submitted the proposal with the intent to defraud NASA.

This case was investigated by NASA OIG, NSF OIG, and DoE OIG.  Assistant U.S. Attorney Jeremy R. Jehangiri prosecuted the case.

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Updated January 30, 2019