Husband And Wife Sentenced In Scheme To Defraud The United States
CONTACT: Barbara Burns
PHONE: (716) 843-5817
FAX #: (716) 551-3051
ROCHESTER, N.Y. - U.S. Attorney James P. Kennedy, Jr. announced today that Bin “Ben” Wen, 46, and Peng “Jessica” Zhang, 45, both formerly of Horseheads, NY, who were convicted of conspiracy to commit wire fraud and conspiracy to defraud the United States respectively, were sentenced by U.S. District Judge Elizabeth A. Wolford. Wen was sentenced to serve 33 months in prison while Zhang was sentenced to five years of probation, to include six months of home detention. The defendants were also ordered to pay $5,500,000 in restitution.
Assistant U.S. Attorneys Tiffany H. Lee and Grace M. Carducci, who handled the case, stated that between June 2010, and December 2015, the defendants participated in a scheme to defraud departments and agencies of the United States of federal research funds that were awarded to companies controlled by the defendants. The government entities defrauded by the defendants included: the National Science Foundation (NSF); the United States Department of Energy (DOE); and the United States Department of Agriculture (USDA).
In December, 2003, Zhang incorporated United Environment & Energy, L.L.C. (UEE) in Horseheads, NY. Meanwhile, Wen incorporated Advanced Technologies and Materials, L.L.C. (ATM), in December, 2007, also in Horseheads. UEE submitted approximately 13 applications to NSF totaling over $2,600,000, 10 applications to the DOE totaling more than $5,000,000 and four applications to the USDA totaling approximately $650,000. The defendant received, through their companies, approximately $8,400,000 in awards from the NSF, the DOE, and the USDA.
Wen and Zhang submitted false and fraudulent information in Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) applications by:
• fabricating letters of support and investment;
• providing false information in research grant proposals and reports regarding business entities, business employees, business/research facilities, matching funds and investments; and
• providing falsified reports and emails regarding how federal research funds were expended.
A substantial amount of the fraudulently obtained money went toward the personal use and benefit of the defendants.
“By diverting monies that were intended to promote innovation and technology in small businesses, the defendants, through their frauds, not only swindled taxpayers but stifled economic and scientific development,” stated U.S. Attorney Kennedy. “One of the core responsibilities of my Office is to ensure that those receiving federal funds are entitled to those funds and that such funds are spent in accordance with the purpose for which they were given. Where, as here, they are not, prosecution will follow.”
Allison Lerner, NSF’s Inspector General said, “It is imperative that federal award recipients be truthful in their grant submissions and that they use grant money appropriately. Through their repeated falsification of key personnel, investments, budget figures, and other information in proposals and reports, defendants fraudulently obtained millions of taxpayer dollars intended to advance new technologies. I commend the U.S. Attorney’s Office and our investigative partners for their strong support in this effort to protect the integrity of the SBIR/STTR programs.”
Teri L. Donaldson, Department of Energy Inspector General said: “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 aimed at diverting Federal research funds. We appreciate the efforts of the DOJ in pursuing this matter and will continue to work aggressively with our investigative partners to bring to justice those who seek to defraud government programs.”
IRS-Criminal Investigation NY Field Office Acting Special Agent-in-Charge Jonathan D. Larsen said, “Today’s sentencing emphasizes the fact that in addition to our tax mission, we are also an essential part of the larger law enforcement community. The detailed analysis of the extremely complex flow of money in this case demonstrated how the defendants laundered the fraudulent grant proceeds they received and led to the seizure of over $6 million in assets that will be forfeited.”
“The sentencing in this investigation of fraudulent grant practices demonstrates that those who seek to do business with the Federal government will be held responsible for maintaining the highest level of integrity,” said Douglas Shoemaker, Regional Special Agent-In-Charge, U.S. Department of Transportation Office of Inspector General (DOT-OIG). “The Department has made accountability a top priority and working with our law enforcement and prosecutorial partners, we will continue our vigorous efforts in preventing, detecting and prosecuting grant fraud.”
Today’s sentencings are the result of a joint investigation by Special Agents with the National Science Foundation, Office of Inspector General, under the direction of Inspector General Allison Lerner; the Department of Energy, Office of Inspector General, under the direction of Inspector General Teri L. Donaldson; the Internal Revenue Service, Criminal Investigations, under the direction of Acting Special Agent-in-Charge Jonathan D. Larsen, New York Field Office; and the Department of Transportation, Office of Inspector General, under the direction of Special Agent-in-Charge Douglas Shoemaker.
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