coordinating investigative efforts · 9/11/2013  · coordination investigation pi was an endowed...

Coordinating Investigative Efforts

September 2013

Paul Coleman, CFE, Sr. Special AgentNational Science FoundationOffice of Inspector General

Office of Investigations

pcoleman@nsf.gov703-292-7918

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Building Relationships 1988 – NSF-OIG created 1989 – Hired as 1st Special Agent 1992 – First coordinated Investigation with a

University Internal Audit Department, expected: Cooperation/access to documents/witnesses

Working with Internal Auditors, found: Expertise/Knowledge of internal systems and

Documents, plus detailed analysis Coordination with stakeholders/administrators Building Partnerships, Teamwork and Trust

What does NSF-OIG investigate?

The simple answer:

LyingCheatingStealing

Grant Fraud/Financial Fraud Follow the Money/Evidence

Criminal Fraud Cases

Burdon of Proof – Beyond Reasonable Doubt – Knowledge and Intent Travel Fraud – False or Duplicate Payments Payroll Fraud – False or Fictitious Employees Stipend Fraud – False recipients/vouchers Invoice Fraud – Fake or enhanced Consultant

or Vendor invoices or receipts Duplicate Funding – Additional funding Used

for Personal Business/Personal Activities

Civil/Administrative Resolution of Cases

Civil False Claims Act – 31 USC 3729-33 Liability for Defrauding Gov’t Programs Fines $10,000 per claim/Treble Damages Burdon of Proof – Preponderance of the

Evidence – Deliberate Ignorance – Reckless Disregard of the Truth Compliance Plan may accompany settlement

Misuse of Grant Funds – Mischarging Corrective Plan/Return of Funds

Expertise & Knowledge Case Internal Audit called OIG – mischarging of

funds by Department Chair for Biology NSF & Non-Profit Grants wrongfully charged Possible personal purchases/gifts/travel Overtime paid to departmental personnel

Internal Auditors itemized 4 years of expenditures and participated in: Investigative planning and witness interviews Obtaining written confession from Chair

Results of Chair Investigation Proposed work for grants was not done UIPUI terminated grants & returned funds Department Chair resigned and returned

over $232,000 to the university Guilty plea for Embezzling $100,000 for: Overtime salary for personal services Personal purchases, gifts/watch/camera Internet charges for stock trading False Travel vouchers

Coordination Case PI contacted NSF Program Officer

claiming that University Administration and Internal Audit were disrupting research. First Trip - met with Administrators and

Internal Audit about the internal investigation. Met with Local DA who also received allegations. OIG coordinated Investigative efforts

between Internal Audit, LEO and DA.

Coordination Investigation PI was an endowed Chair of Computer

Science and highest paid professor at university. PI failed to disclose that: Suite of 12 university offices was used to run

SBIR and computer training businesses university computers, telephones, personnel,

& students was used for private businesses personal businesses purchases and business

travel expenses were paid with grant funds.

Results of Investigation PI pled guilty to Abuse of Official Capacity

– training material and travel expenses paid for PI’s computer training company Civil law suite brought by the PI dismissed DOD, NSF, and State grants terminated

and $160,000 of NSF funds were returned University terminated employment of the

PI, upheld by faculty senate committee DOD issued debarment of the PI

Teamwork – P Card Cases

Case 1 – Program Coordinator – Gift cards purchased with P-Card Case 2 – Center Accountant – Purchases

from Internet vendor with P-Card Vague receipts submitted by the P-Card

users and many receipts looked similar Most purchases charged to NSF Grants Both Subjects resigned during initial

Investigation by GA Tech Internal Audit

Program Coordinator misused P-Card

Gift cards from Walmart/Target/Sams Club Personal cell phone and cable TV service Auto repairs and insurance Grocery Stores near home address Tuition/parking fees at another university Diamond ring ($1334) from Amazon. COM Submitted questionable check request

Program Coordinator provided confession to NSF-OIG Agents

Fraud started 6 months after employment Over 1000 personal purchases made from

more than 65 different vendors NSF/State/Private accounts fraudulently

charged for personal purchases Submitted false check request for $4865 Over $173,000 fraudulently diverted.State and Federal prosecutors briefed.

Center Accountant’s Computer files obtained by Internal Audit

GA Tech Computer use Policy resulted in obtaining key electronic evidence: E-mails from Internet vendors shipping goods

to the employee’s home, Copies of templates for various Internet

vendor invoices, One template had been altered 64 times, Personal Pictures of the P-Card User enjoying

the good life.

Tracking the EvidenceDESCRIPTION CHARGED VENDOR

001 Security First JCS-552/27A 5 " Rear View Camera System $249.99 Buy. COM

002 Draper 207010 4:3 Manual Wall Projection Screen $151.14 Amazon. COM

003 RV Air Conditioner, Complete (13.5K / Cool Only / Non-Ducted) - Color - White $518.99 Amazon. COM

004 RV Air Conditioner (15K - Heat/Cool) - Complete Assembly - Color - Ivory $639.00 Amazon. COM

005 Carefree Fiesta 14' Vinyl Awnings - Color - Ocean Blue $648.99 Amazon. COM

007 InFocus X2 Multimedia DLP Projector $794.99 Amazon. COM

008 Igloo AUDIO CO AU College Audio Cooler - Auburn University $83.94 Amazon. COM

009 Classic Check Oilcloth Table Cloth - Orange (48 x 108) $30.00 Amazon. COM

010 4 - NCAA Auburn Tigers Orange Adult Chair $183.45 Amazon. COM

011 4 - Byre of Maine Folding Table (16" x 16" x 16.5") $161.97 Buy. COM

012 Auburn Tigers Tailgater Mat $181.93 Amazon. COM

013 Coleman Road Trip Grill $210.40 Amazon. COM

014 Auburn White Canopy by Logo Chair $291.95 Amazon. COM

015 Auburn Color Canopy by Logo Chair $311.95 Amazon. COM

016 NCAA Auburn Tigers logo XL 5 X 8 Tailgate Rug $129.99 Amazon. COM

017 Auburn Tigers 11"x15" Garden Flag $16.99 Amazon. COM

018 PAYPAL - Purchase (utility trailer) $550.00 Pay Pal

020 Optronics TLL-56RK Waterproof LED Trailer Light Kit $54.98 Buy. COM

021 NCAA Auburn Tigers 20" Double Level Ribbon Pinwheel - Team Sports America $30.48 Amazon. COM

OIG & Internal Audit foundthe Accountant misused P-Card

Over 3800 personal purchases made from more than 15 different vendors over 5 yrs Over 1900 transactions through the

institution’s financial system Over 30 different accounts

(NSF/State/Private) fraudulently charged Over $316,000 fraudulently diverted

Concealment of Fraudulent Activities

Majority of items shipped to home address Lied to supervisors and co-workers Forged the supervisor’s signature on P-

Card statement review documents Created false invoices Manipulation of the institution’s accounting

system

Specific Items over $1000

Manipulation of accounting system

Poulan Lawn Tractor - $1099 – transferred 3 times in 3 months HP Pavilion Notebook PC - $1023

– transferred 3 times in 4 months BUNN Ultra-2 Drink System - $2134

– transferred 3 times in 4 months Portable RV Refrigerator/Freezer - $1029

- transferred 5 times in 4 months

Fake Receipt

What was really bought

Backyard view from the Street

FBI & OIG Seized Over 50 Items

5 flat screen TVs (3 with built in DVD player) 5 computers (2 desk tops and 3 laptops) 5 digital cameras (2 in original boxes) Poulan Lawn Tractor (tools/lawn equipment) Multimedia Projector/Wall Projection Screen Bunn Frozen Drink System Yamaha Wave Runner III Auburn Elite Leather Man’s Watch.

Results of P-Card Investigations

Guilty Plea by Center Accountant to 22 counts of Federal Indictment Sentenced 32 months prison/3 yrs probation $316,000 Restitution/$2200 fines-assessment

Guilty Plea by Program Coordinator to State Criminal Indictment for Fraud Withdrew initial negotiated Plea Sentenced to serve 10 years prison/10 yrs

supervised probation $125,000 Restitution

Partnership & Trust – Director of Internal Audit

10 year working relationship Professional Skepticism/Auditgator Partnered multiple Investigative matters Obtained results with limited resources Resolved two of the most difficult cases Both Cases involved failure to disclose

Conflicts of Interests and diversion of grant funds for personal gain.

Undisclosed Consulting and Duplicate Travel Payments

68 Duplicate payments to the Superintendent all charged to the School District which duplicated the university, and 26 other institution.

11 Duplicate payments to Superintendent's staff, all cash returned to Superintendent.

$60,000 in duplicate travel payments$70,000 in consulting/speaking fees.

01/23/05 to 01/24/05 - Scottsdale, AZProvided to School District 

Provided to university

11/21/05 to 11/22/05 – Nashville, TN (Page 1)Provided to School District

11/21/05 to 11/22/05 – Nashville, TN (Page 2)Provided to univerisity

09/24/06 to 09/26/06 – Raleigh, NC (Page 1)Provided to School District

Provided to TSU09/24/06 to 09/26/06 – Raleigh, NC (Page 2)

04/29/07 to 05/01/07- Raleigh, NCProvided to School District

Provided to university

Undisclosed and Fraudulent Salary Payments

Salary as CA Site Director from 2002 to 2007 - $150,000 (2006 & 2007 - $50,000)

Salary to family friends in 2006 & 2007 for processing student testing data - $46,000

Salary to superintendent’s son from 2005 to 2007 for teacher videos $24,000

Payments in 2003 through consultant to the Superintendent for test data - $20,000

Data submitted under the Research Grant

Between 2006 and 2008, $2,095,596 was expended on the NSF Research Grant.In 2006, Superintendent, as the CA Site Director, provided 2004-2005 student data.In April 2007, student data was published claiming that the Superintendant’s special Hands-on-Science method produced the highest gains in state student test scores, above the state proficiency level.

Study 1: HLM Analysis of Scaffolded Guided Inquiry Instruction and Text-based Instruction

California Science Test: Physical Science Subtest (Grade 5)

0

2

4

6

8

10

Fixed Effects ofText-based Instruction

Fixed Effects of Scaffolded GuidedInquiry Instruction

Raw

Sco

re(C

A S

cien

ce T

est:

Phys

. Sci

. Sub

test

)

3.37

5.95

93 % of these scores were false, 39% fabricated and 54% altered.

Study 2: HLM Analysis of Scaffolded Guided Inquiry Instruction and Kit-based InstructionCalifornia Science Test: Physical Science Subtest

0

2

4

6

8

10

Fixed Effects ofKit-based Instruction

Fixed Effects of Scaffolded Guided InquiryInstruction

Raw

Sco

re(C

alifo

rnia

Sci

ence

Tes

t: Ph

ysic

al S

cien

ce S

ubte

st) 56 % of these scores were false,

3% fabricated and 53% altered.

Study 3: HLM Analysis of Combined Study Using Study 1 and Study 2

California Science Test: Physical Science Subtest

6.02

3.893.35

0

2

4

6

8

10

Fixed Effects of Text-basedInstruction

Fixed Effects ofKit-based Instruction

Fixed Effects of ScaffoldedGuided Inquiry Instruction

Raw

Sco

re C

alifo

rnia

Sci

ence

Tes

t: Ph

ysic

al S

cien

ce S

ubte

st

real

4.6

real

5.1

real

3.9

75 % of these scores were fabricated or altered.

Falsification of Data for Kit-Based and SGI Raw Scores55% of Kit-Based scores were false, 3% fabricated and 52% altered.

67% of SGI scores were false, 7% fabricated and 60% altered.

A fake SGI score of 6.02 was above the California proficiency level of 6.0.

Falsification of Data for Text-Based Raw Scores

Results were falsely reported to be from 5th grade students taught without kits.7 of 10 classes were fabricated, listing names of 6th grade students from other schools.Of the 3 remaining classes, 87 % of scores were false.

Convictions and SentencingSuperintendent plead guilty to two counts of

Wire Fraud, one related to the original grant and one related to the CA grant funds.

Superintendent was sentenced to 10 months confinement, 3 years parole, and ordered to pay $325,000 in restitution.

Related to CA grants, Assistant Dean and Ed Professor plead guilty to submitting False Statements and sentenced to 5 years supervised probation.

Resistance to Coordinated Investigative Efforts

Institutional resistance or hesitance: Concerns of outside audit/investigation Concerns of negative publicity or litigation Faculty/employee opinion Belief that the investigation is unjustified

Internal Audit Departments resistance: Lack of resources/required audits Lack of institutional management support

Benefits of Coordination Shared audit/investigative expertise Combining resources saves time and

expedites findings OIG can obtain evidence and testimony

outside of the university Initiation and support of corrective actions

plans and systemic recommendations Results can be reported positively

Contact Information

www.oig.nsf.gov

Hotline:1-800-428-2189E-mail:oig@nsf.govFax:(703) 292-9158

Mail:4201 Wilson Boulevard Arlington, VA 22230 ATTN: OIG HOTLINE