Let's take this opportunity to swaddle some of you working from home with another blanket of potential legal liability that we'll call the government's growing concern with foreign funding of domestic research programs. Before COVID-19 saturated our headlines, red flags were rising for our nation's universities and research institutions.
On November 18, 2019, the U.S. Senate Permanent Subcommittee on Investigations published a 109-page report, "Threats to the U.S. Research Enterprise: China's Talent Recruitment Plans." This was followed by a series of escalating scrutiny of federal research grant recipients. An esteemed professor in nanotechnology was arrested and charged with a criminal complaint for "making a materially false, fictitious and fraudulent statement." The professor had received grants from the U.S. National Institutes of Health (NIH) and Department of Defense (DOD), which require disclosure of significant foreign financial conflicts of interest, including financial support, but failed to disclose his involvement in the Chinese-backed Thousand Talents Program. Similarly, Van Andel Research Institute (VARI) settled alleged False Claims Act (FCA) violations relating to one of its researchers receiving Chinese grants for research that was partially funded by the NIH. Recently, the Department of Education announced the opening of investigations into well-known research institutions for failing to disclose foreign funding sources from countries such as China and Saudi Arabia. Last month, Senator Marco Rubio (R-FL), citing the above-referenced professor, requested that the U.S. Small Business Administration (SBA) explain how it ensures that recipients of grants do not have improper ties to foreign entities.
Taking VARI's FCA settlement as a cautionary tale, we note that the NIH requires recipient institutions to disclose other key research funding sources and whether federally funded research will be or has been performed outside of the United States. At least one of VARI's researchers received funding from the Thousand Talents Program, a Chinese government program with the purpose of returning talent, research, and technology to China. Despite having policies and procedures in place to address conflicts of interest, the government alleged that VARI failed to take adequate additional steps to investigate foreign funding sources. For example, after receiving notice of one VARI researcher's involvement with the Thousand Talents Program, rather than inform the NIH, VARI removed references to the researcher's grant work and took additional steps to make false statements to the NIH concerning the project funding overlap between Chinese and NIH grants. VARI settled with the government for $5.5 million.
The point here is not to stoke fears but to encourage universities and other entities receiving research grants from the federal government to take whatever down time they may have to audit their existing funding sources. Among other things, such audits and reviews should cover the following:
- identify all funding sources and determine whether any sources may violate terms you have with your federal grants, such as the NIH's prohibition on foreign sources that served as the basis for VARI's FCA violations;
- assess your written policies and procedures to determine whether there are sufficient checks to maintain ongoing compliance (i.e., at least an internal and an independent review for compliance of funding agreements);
- examine your actual funding sources to ensure there is no noncompliance, and if anyis found to exists, develop a disclosure action plan; and
- develop an ongoing compliance apparatus to ensure continuous education, training, and communication with staff regarding your policy and procedures in this regard.
Indeed, having a robust compliance program, including making self-disclosures of violations, meets the criteria of the Department of Justice's (DOJ) cooperation guidelines. The guidelines direct DOJ attorneys to consider various factors when negotiating FCA settlements and determining what degree of leniency to grant. Though not comprehensive, the guidelines stress the importance of voluntary self-disclosure of misconduct, cooperation with the government during investigations into alleged misconduct, and remedial actions. Such remedial actions include identifying the root cause of the misconduct, implementing compliance measures, disciplining responsible individuals, and taking measures to identify future risks. Thus, prudent entities that receive enough credit can significantly reduce the financial and reputational hardship they would otherwise receive.