AQUASENT: The Assurances That Kept Research Money Coming

AQUASENT and five officials or employees agreed to a $400,000 civil settlement over allegedly false SBIR employment, facilities and investor representations, along with timekeeping assurances and project reports. The company had received approximately $924,618 in National Science Foundation grants under the program since 2008. The allegations reached from the first grant application to the timesheets supplied to federal investigators. If you worked with the research staff, the accounts or the investors, those are parts of the business you could recognize without ever having written a grant proposal.

Aquatic Sensor Network Technology, known as AQUASENT, was based in Storrs, Connecticut. Formed in October 2007, it focused on underwater wireless communications and networking solutions. The National Science Foundation funded the company through its Small Business Innovation Research program. The government’s case concerned what AQUASENT represented about the people, facilities and financial records behind that research.

What the National Science Foundation Required

The National Science Foundation awarded these research grants in successive phases, with later funding dependent on compliance with the program’s requirements. The program supported innovative small businesses undertaking high-risk scientific and engineering research. Its purpose was to give small firms the opportunity to do that work and encourage competition, productivity and economic growth.

The assurances went beyond the proposed technology. The National Science Foundation required certifications about the principal investigator’s primary employment, the accuracy of the proposal, the location and size of the company’s facilities, and the identities of third-party investors. It also required a Financial Management Systems Questionnaire and project reports certified as truthful and accurate.

The questionnaire had a practical job: the agency used it to establish that the company understood and followed accounting and timekeeping requirements. That made the people maintaining the accounts part of the funding story, alongside the scientists doing the work.

Phase I Employment and Facilities Representations

Before the Phase I award, AQUASENT allegedly misrepresented the principal investigator’s primary employment at the company and the size and scope of its facilities. These were statements about the business that would carry out the research: who worked there and what resources it had.

For someone inside a research company, an employment certification can be compared with the working relationship they know. A facilities description can be compared with the space and resources available to the project.

The same capacity question appeared in Sterling Biomedical’s NSF grant case. The government alleged that Sterling’s proposals misstated its size, assets and ability to conduct research, and that one project was not performed as represented. That comparison gives AQUASENT’s facilities allegation its practical significance: the proposal tells the agency what the business can do, while the people inside it know what the business has available to do it.

Phase II Timekeeping Assurances and Project Reports

Before Phase II, AQUASENT allegedly submitted a false Financial Management Systems Questionnaire describing its time-and-effort policies, including the maintenance of biweekly timesheets. The government then alleged that Phase II project reports falsely represented that spending on time and effort was supported by timesheets or other documentation.

The timing matters to the money. According to the government’s account, misrepresentations during Phase I and Phase II resulted in the release of incremental funding. These included renewed false certifications about the Phase I principal investigator’s primary employment and the Phase II reports about support for time-and-effort spending.

That is the connection between a false certification and a government payment. An assurance about how the company keeps time can help it obtain an award. A later assurance about the records supporting its spending can help it obtain more funding. We look at the questionnaire, the project report and the underlying time records together because each describes a different part of the same spending.

We expect a timekeeping safeguard to protect research money. Here, the government alleged that the assurances about that safeguard were themselves false. Even the safeguards needed checking.

When an Effort Form Conceals the Work

The Scripps Research Institute case shows why the content of an effort record matters. In that separate National Institutes of Health grant case, the government alleged that faculty time spent on new grant applications, teaching, committee work and administration was charged to existing projects without adequate effort accounting.

A former employee’s complaint described the problem inside the form itself:

The alleged problem at Scripps was what its effort form failed to distinguish. At AQUASENT, the government challenged assurances that time-and-effort spending had supporting records. Both accounts put the employee’s knowledge of the work beside the paperwork used to justify charging a grant.

False Timesheets Supplied to Federal Investigators

The government also alleged misrepresentations to the National Science Foundation’s Office of Inspector General concerning multiple false timesheets supplied in response to its requests and subpoenas. That allegation concerned the material provided during the investigation, after the funding representations were already under scrutiny.

The National Science Foundation had received a description of a timekeeping system before the Phase II award, then reports saying that time-and-effort spending had documentation behind it. Investigators subsequently received timesheets that the government alleged were false. The company’s account of its recordkeeping and the records presented to support that account were both at issue.

Phase IIB Investor Representations

The Phase IIB allegation concerned the identity and number of third-party investors whose investment the National Science Foundation was asked to match. The government alleged that AQUASENT misrepresented those facts in its application for matching funds.

This put the company’s financing alongside its employment and timekeeping records. The matching request described private investment as the basis for additional public money. Who the investors were, and how many there were, became representations the agency was asked to rely on.

What the AQUASENT Settlement Covered

The Justice Department announced the settlement on June 2, 2016. The civil settlement resolved the government’s allegations about AQUASENT’s management of those grants.

The agreement covered the company and the officials and employees identified in the announcement. The U.S. Attorney’s Office for the District of Connecticut handled the civil case, and the National Science Foundation’s Office of Inspector General investigated.

The settlement brought together allegations about obtaining the awards, securing further payments, supporting the spending and responding to investigators.

What Someone Inside the Research Company Can See

The strongest comparison in this case runs between the representations sent to the National Science Foundation and the business behind them. A research employee may know the principal investigator’s actual working relationship and the facilities available. Someone handling grant accounts may know whether the reported spending had time records behind it. Someone handling investment may know whether the matching application described the investors accurately.

We build the connection between the payment and the records supporting it with you. Your knowledge can explain why an assurance looked credible to an agency and why the people inside the business saw a different picture. That is where a specific account of the work becomes useful evidence about government money.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Our assessment of a whistleblower reward starts with the funding and the conduct your information can explain.

You Know What Was Behind the Grant Application

If you know who actually worked on an SBIR project, what supported its time charges or who invested, talk with our whistleblower experts about the assurances sent to NSF. We work beside you to build your strongest grant fraud whistleblower case and bring in federal grant fraud whistleblower lawyers who understand research funding and effort records. You bring the knowledge of the business, and we bring the experience to pursue it with you.