University of Kansas Professor Indicted for Fraud, Based on Failure to Disclose Conflict of Interest with Chinese University

On August 21, the United States Department of Justice announced that a federal grand jury in the District of Kansas indicted Feng “Franklin” Tao, a University of Kansas (KU) associate professor and researcher at the KU Center for Environmentally Beneficial Catalysis (CEBC) since 2014, on multiple counts of fraud, for allegedly “hiding the fact he was working full time for a Chinese university while doing research at KU funded by the U.S. government.”

According to the indictment,

in May 2018 Tao signed a five-year contract with Fuzhou University in China that designated him as a Changjiang Scholar Distinguished Professor.  The contract required him to be a full time employee of the Chinese university.  While Tao was under contract with Fuzhou University, he was conducting research at KU that was funded through two U.S. Department of Energy [DOE] contracts and four National Science Foundation [NSF] contracts.

In annual conflict of interest reports to KU that the Kansas Board of Regents require staff to file, Tao allegedly falsely reported that he had no conflicts of interest.  During his tenure at KU, he “fraudulently received more than $37,000 in salary paid for by the Department of Energy and the National Science Foundation.”

Tao is charged with one count of wire fraud and three counts of federal program fraud.  In addition, the indictment includes a forfeiture allegation in which the government seeks the recovery of salary that he received from KU since May 2018.  He is scheduled to make his initial appearance tomorrow in federal district court in Kansas City, Kansas.

Note: At first glance, it may appear unusual that the Justice Department would take the trouble to obtain an indictment against an individual for a conflict of interest involving a fairly modest amount of federal funds.  While federal fraud prosecutions involving conflicts of interest typically involve millions of dollars, the Department has occasionally prosecuted conflict-of-interest cases involving comparable or even lesser amounts of money than the Tao indictment.

Two factors may have influenced the decision to indict Tao rather than allow him the opportunity to plead guilty.  First, given his full-time position at Fuzhuo University, prosecutors may have been concerned that if no charges were pending against him, Tao would take the opportunity to flee the United States.  Second, some media have reported that the Tao indictment “is part of an FBI push to target ethnic Chinese scientists working in the U.S. who are believed to be passing secrets to China,” although neither the Justice Department announcement nor the indictment include any information to support that theory.

One oddity in the indictment concerns the forfeiture allegation.  That allegation states that, upon conviction of offenses in Counts 1 through 3, the government will seek forfeiture money judgments in amounts “equal to the amount of proceeds that the defendant obtained from the commission of” Counts One and Two.  Count 1, however, is the wire fraud count, which pertains only to Tao’s online submission of his conflict-of-interest form to KU and makes no reference to a specific amount of money.  Counts 2 and 3, on the other hand, specify the amounts of Tao’s salary, totaling $32,506, that came from NSF and DOE contracts.  This discrepancy may be resolved after Tao’s arraignment.

In any event, this case provides counsel at public and private universities with a timely opportunity to remind their staff members of their obligation to disclose all reportable conflicts of interest, and of the potential consequences for false submissions.

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