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WSU professor accused of fraud collected about 30 federal research grants

PULLMAN – If his salary is any indication, Haifang “Harry” Wen has come a long way since his childhood in rural eastern China, where there weren’t many paved roads. As a distinguished engineering professor at Washington State University, Wen collected more than $127,000 in 2014, researching ways to make asphalt out of recycled cooking oil.

His brother, Bin “Ben” Wen, and sister-in-law, Peng “Jessica” Zhang, apparently have done well for themselves, too, operating six engineering and investment firms since 2005. A few years ago, they moved into a red-brick house on an idyllic acre of land in Great Falls, Virginia – a property the county assessor’s office values at more than $1.7 million.

Now, prosecutors say the trio cheated the federal government out of more than $8 million during the course of a decade. Using six companies, fake names, fabricated letters and Haifang Wen’s ties to WSU, they won about 30 research grants from federal agencies, and then spent a large chunk of that money on themselves, according to records filed last week in federal court in Rochester, New York.

WSU officials said it came as a surprise when two investigators from the National Science Foundation showed up at Wen’s office to confiscate his work computer Feb. 24 – the same day he was arrested at his Pullman home, where he lives with his wife and their baby.

“The federal government did not tell us they were conducting an investigation,” said WSU spokesman Robert Strenge.

In a letter sent to WSU students and staff this week, Interim President Dan Bernardo said the university has formed a response team to collect information for the NSF investigation. In turn, the NSF provided WSU with a list of people, businesses and other organizations and asked for information on the university’s transactions with those entities.

“WSU had contracts with one of the businesses” on that list, Bernardo said in his letter.

Strenge said, however, “we have not worked our way through the list of individuals, so we can’t say for certain if there are other connections.”

Federal authorities have said research grant fraud may be on the rise. In its most recent semiannual report to Congress, the NSF’s Office of Inspector General highlighted more than a dozen cases from last year alone.

In September, for example, two Florida scientists were sentenced to prison for defrauding federal agencies of about $10.6 million. In November, a Georgia business owner was sentenced for creating fictitious employees and misrepresenting costs in a project that also involved NASA. And an unnamed Massachusetts university paid $2.7 million to settle claims that it illegally spent nearly $35 million in federal grants at a foreign research facility.

Many of those grants are funneled through two federal programs, Small Business Innovation Research and Small Business Technology Transfer, which are designed to help small companies make big leaps in science and engineering.

One of the WSU contracts university officials are investigating was funded by the technology transfer program, Bernardo said in his letter.

A spokeswoman for the U.S. Small Business Administration, the Cabinet agency that oversees those programs, declined to comment, even in general terms, about efforts to mitigate fraud.

Haifang Wen, 41, is a naturalized American citizen with three degrees in civil engineering – most recently a Ph.D. from North Carolina State University. After moving to the United States from China in 1998, he worked at a research consulting firm in Milwaukee, Wisconsin.

WSU hired him in 2008, and a university news release noted he “has been involved in more than $17 million in research grants from national and state agencies.”

From 2006 to 2012, Bin Wen, 44, and Peng Zhang, 43, also naturalized citizens, lived in Horseheads, New York, where they established three limited liability companies: United Environment and Energy, Advanced Engineering Research, and KEW Technologies. Another three companies, including one that listed a Milwaukee address, appeared to be independent investors, although they, too, were owned by the couple.

Through the two small-business programs, the defendants won grants from the NSF, the Department of Energy, the Department of Transportation and the Department of Agriculture.

Prosecutors say the paperwork didn’t add up.

One issue, according to court records, is that the presidents of the investment companies, who signed letters pledging to contribute money to the grant projects, did not actually exist.

Court records also say the defendants misrepresented their relationships with several people who were listed as consultants and employees, in an attempt to collect additional grant money to pay those people’s salaries.

Bernardo wrote in his letter to students and staff that WSU has about 4,000 grant accounts and $330 million in annual research spending.

“As this case unfolds, I want to assure our WSU family of the strong integrity of our research enterprise. … Our research projects are growing in complexity and in local and national reach, and we will continue to enhance our compliance functions to keep pace.”

Haifang Wen is out of custody and made a preliminary appearance by telephone at the federal court in New York. Messages left at his WSU office were not returned. His lawyer, Jeff Coopersmith, declined to comment.

The charges against all three defendants, including wire fraud and lying to federal agencies, carry a maximum penalty of 30 years in prison and a $1 million fine.



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