New York Educational Technology Company Agrees to Settle Federal Grant Fraud Claims for $274,634

Joseph Nocella, Jr., United States Attorney for the Eastern District of New York, announced today a settlement agreement with New York Educational Technology Company, LangInnov Inc. (LangInnov). The settlement agreement addressed allegations that LangInnov violated the federal False Claims Act (FCA) by 1) performing research and development funded by the National Science Foundation (NSF) through the Small Business Innovation Research (SBIR) program outside of the United States, which was expressly prohibited 2) double-booking payroll to both the SBIR program and a Paycheck Protection Program (PPP) loan, and 3) not primarily employing its principal investigator as required under the program. LangInnov agreed to pay $50,000 and to forgo $224,634.25 remaining unpaid on an SBIR award to settle these allegations. The settlement was based on LangInnov's ability to pay.

"SBIR awardees are required to conduct all research and development in the United States to ensure that funds are used to support small businesses and technological advancements in the U.S. and to protect national security interests," stated United States Attorney Nocella. "As alleged, LangInnov disregarded this requirement by improperly conducting federally funded work overseas. The settlement in this matter demonstrates our commitment to holding those who defraud government programs accountable for their actions."

United States Attorney Nocella thanked the Office of the Inspector General for the National Science Foundation (NSF OIG) for its partnership in the investigation.

"When companies fail to follow the requirements of the SBIR program, it is not only a misuse of taxpayer dollars but also takes away funding from deserving U.S. businesses. NSF OIG remains committed to pursuing oversight of these programs to ensure taxpayer funds are invested in the United States to benefit U.S. businesses, the U.S. economy, and national security. I commend the U.S. Attorney's Office for supporting this important proactive effort," stated Megan E. Wallace, NSF's Acting Inspector General.

NSF participates in the SBIR program, a critically important and highly competitive program created to fund technological advancements within the United States. Funding for this program strengthens the competitive free enterprise system and the United States economy. To maximize that impact, SBIR regulations require all research and development to be conducted in the United States. Additionally, the primary employment of the principal investigator for an SBIR project must be with the small business for the duration of the award.

The PPP was intended to provide emergency financial assistance to American small businesses by providing forgivable loans for payroll and certain other expenses. SBIR awardees were permitted by NSF to apply for PPP loans but were not permitted to receive or request compensation for the same costs for both programs.

LangInnov applied for and was awarded Phase I and Phase II SBIR awards by NSF to research and develop an innovative application for bilingual students. LangInnov also obtained a PPP loan which was subsequently forgiven by the U.S. Small Business Administration.

The United States Attorney's Office commenced its investigation based on NSF OIG's proactive initiative to protect national security interests by identifying SBIR recipients who improperly operate outside of the United States. As alleged, LangInnov improperly booked payroll to the Phase I SBIR award for its Chief Operating Officer for 100 hours of work performed in Paris, France. LangInnov also falsely stated in its PPP application that the United States was the principal place of residence for all employees and double-booked payroll to both the SBIR award and the PPP loan, including payroll for work in Paris. Additionally, LangInnov failed to primarily employ its principal investigator for the duration of the Phase I award. NSF suspended payments on the Phase II award when it learned of the conduct. At the time, $224,634.25 was the unpaid balance remaining on the award.

The claims asserted against LangInnov are allegations only and there has been no determination of liability.

The investigation is being handled by Assistant U.S. Attorney Bonni J. Perlin.