Ansun Biopharma Settles False Contract Claims for $2

Posted: 01/13/2015  browse the blog archive
Ansun Biopharma Settles False Contract Claims for $2

Ansun Biopharma, Inc. has agreed to pay $2 million to the United States to settle charge and allegations that the company knowingly submitted or caused the submission of false claims to the National Institutes of Health (NIH), the U.S. Attorney’s Office for the Southern District of California announced last week.

Ansun Biopharma, Inc., formerly known as NexBio, Inc., is a biotechnology company headquartered in San Diego, California, that had received several research grants and a contract from the NIH. Among these were a grant award for “Broad-Spectrum Therapeutics for Influenza,” a grant award for “Development of Fludase as an Anti-Influenza Agent,” and, in September 2006, a $50 million contract to develop a drug to combat influenza (the “Fludase Contract”). Fludase was an experimental antiviral drug for the treatment of influenza.

According to the settlements, Ansun’s former Chief Executive Officer, Mang Yu, directed its then-Vice President of Finance and Administration (who was responsible for the accounting department), Dongmei Wang, to fabricate timesheets for company employees to maximize billing on the NIH grants and the Fludase Contract.

The company admitted that it created a time-keeping policy that required employees to accurately record the number of hours devoted to certain projects, including projects covered under the Fludase Contract and other NIH-funded grants. The policy also required employees to accurately record the number of hours attributed to overheard, General &Administrative, and other labor categories. Despite these time-keeping requirements instituted by NexBio, Yu directed accounting personnel to maximize reimbursements from NIH, regardless of the actual number of employee hours spent on the Fludase Contract or the other NIH-funded grants. In particular, Yu directed Wang to bill employee hours to the Fludase Contract, even if the project the employee was working on did not fall within the scope of the Fludase Contract.

The company also acknowledged that Yu informed Wang that NexBio should use the money authorized by the Fludase Contract whenever possible, in case NIH terminated the Fludase Contract before NexBio had used all the allotted funds. In addition, Yu told Wang to extend the funding available on the NIH grants for as long as possible because he needed access to the money from the grants to manage cash flow problems at the company.

To comply with Yu’s orders, Wang corrupted the integrity of the employee time-keeping system by fabricating timesheets for certain employees, altering the number of hours entered on certain timesheets and moving employee hours from one labor category to another, and from non-government projects to either the Fludase Contract or one of the NIH grants. The purpose and effect of these alterations was to obtain money from NIH, even if the work was not covered under the terms of the Fludase Contract or NIH grants.

For this conduct, a criminal information was filed charging Ansun with a violation of Title 18, United States Code, Section 1031, executing a scheme to defraud the United States in a contract valued more than $1 million. As part of its settlement, Ansun has agreed to pay the NIH $1,654,600.

Separately, Ansun entered into a settlement agreement with the United States to resolve civil allegations that it violated the False Claims Act by submitting invoices that falsely stated the number and category of hours worked by employees in connection with several research grants and a contract funded by NIH. Ansun agreed to settle the civil matter with a payment of $495,000 to the United States. The False Claims Act is the government’s primary civil remedy to redress false claims for government funds under government contracts and research grants and allows private parties to sue on behalf of the government and share in any recovery.  Had there been a whistleblower in this case, they would have been entitled to up to 30 percent of the settlement.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.