Reporting Fraud

Image depicts an exclamation point and report fraud, waste and abuse.The HHS OIG promotes the effective, efficient, and economical operation of HHS’ programs and operations through audits, inspections, investigations, and other reviews. The HHS OIG investigates any fraudulent acts involving HHS, its contractors or subcontractors, or any crime affecting the programs, operations, Government funds, or employees of those entities.

Please use the following if you want additional information or want to report wrongdoing:

Combating Fraud

What types of fraud are found in the SBIR/STTR Programs?

  • During Application Process:
    • Submitting a plagiarized proposal
    • Providing false information regarding the company, the Principal Investigator or work to be performed
    • Seeking funding for the work that has already been completed
  • During Award:
    • Using award funds for personal use or for any use other than the proposed activities
    • Submitting plagiarized reports or reports falsely claiming work has been completed
    • Claiming results for an award that were funded by a different source

Knowing the Rules

Which SBIR rules should you be particularly familiar with?

  • Duplicate or overlapping proposals may not be submitted to multiple agencies without full disclosure to all agencies.
  • The company must meet SBA’s requirements for a small business, including being majority American owned and have 500 employees or fewer.
  • For SBIR: The Principal Investigator’s primary employment must be with the company during the grant period and he or she may not be employed full time elsewhere.
  • For SBIR: For Phase I, a minimum of two thirds of the research effort must be performed by the grantee company; for Phase II, a minimum of one-half of the research effort must be performed by the grantee company. Work performed by a university research lab is NOT work completed by the grantee company.
  • University employees participating on an SBIR award should disclose their involvement to the university as well as their use of university facilities.
  • R&D must be performed in the United States.


What happens if you break the rules?

  • If you commit fraud or other wrongdoing in applying for or carrying out an SBIR/STTR award, HHS will investigate.
  • HHS refers violations of civil or criminal law to the Department of Justice (DOJ). If DOJ prosecutes you for fraud or false statements, you may be sentenced to prison and required to pay full restitution.
  • If DOJ pursues a civil action under the False Claims Act, you may have to pay treble (triple) damages and $11,000 for each false claim.
  • HHS may terminate your awards and debar you from receiving grants or contracts from any federal agency.

SBIR Fraud Cases

Lexington Couple Pleads Guilty to Grant Fraud

Department of Justice, U.S. Attorney’s Office, Eastern District of Kentucky Press Release

February 10, 2016

LEXINGTON — A Lexington couple has admitted in federal court that they submitted false claims related to federal grants from the National Institutes of Health (“NIH”) and defrauded the government out of hundreds of thousands of dollars.

Today, Jerome Hahn, 69, pleaded guilty, to conspiracy to defraud the United States with respect to claims, before U.S. District Judge Danny C. Reeves. On December 16, 2015, Vesta Brue, 70, pleaded guilty to making a false claim against the United States.

According to court documents, Vesta Brue certified on behalf of Telehealth Holdings, LLC, a company owned by Jerome Hahn, that the company had incurred expenses totaling $222,037, relating to two federal grants Telehealth received from NIH, for the development of medical devices. Brue falsely certified that the funds had been spent in accordance with grant rules and regulations.

Brue and Hahn waived their right to be indicted by a grand jury, were formally charged in court, and admitted to the charges.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky; Howard S. Marshall, Special Agent in Charge, Federal Bureau of Investigation; Derrick Jackson, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General, Atlanta Region; and Christopher A. Henry, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division, jointly announced the guilty pleas.

The investigation was conducted by the Federal Bureau of Investigation, the U.S. Department of Health and Human Services, Office of Inspector General, and the Internal Revenue Service, Criminal Investigation Division. Assistant U.S. Attorney Kate K. Smith represents the federal government in this case.

Vesta Brue is scheduled to be sentenced on March 30, 2016. She faces a maximum prison sentence of 5 years and a maximum fine of $250,000. Jerome Hahn is scheduled to be sentenced on May 18, 2016. He faces a maximum prison sentence of 10 years and a maximum fine of $250,000. Any sentence will be imposed by the Court after consideration of the U.S. Sentencing Guidelines and the federal statutes.

Page last reviewed: June 1, 2018
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