Stanford makes deal over fraud

October 27, 1994

Stanford University, one of America's foremost academic establishments, has made a deal with the United States government over an expenses fraud scandal in which flowers at the university's president's home, and the depreciation of a yacht were claimed as research costs.

The furore over Stanford University's skirting of the rules over "indirect costs" on government-funded research was immense. Donald Kennedy, the then president, had to answer questions in front of television cameras and before a Congressional committee. He eventually resigned.

Stanford received a good deal of embarrassing publicity from the whole affair.

The deal involves the university repaying a small fraction of the $1.2 million which it had claimed were expenses incurred in the course of research carried out for the government. The government has dropped its claim that it was overcharged as much as $185,000 and a three-year inquiry has found there was no wrongdoing by the university.

The settlement means that Stanford will have repaid a total of more than $3 million to the government. The alleged overcharging "cast a shadow over Stanford and I'm glad that shadow has dissipated," said university president Gerhard Casper.

The issue goes back to 1990 when a government official, Paul Biddle, who worked on the campus, blew the whistle on the practices involved in billing the government for so-called indirect costs of federally sponsored research.

He claimed that Stanford had overcharged the government about $230 million, an allegation that the university denied. It always described the overcharging as "an error".

Before Mr Biddle's complaint Stanford had received indirect costs amounting to $700,000 on top of every $1 million worth of research awarded by the federal government to cover the cost of laboratories, utilities and other unspecified items. This was one of the highest rates in the country.

After the complaint, Stanford's rate was reduced to 55.5 per cent. Today it receives 58.3 per cent. Other universities were also caught in the research expense scandal, but none to the extent of Stanford.

The affair is not quite over as Mr Biddle is suing the university privately. His lawsuit was "without merit", said Gerhard Casper, Stanford's president, and would be "vigorously" defended.

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