NYU Hit for $15 Million on Indirect Costs

The New York University (NYU) Medical Center has agreed to pay $15.5 million to the federal government to settle a civil complaint alleging that for 11 years the center overcharged for indirect research costs--overhead such as maintaining a library and providing electricity to labs. The settlement, announced yesterday by Mary Jo White, U.S. Attorney for the Southern District of New York, is the largest payment by a university accused of such transgressions.

The government alleges in an amended complaint filed with a settlement agreement yesterday that NYU Medical Center had negotiated and obtained an inflated indirect cost rate on grants and contracts from 1982 to 1993 by submitting false information to the U.S. Department of Health and Human Services. According to the complaint, that information included duplicate claims for utility costs, overstatements of housekeeping expenses based on budgeted instead of actual costs, and requests for reimbursement for unallowable expenses relating to entertainment. "This settlement demonstrates the government's strong resolve to combat abuses and overcharges by educational institutions and to ensure that no institution receives more than its fair share of limited federal research funds," White said in a statement.

The original complaint was filed under the False Claims Act in December 1993 by Emmanuel Roco, who was assistant manager of financial studies in the indirect cost department at NYU Medical Center from 1986 until 1992. For blowing the whistle, Roco will receive a share of the settlement amounting to $1.57 million.

According to the sealed settlement agreement, White's office says that NYU will be reimbursed for indirect costs at an undisclosed revised rate for 1994 to 1997. NYU officials declined to comment, referred inquiries to the public relations firm Kekst and Co. In a statement issued through Kekst, NYU Medical Center acknowledged having made "some accounting and administrative mistakes" but says these were "inadvertent."

Posted in Policy