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Monday, January 23, 2017

Wash. U. Fired Whistleblower for Questioning Fraud on Federal Contract, Lawsuit Alleges

Posted By on Mon, Jan 23, 2017 at 7:49 AM

Washington University receives hundreds of millions of dollars each year in federal grants and contracts, but St. Louis' flagship research institution is now facing a lawsuit alleging that its officials may have defrauded the federal government — and then fired the whistleblower who brought the scheme to a superior's attention.

Science is expensive. In 2016 alone, Washington University handled nearly $500 million in government grants and $24 million in contracts, much of it supporting research into breakthroughs in medical technology. Back in 2010, the university landed one of its largest contracts in recent history: a five-year, $18 million deal from the National Heart, Lung and Blood Institute to study how nanotechnology could be used to treat heart and lung diseases.

According to her lawsuit, which was filed last month in St. Louis County Circuit Court, Beth Owen was hired by Washington University in 2014 as a contract management liaison, a position that gave her oversight over purchase orders tied to the 2010 contract.

There were strings attached to the money: The government mandated that the university make a certain percentage of all contract purchases from minority-owned vendors and what's known as "service disabled veteran-owned businesses," the suit alleges.

In November 2014, eight months after she was hired, Owen got an email from her supervisor about a Mississippi-based company, RAS Enterprises, which is certified as minority-owned vendor and service disabled veteran-owned business. According to the lawsuit, her supervisor's email instructed Owen to approve all purchase requests for RAS.

But something about RAS didn't seem right to Owen. Four months later, the suit alleges, she emailed an administrator at the university's Division of Radiological Sciences and asked for details about how RAS priced the laboratory equipment it was providing the university.

The administrator, however, admitted to Owen that RAS didn't actually provide any equipment, the suit alleges. Instead, in an email included in the lawsuit, the administrator told Owen that RAS was paid a 9 percent "handling fee" to ship equipment purchased from the catalog of Fisher Scientific, a massive biotechnology and laboratory supply company.

"This thing is as convoluted as it gets," says attorney Jeremy Hollingshead, one of Owen's lawyers. According to the lawsuit, Owen began investigating RAS to determine whether it was actually providing vendor services to the university.

Owen's sleuthing ultimately got her fired, the suit alleges. In June 2015, she emailed the same administrator and asked why RAS prices didn't match up with the Fisher Scientific catalog. She also wanted to know why RAS had been charging $260 for shipping.

"Do you know why the shipping is so much?" Owen allegedly wrote in the email. She cautioned that using RAS as a "middle man" to satisfy the requirements of the government contract is "usually considered illegal."

In a follow-up email to the administrator, the suit alleges, Owen wrote that "things have changed" since the contract began in 2010, and that she wanted to find a different vendor to replace RAS. "There are actual minority-owned vendors who run a real business, not a pretend one like Fisher would like the government to believe," she wrote.

That same day, according to the lawsuit, Owen was summoned to a supervisor's office and fired.

According Owen, the university spent about $200,000 of the contract's funds on purchases made through RAS — barely a drop in the bucket to the deep-pocketed feds. But Owen was concerned that the government had granted the contract on the condition that a portion would be spent on a minority-owned vendor. To her mind, RAS was just a minority-owned middle man. (Riverfront Times sent questions about the lawsuit to an email address associated with RAS Enterprises last week. We got no response; we'll update this post if we hear back.)

It's worth noting that Owen's lawsuit is primarily concerned with her termination, not any alleged fraud; if the case reaches trial, Owen's lawyers won't necessarily have to prove that Washington University committed fraud and fired Owen to cover it up. Instead, Owens is alleging the university violated the state-level legal protections for whistleblowers who have a "good faith belief" that their employer has broken the law.

"The story here is obviously way bigger than our client," says attorney Hollingshead. "There are larger ramifications of a university finagling the system. Did it happen? We don’t really know. We do know that she had a good faith belief, based on her own expertise and educational background and work experience, that they were potentially defrauding the government out of tens of millions of dollars. And then she was terminated for that."

Washington University spokeswoman Sue Killenberg McGinn said the school "believe[s] the case is meritless," but said she could not comment directly on pending litigation.

Follow Danny Wicentowski on Twitter at @D_Towski. E-mail the author

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