The U.S. government has intervened in part of a False Claims Act (FCA) lawsuit against Agave BioSystems, a biotechnology-based small business with laboratories in Ithaca, New York. United States v. Agave BioSystems, Inc., No. 5:10-cv-102 (U.S. Dist. Ct., N.D.N.Y., election to intervene filed March 27, 2013). The court has ordered the government to serve its complaint on the defendants within 30 days. The government declined to participate in that part of the lawsuit alleging retaliation and the submission of false claims by any defendant other than the company and its now-deceased owner Noe Salazar.
According to the original complaint filed by the Ithaca facility’s former administrative office manager, the company fraudulently billed the Department of Defense (DOD) for “phantom labor and services which have never been provided, and for phantom expenses which have never actually been incurred in connection with any DOD contract.” The manager alleges that the fraud equaled or exceeded $15 million under each “Cost Plus Fixed Fee Contract.”
Among other matters, the manager alleges that the defendants represented to DOD that these contracts would involve specified hours of work by a mechanical engineer, electrical engineer and technician—actually “his wife (a house wife), his daughter (a full-time photographer) and her live-in boyfriend (a musician),” who were allegedly placed on the payroll, but did not work on the government contracts. The complaint also alleges that the defendants secured reimbursement from DOD for a down payment on a BMW automobile, contractor bills for work on the owner’s personal residence, restaurant meals, and cellular phone bills.
The company’s Website indicates that it has expertise in “micro and nanofabrication techniques” and focuses on “the miniaturization of lab-scale diagnostic and analytical instrumentation.” It claims that the principal funding for its research and development initiatives is provided by contracts with DOD, the National Institutes of Health, Environmental Protection Agency, and NASA.