ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Saturday, September 28, 1996 TAG: 9609300047
SECTION: VIRGINIA PAGE: C-1 EDITION: METRO
The Department of Defense seized records from a Radford research firm this week as part of an investigation into whether company officials falsified information on government contracts.
For at least the past decade, the American Research Corporation of Virginia, known as ARCOVA, has received millions of dollars in contracts with government agencies, including the Air Force, Army, Navy and NASA.
The Defense Department, the FBI, NASA and the military began an investigation three months ago, apparently after a group of ARCOVA employees told a federal contract auditor "they were being pressured to report that they had worked on contracts on which they had not," according to the search warrant affidavit. It was filed by a Defense Department criminal investigator in Roanoke federal court Friday.
"Whenever a contract was running out of funds and had not been completed, ARCOVA employees would mark their time sheets to show that they had worked on another contract which had funds remaining," the affidavit says. "As a result of this continued practice, ARCOVA employees ultimately were not able to provide the full level of effort required by later contracts."
The affidavit says ARCOVA president and owner Russell J. Churchill, director of research Usha Varshney and bookkeeper Wanda Gibson are being investigated for conspiring to defraud the U.S. government and, along with other ARCOVA employees, engaging in false labor hour reporting and billing to the government.
No one involved with the company has been charged with a crime, but the investigation continues. Defense Department agents executed the search warrant at the business this week and made the warrant public Friday.
Some of ARCOVA's government contracts provided a fixed amount of funding. Others were cost-plus-fixed-fee contracts, which provided for a negotiated fee and the reimbursement of the contractor's costs. Contractor's costs include the "direct labor" spent working on a contract.
Payment for the time employees spent drafting bid proposals and on other work not related to a specific contract is considered "indirect labor" and is not fully reimbursed by the government.
The affidavit says employees were told to charge as much time as possible "direct" to cost-plus-fixed-fee contracts, regardless of what they were doing.
The Defense Department also claims ARCOVA technicians made many plumbing and electrical repairs to the [ARCOVA] building and charged their time as direct labor on research and development contracts.
The Defense Department claims that Churchill himself charged hundreds of hours to the government for research he never performed.
Among other files, investigators seized payroll records, computer disks, budgetary projections, time sheets and files marked "Department of Commerce," "Navy," and "EPA."
Dale Kipp of Blacksburg, who worked as a research scientist for the company for two years, said Friday he was asked to change his time sheets to create the impression that the company was making progress on a NASA project when, in fact, he was working on a Navy project.
The problem the company faced on federal projects in which Kipp participated was not running out of funding but being understaffed, he said. "We didn't have the people necessary to do the work, and we were falling behind. We were misfiling to give the sense there was progress."
The company typically worked on as many as a dozen contracts at one time, ranging in size from $50,000 to $750,000 projects, with agencies such as NASA, the Navy and the Air Force, according to Kipp.
About half of the company's employees worked with software and multimedia; the other half were chemists, mechanical and materials engineers and physicists, Kipp said. His research as a chemist dealt with batteries, anticorrosion coding and lasers for welding, he said.
Kipp said he began talking with Defense Department investigators before the company fired him in June, on the grounds that he was late turning in reports.
Churchill was named the Radford Chamber of Commerce's Business Person of the Year for 1996.
He created the company in August 1982 and now employs about 40 people working in research and development for government.
The chamber award also listed Churchill as president of the Virginia Advanced Technology Association and past president of the Radford Rotary Club.
Churchill was quoted in a 1991 Roanoke Times story as saying he found the Radford area a good place to do business because it is "much easier to get high-level people at good salaries here." According to the story, about a state study of Southwest Virginia's labor market, he said he probably saved 10 percent to 15 percent in hiring Ph.Ds, as compared to the salary he would have had to pay in Northern Virginia.
Staff writer Betty Hayden Snider contributed to this story.
LENGTH: Medium: 89 linesby CNB