A Tucson-based high-tech company forged documents for years to get government contracts through small-business research grants, the U.S. Justice Department alleged in a complaint filed this week.
The government's complaint, filed late Wednesday in Tucson's U.S. District Court, says Materials and Electrochemical Research Corp. submitted false claims and subsequently entered into Small Business Innovation Research funding agreements with the National Aeronautics and Space Administration, the Energy Department and the Defense Department.
The government's case is based on accusations that SBIR documents were knowingly signed with someone else's signature, and that executives set up a non-existent venture-capital firm, Southwest Investment Partners, to provide financing.
Company attorneys strongly dispute the government's charges, pointing to a solid history of research and development — and to the government's continuing support of the company through SBIR contracts. One lawyer, Bruce Heurlin, said the company will deny in its response to the complaint that the signatures were unauthorized and that Southwest does in fact exist.
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The government's complaint against MER, as the company is known, comes three years after a former employee, Masoud Samandi, filed a lawsuit making related allegations of wrongdoing. Samandi's suit progressed under seal until U.S. District Judge David C. Bury unsealed his complaint in early April.
Samandi's suit alleges MER, 7960 S. Kolb Road, plagiarized or made up the results of several research projects in order to win or receive payments on federal research contracts. Samandi claims company co-owners James C. Withers and Raouf Loutfy told him he would be fired if he didn't include plagiarized results in reports or charge time spent on private projects to government contracts.
The government joined Samandi's lawsuit Wednesday, detailing its own complaints.
In an interview Thursday, Jere Glover, an attorney for MER who is based in Washington D.C., said the company had "one of the best records" for commercialization of its products, including fuel cells and vehicle armor that protects U.S. soldiers.
Founded in 1985, MER specializes in battery technology, advanced materials, composites and rapid manufacturing of metal alloys. The company employs about 70 people. Since it formed in 1985, the company has received hundreds of contracts from the SBIR program. The program is meant to provide the government with new technology while stimulating small-business development. Progress reports are required to receive payment under the contracts.
In Wednesday's filing, the government said MER damaged the United States by at least $9 million. But Heurlin said the "damages" are essentially non-existent because the company delivered its products in the examples detailed by the Justice Department.
"Every one of these contracts was performed by MER successfully and completed," Heurlin said. "No one ever said the product wasn't adequate."
Still, in Samandi's now-unsealed suit, the former worker contended that:
● In one contract proposal, MER showed a photo of "a typical system currently being tested at MER," but the company didn't have the system and didn't build one until more than a year later. The photo was of a system Samandi built for an Australian university, where he previously worked.
● On at least two contracts, MER plagiarized the research results of some of Samandi's former graduate students. The company's reports said the results came from MER research conducted under the contracts.
● The company claimed in other proposals that it could join titanium to steel, which it hasn't been able to do.
In a statement, Glover's law office called Samandi a "former disgruntled employee" who made complaints that the government later abandoned after a three-year investigation.
MER plans to file its response to the government's complaint within weeks, and says it will ask for a jury trial to dispute the government's charges.
At a glance
Company: Materials and Electrochemical Research Corp.
Location: 7960 S. Kolb Road.
Founded: 1985.
Products: MER specializes in battery technology, advanced materials, composites and rapid manufacturing of metal alloys.
Number of employees: About 70.