A criminal liability cloud may hang over Stanford University for overcharging the government as much as $200 million during the 1980s for indirect, but unallowable, expenses related to federal research, Rep. John Dingell, D-Mich., said.
The investigations subcommittee of the House Energy and Commerce Committee, which is headed by Dingell, held hearings Wednesday on Stanford's practice of charging the government for certain overhead expenses considered unallowable, such as flowers, a yacht, the university president's wedding reception, cedar closet liners, sterling silverware and a university-owned shopping center."What we will hear today is a story of taxpayer dollars going to bloated overhead, rather than to scientific research. It is a story of excess and arrogance, compounded by lax governmental oversight," Dingell said.
"The General Accounting Office and the Defense Contract Audit Agency have found a number of charges in these certified accounts that are expressly unallowable, raising a serious question as to criminal liability."
Milton Socolar, special assistant to the GAO's comptroller general, told the committee that from 1981-1990, Stanford - a leading research university in Palo Alto, Calif. - overcharged the government between $160 million and $200 million.
Stanford University President Donald Kennedy acknowledged that problems existed but that the university was reimbursing the government for many of the overcharges and that accounting changes are taking place.
"Mr. Chairman, we have a problem, and we are taking it seriously," Kennedy testified. "I should have been more alert to the serious policy issue raised by our cost accounting practices and insisted on a more intensive review of these transactions," Kennedy said.
GAO's Socolar faulted both Stanford and the Office of Naval Research, which handled the university's defense contracts, for allowing the overcharges to occur.