Date: Aug 19, 2013 Author: Eric Hornbeck Source: Law360 (
click here to go to the source)
Law360, New York (August 19, 2013, 11:54 AM EDT) -- A New York federal judge approved a settlement Friday over a whistleblower's allegations that Agave BioSystems Inc. defrauded the U.S. Department of Defense out of more than $15 million by staffing contracts with its founder's family members instead of engineers.
U.S. District Judge Norman A. Mordue approved a stipulation of dismissal in light of the settlement, which was reached on May 22 and calls for Agave and other defendants to pay $300,000.
Matt Salazar, Agave's president, told Law360 on Monday that it was cheaper to settle the matter than to fight it, especially now that his father, Agave founder Noe A. Salazar, had died. The company had always denied any misconduct or liability, he said.
"While my father was alive, we vigorously contested the allegations against him and the company. After his death, we felt it was important that the company move forward without the expense and distraction of protracted litigation," Matt Salazar said.
The U.S. attorney for the Northern District of New York noted in June that the relator, Rafik Tawadrous, will receive $54,000 of the $300,000 settlement.
In March, the U.S. said it would intervene in the portion of the lawsuit that accuses now-deceased Noe A. Salazar of promising to use experienced engineers on government contracts, including contracts to combat bioterrorism, but instead hiring his family members for "no show" jobs in violation of the False Claims Act.
"Salazar did not hire a mechanical engineer, an electrical engineer or a technician, but instead 'hired' his wife (a housewife), his daughter (a full-time photographer) and her live-in boyfriend (a musician), placed them 'on the payroll,' and began billing the DOD for reimbursement for their 'labor' despite the fact that none of them have ever worked on any government contract," the complaint said.
While Agave's laboratories are in Ithaca, N.Y., Salazar and his family live in Austin, Texas, according to the suit, which was originally filed under seal in January 2010.
The complaint also contends that Agave falsified data to make its products for combating bioterrorism look more effective than they were, and that Salazar used money he received from government contracts for non-project-related costs including payments for his wife's BMW, meals and cellphone bills.
The government said that it wasn't intervening in the parts of the lawsuit that accuse Agave of firing Tawadrous for complaining about the allegedly false claims submitted to the government, or in portions of the complaint directed at Salazar's wife and family.
Tawadrous asserts that he was hired as Agave's administrative office manager in 2009 at the company's Ithaca lab. He helped the company prepare proposals for cost plus fixed fee government contracts, but maintains that he was fired after he protested over the false claims the company was submitting to the government.
The company focuses on miniaturizing instruments used for diagnostic and analytical purposes in labs, as well as research projects to adapt technology to other areas of nanofabrication, its website said.
Agave has won research contracts from the DOD, the National Institutes of Health, the U.S. Environmental Protection Agency and NASA, according to the company's website.
Tawadrous is represented by Andrew J. Campanelli of Campanelli & Associates PC and David A. Koenigsberg of Menz Bonner Komar & Koenigsberg LLP.
Counsel information for Agave couldn't immediately be identified.
The case is U.S. ex rel. Rafik Tawadrous v. Agave Bio Systems Inc. et al., case number 5:10-cv-00102, in the U.S. District Court for the Northern District of New York.
--Editing by Jeremy Barker.
