Date: Aug 10, 2012 Author: Tim Carpenter Source: The Topeka Capital Journal (
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by: Tim Carpenter
A former executive of a Manhattan high-technology company entered a guilty plea to a single count of wire fraud against the federal government, a prosecutor said Friday.
U.S. Attorney for Kansas Barry Grissom said the one-time chief executive officer of Nanoscale Corp. admitted to perpetrating the crime when the private company fell into financial distress.
Aaron Madison, 42, was at the company while it focused on contracts with the U.S. Department of Defense and U.S. Department of Health and Human Services. In this case, Madison attempted to meet Nanoscale's cash flow requirements from January 2009 to April 2011 by defrauding the U.S. government.
Grissom said the effort to make payroll and keep Nanoscale in business led to creation of false invoices tied to the two federal agencies.
During the period Madison defrauded the federal government, the state taxpayer-financed Kansas Bioscience Authority awarded $675,000 in grants to Nanoscale. Payments to the company by the KBA so far have totaled $655,000.
In the past year, the KBA came under withering scrutiny by some Kansas legislators and Gov. Sam Brownback for leadership and investment decisions made in support of bioscience start-up companies. The KBA receives about $35 million annually from the state for economic development.
David Vranicar, president and CEO of the KBA, said the authority's board members weren't aware of Madison's illegal conduct while allocating grant funding. The company met required milestones to demonstrate progress in moving ahead as a viable firm, he said.
"We learned about the allegations after the fact," Vranicar said. "We have no reason to believe anything related to our investments was caught in all that" illegal activity.
In 2009, the KBA invested $475,000 in Nanoscale's research to improve early detection and treatment of cancer, as well as research on substances to neutralize biological warfare agents.
The KBA awarded $199,000 to Nanoscale in 2010 to assess whether a urine or blood test to detect cancer was feasible using nanoparticle and enzyme technology.
Sentencing for Madison was set for Nov. 13. The maximum penalty is 20 years in federal prison and a fine up to $250,000.
Grissom said the defense department's office of inspector general assisted with the case.
