Book-Juggling Alleged at Argonne Labs

CHICAGO (CN) - Its former Chief Financial Officer claims in court that Argonne Labs fired him for objecting that the Labs gave its "pet programs" discounts on overhead, billing other contractors "to subsidize the overhead associated with those pet programs."

Michael Besançon sued UChicago-Argonne LLC in Cook County Court.

Argonne LLC manages and operates the Argonne National Laboratory for the U.S. Department of Energy. It employs or contracts with researcher to do federally funded research at the labs, and bills the federal government for the research. The University of Chicago is the sole member of Argonne LLC.

Besançon says he was Argonne's chief financial officer from 2008 to 2010, and that "He was fired from that position by Argonne LLC because he refused to participate in unlawful billing practices by Argonne LLC and blew the whistle on them."

Besançon says Argonne recruited him from Northwestern University, where he was an associate dean at the engineering school. Before that, he served for 27 years in the Navy.

"As CFO for Argonne LLC, Besançon's responsibilities included advising Argonne LLC about how to allocate overhead (or 'indirect') costs among the various research projects carried out at Argonne Lab before billing them to the federal government," he says in his complaint.

"'Indirect' or 'overhead' costs are costs not readily identified with a specific project but, instead, incurred for the shared benefit of several projects or an organization as a whole. For example, maintenance, repair and facilities costs are typical indirect costs - because they are almost always incurred for the shared benefit of many research projects at a lab, rather than only one of them.

"In his position as CFO for Argonne LLC, Besançon was responsible for assuring that indirect costs were correctly allocated among the research projects at the Lab, were correctly billed to the federal government, and were accurately disclosed to DoE [U.S. Department of Energy] in conformity with the Federal Costing Accounting Standards.

"Federal Cost Accounting Standards require that all projects benefiting from overhead expenditures share those expenditures in reasonable proportion to the beneficial or causal relationship between the expenditures and the project. No project is to be charged more (or less) than its reasonably proportional share.

"At Argonne Lab, however, some researchers attempted to have their projects charged appreciably less than their proportional share of overhead expenses. These researchers tried to get discounted rates for overhead for their projects because every dollar less they had to allocate to overhead was another dollar they could allocate instead to pay salary to themselves, graduate students and staff or to purchase supplies.

"While employed at Argonne Lab, Besançon received several requests from senior personnel at the lab to discount the overhead costs that would be charged to their programs. In the course of responding to these requests, Besançon discovered that for a number of years Argonne LLC had been providing undisclosed, discounted overhead rates to pet programs undertaken by certain preferred researchers or subcontractors, including researchers from Argonne LLC's parent institution, the U of C, while looking to other contracts to subsidize the overhead associated with these pet programs."

Besançon says he informed Argonne's director and its chief operating officer that this selective discounting of overhead costs violated federal cost accounting standards.

"In response, Argonne LLC's director advised Besançon that he intended to continue to extend preferential subcontract rates to certain subcontractors, at his discretion, 'for strategic reasons,'" according to the complaint.

"Soon after, Besançon received yet another request to authorize a discounted overhead rate. This request came from the Associate Laboratory Director for Computational Environmental and Life Sciences (CELS), on behalf of Donald Q. Lamb, a professor at the University of Chicago. Lamb claimed to have received discounted overhead rates in the past. He wanted a discount again: every dollar in one of his contracts that was not allocated to overhead could be used for other items instead. When Besançon refused to authorize a discounted overhead rate at Lamb's request, Argonne LLC's director, Eric Isaacs, intervened. Over Besançon's objection, Isaacs, through his acting chief operating officer, Bo Arnold, specifically directed that Lamb's program receive a preferential discounted overhead rate not approved by the DoE.

"The consequence of Argonne LLC's selective discounting was that certain select programs, including programs associated with the University of Chicago, like Lamb's, routinely paid less than their equitable share for overhead, while the majority of government programs were, in turn, charged higher rates to recoup the difference. Between 2006 and 2009, Argonne LLC provided 7 to 8 million dollars in overhead discounts to preferred programs. Federal cost accounting standards prohibit this practice, requiring that pooled overhead costs must be allocated across programs both in conformity with the description of the allocation provided in a contractor's approved CAS Disclosure Statement and in reasonable proportion to the beneficial or causal relationship of the pooled costs to each program.

"On November 22, 201O, in retaliation for his opposition to Argonne LLC's illegal practices and his refusal to participate in them, Besançon was terminated by Argonne LLC."

Besançon seeks punitive damages as a whistleblower and for retaliatory discharge.

He is represented by Joshua Karsh, with Hughes, Socol, Piers, Resnick & Dym.

The only defendant is UChicago-Argonne LLC.

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