Court Affirms $5M Ruling Against Grant Recipient

(CN) - Lithium Power Technologies and its founder must pay $5 million for bilking the Department of Defense out of more than $1.6 million in grant money for the purported development of thin, rechargeable lithium-based batteries.

The 5th Circuit upheld the damage award against Lithium Power and founder Mohammed Zafar A. Munshi, who were accused of lying on grant proposals, double billing the government and billing for work that was never completed.

Lithium Power, which makes lithium-based batteries, submitted four grant proposals to the Department of Defense - two to the Ballistic Missile Defense Office and two to the Air Force. It received more than $1.6 million under those four grants, according to the ruling.

Lithium Power's alleged abuse of the grant money surfaced in 2002, after the company hired Alfred Longhi Jr. as vice president of sales. Longhi suspected the company and Munshi were defrauding the government, so he began to document their conduct.

He was eventually laid off for financial reasons, shortly after he filed a false-claims suit on behalf of the government.

Longhi accused Lithium Power of fraudulently billing the government in connection with 21 different contracts. The government investigated and intervened in 2005, jumping in to recover money under the four defense grants.

The government said Lithium Power lied in all four grant proposals, including falsely claiming to have a cooperative arrangement with the University of Houston and Polyhedron Laboratories.

The district court found the defendants liable and ordered them to repay the $1.6 million in grant money, which it tripled to nearly $5 million. It also ordered the defendants to pay Longhi $283,765 in attorney fees - the full amount requested.

On appeal, the New Orleans-based appellate judges said the government met its burden of showing that Lithium Power and Munshi had knowingly provided false information or fraudulent statements in the four grant proposals.

But Lithium Power argued that it did, in fact, have an "arrangement" with the University of Houston and Polyhedron Labs, because members of the public could use the labs for a fee.

"This argument is patently absurd," Judge Carl Stewart scoffed.

The three-judge panel refused to lower the damage award simply because the company went on to design and make a lithium battery that the government accepted.

"The defendants' ability to deliver on the hoped-for "ends" ... does not justify the means it employed to receive the grants."

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