United States v. Agrawal

97 F.4th 421

UNITED STATES of America, Plaintiff-Appellee, v. Jyoti AGRAWAL, Defendant-Appellant.

No. 22-5931

United States Court of Appeals, Sixth Circuit

Argued: October 26, 2023

Decided and Filed: April 1, 2024

Appeal from the United States District Court for the Eastern District of Kentucky at Lexington. No. 5:21-cr-00047-1—Danny C. Reeves, Chief District Judge.

ARGUED: Kevin M. Schad, OFFICE OF THE FEDERAL PUBLIC DEFENDER, Cincinnati, Ohio, for Appellant. James T. Chapman, UNITED STATES ATTORNEY'S OFFICE, Lexington, Kentucky, for Appellee. ON BRIEF: Kevin M. Schad, OFFICE OF THE FEDERAL PUBLIC DEFENDER, Cincinnati, Ohio, for Appellant. James T. Chapman, Charles P. Wisdom, Jr., UNITED STATES ATTORNEY'S OFFICE, Lexington, Kentucky, for Appellee.

Before: MOORE, READLER, and MURPHY, Circuit Judges.

OPINION

MURPHY, Circuit Judge.

Jyoti Agrawal successfully obtained over $1.5 million in federal and state grants to research and develop a scanning electron microscope. But fraud tainted these grants. Agrawal received the largest grant by forging a letter in her company's application to the Department of Energy. She later lied to the Department about how her company had spent the funds, failing to disclose (among other things) that she had used a portion to pay for her MBA. A jury convicted Agrawal of three financial crimes. The district court found that her conduct had caused $1,548,255 in "loss" when calculating her guidelines range. It also ordered Agrawal to pay that amount back in restitution and authorized the United States to confiscate her house and personal financial accounts as part of a separate forfeiture judgment.

On appeal, Agrawal challenges the district court's evidentiary and instructional rulings at trial. She challenges the court's estimate of the amount of the "loss" from her fraud, claiming that the court should have reduced its estimate by the sums she legitimately spent on the research-and-development project. She lastly challenges the court's decision to find her personal property forfeitable due to the fraud. But the alleged evidentiary and instructional errors were all harmless. The district court also properly refused to offset its "loss" amount by her project expenses because it reasonably found that the Department would not have awarded her most of the grant funds if it had known of the fraud. And the court properly subjected her personal property to forfeiture because she commingled that property with grant funds. We thus affirm.

I

Congress has enacted many policies to help small businesses. See 15 U.S.C. ch. 14A. This case concerns two programs that fund small-business research and development: the "Small Business Innovation Research Program" and the "Small Business Technology Transfer Program" (what Congress has dubbed the "SBIR" and "STTR" programs). Id. § 638(e)(4), (6). Under these programs, federal agencies may contract out research-and-development efforts to small businesses. See id. Both programs follow a "uniform process" with three phases. See id. The first two phases matter here. At Phase I, a small business receives initial funding to research the scientific and commercial "feasibility" of an idea. Id. § 638(e)(4)(A), (e)(6)(A). If an agency finds the idea worthwhile after Phase I, the small business can receive more funding to "further develop" it at Phase II. Id. § 638(e)(4)(B), (e)(6)(B).

Agrawal and her ex-husband, Subhadarshi Nayak, applied for many grants under these programs through their small research-and-development business, ScienceTomorrow LLC. Immigrants from India, Agrawal and Nayak both obtained doctorates in science fields and took jobs with Intel in Arizona. Around 2008 or 2009, they began to operate ScienceTomorrow out of their garage. ScienceTomorrow lost money in its early years while Nayak continued to work at Intel. When the couple both began to work for their small business full-time, they relocated to Virginia to be closer to potential government customers. While there, they started to see some success in obtaining defense grants.

In late 2012, the Department of Energy solicited small businesses to apply for Phase I grants on a range of topics under the SBIR and STTR programs. One topic concerned microscopes. Applying for either an SBIR grant or an STTR grant, ScienceTomorrow proposed a project that would research a better and cheaper scanning electron microscope. When obtaining his doctorate at the University of Tennessee, Nayak had studied under a professor who was "one of the leading figures" on these microscopes. Nayak Tr., R.141, PageID 2582. As part of ScienceTomorrow's application, therefore, it proposed subcontracting with this university to perform about $49,000 worth of research. In February 2013, the Department of Energy awarded ScienceTomorrow an SBIR grant of $153,696. The Phase I grant lasted from February to December 2013.

During this phase, Nayak ran the microscope project's "science" side while Agrawal ran its "business" side. Id., PageID 2482, 2495, 2578. Just as ScienceTomorrow proposed in its application, the company contracted with the University of Tennessee to obtain the professor's help with the research. But the university never invoiced ScienceTomorrow for any work, and the company never paid any Phase I funds to the university.

In October 2013, the Department of Energy solicited ScienceTomorrow to apply for Phase II funding of up to a million dollars. The Department imposed a strict December 10 application deadline. Again seeking an SBIR grant or an STTR grant, the couple submitted their application online minutes before the deadline expired.

The Department required ScienceTomorrow to include in its application a "letter of commitment" from any university that it planned to work with during Phase II. Before applying, Nayak had asked the University of Tennessee to commit to a Phase II subcontract of $300,000. But the relevant university office did not learn of ScienceTomorrow's proposal in time to finish its review by the deadline. Late on December 10, the university sent ScienceTomorrow a "provisional letter" committing only to a $221,576 budget. Rather than attach this letter to the application, Nayak and Agrawal sent the Department a forged university letter committing to $300,006. According to Nayak, Agrawal engaged in this fraud on her own while he scrambled to complete the application's technical provisions. According to Agrawal, she forged the letter at Nayak's request.

Either way, the Department awarded ScienceTomorrow a Phase II SBIR grant in early 2014. That spring, the Department and ScienceTomorrow negotiated the final budget. The Department ultimately approved a Phase II budget of $999,266. This budget allocated $300,006 for the University of Tennessee's services. The Department agreed to distribute these funds to ScienceTomorrow over a two-year period from April 2014 to April 2016.

Soon after the couple submitted the Phase II application, they moved to Kentucky. Agrawal had learned that Kentucky ran a grant-matching program that offered additional money to companies awarded SBIR grants. The couple took advantage of this program. Kentucky gave ScienceTomorrow another $500,000 to match part of its Phase II award.

In the summer of 2014, Nayak began the Phase II work with other engineers that the company hired. That August, however, Nayak and Agrawal had a falling out over a personnel issue. According to Nayak, Agrawal fired him. According to Agrawal, Nayak quit. They separated immediately and formally divorced two years later.

Agrawal described Nayak's departure as a "disaster" because he had all the technical expertise. Agrawal Tr., R.147, PageID 3851. But she decided to keep the project alive without him and alerted the Department of Energy of the change. That said, she departed from the approved budget without the Department's permission. For example, ScienceTomorrow never entered a Phase II subcontract with the University of Tennessee and never paid the university any of the budgeted $300,006. Agrawal also used the Phase II funds on the $146,000 that it cost her to obtain an MBA from the University of Chicago. Apart from her MBA, a government accountant estimated that Agrawal kept $444,080.66 of the grant—well above the amount allocated to her as salary.

Ultimately, ScienceTomorrow created a prototype device and obtained U.S. patents on it. Agrawal later certified to the Department that ScienceTomorrow spent all the Phase I and Phase II funds. Federal records showed that the Department disbursed $1,152,962 to ScienceTomorrow. State records showed that Kentucky gave the company $500,000 in grant-matching funds. But a government audit of ScienceTomorrow's financial records suggested that the company did not spend (or return to the Department of Energy) some $319,000 of the grant funds. Agrawal also conceded that the amounts in her final certification reports were "inconsistent" with the company's actual spending. Agrawal Tr., R.148, PageID 3979.

ScienceTomorrow's grants came to the attention of law enforcement when the Environmental Protection Agency began to investigate Nayak for other grant fraud. Investigators soon uncovered the forged letter in ScienceTomorrow's Phase II application. Agrawal admitted to an investigator that she and Nayak had "quickly modified" this letter just before the application deadline. Hinderer Tr., R.145, PageID 3468.

The federal government criminally charged Agrawal and Nayak. Nayak pleaded guilty to wire-fraud offenses. See United States v. Nayak, 2023 WL 2911659, at *1 (6th Cir. Apr. 12, 2023). Agrawal stood trial on three counts: conspiring with Nayak to commit wire fraud, in violation of 18 U.S.C. § 1349; committing wire fraud, in violation of 18 U.S.C. § 1343; and laundering the ill-gotten money, in violation of 18 U.S.C. § 1957. At trial, the government alleged that Agrawal had committed wire fraud (and conspired to do so) by fraudulently obtaining the Phase II grant and by...