7/19/18 Qingyou Han

Professor Qingyou Han and his company have been indicted on charges that the professor defrauded the National Science Foundation. 

HAMMOND, Ind. — A former Purdue professor and his company were sentenced to two years of probation and made to pay $1.6 million in restitution to government foundations after the professor defrauded them to inappropriately acquire grant money, a U.S. District Court Judge in Hammond ruled Monday morning.

Former professor Qingyou Han was sentenced after pleading guilty to wire fraud in late 2019. His wife, Lu Shao, represented a company she registered as Hans Tech, LLC, but her 2018 indictment was dismissed by U.S. District Court Judge Philip Simon as part of the sentencing agreement. 

Both Han and the company were placed on probation for two years and sentenced to pay restitution of $1,351,956 to the National Science Foundation and $300,000 to the Indiana Economic Development Corp. together.

Han was also fined $25,000 and charged an $100 special assessment fee, along with a sentencing of 200 hours of community service. Shao herself was not placed on probation nor made to pay a fine, though the company she represented was placed on probation for two years, barred from participating in federal programs and charged a $400 special assessment fee.

Simon ruled after spending more than two hours listening to Han's counsel plead for a lighter sentence than the federally recommended 57-71 months in federal jail. Assistant U.S. Attorney Jill Koster spoke to the severity of Han's fraud, and emphasized the importance of a harsher sentence in both punishing Han and sending a message to others with similar motives of defrauding the government.

"He rigged NSF's system," Koster said.

One of her main points to the court was that regardless of how Han spent his ill-gained funds, for legitimate research or otherwise, he still used inappropriate means in receiving those grants. Han misrepresented his laboratory's address, listed his daughters as employees and withheld the fact that he and Shao were married from the NSF.

Though Han reportedly made strides in his research, even filing some patents and beginning the process of commercialization, he still used funds that could have been given to a more deserving, more honest candidate, Koster argued.

Though he acknowledged the criminality of falsely applying for federal grant money, the judge spent much time considering Han's defense before sentencing the retired professor. Han's lawyer touched on several of Han's academic achievements while he argued the pointlessness, in his view, of punishing Han further.

"He is a broken man," defense attorney David Schertler said, noting Han's loss of professorship at Purdue. "That's gone. He's lost his own sense of self-respect."

Han, 62, stared ahead at the microphone in front of him.

"Nobody wants to lose what this man has lost," Schertler added.

The lawyer contended that though Han made a "mistake" and criminally received federal grant funds, he still completed useful research for the auto industry, work that could lead to cars being built with more efficient metals that are lighter and stronger.

Schertler said that throughout his research, Han lived a fairly middle-class life, and since facing the court has suffered great loss both personal and academic. The lawyer recounted the professor's struggles to explain the case to his elderly parents, daughters and other colleagues.

"It's a difficult time for me," Han said, his voice cracking in the quiet courtroom. In sentences broken by long pauses due to his throat choking up, Han expressed his apologies to Purdue, his former students, his family, his daughters and his wife, who sat still in the gallery of the courtroom.

"This was a surprise to them," Han said, referencing his teenage daughters who were 9 and 14 when listed as research employees and given thousands of dollars in salaried pay.

Schertler said Han's entire retirement savings of $800,000 will go toward the restitution, as will part of the proceeds that result from the sale of his residence, where his wife and daughters currently live. An additional $100,000 has already been forfeited from Han's account with Purdue Federal Credit Union, the lawyer said.

After Han and the company were sentenced to a couple of years of probation and told to pay more than $1.5 million in restitution, Schertler commented on the group's opinion of the judge's ruling.

"We're very gratified with the judge's decision," the lawyer said, standing just outside the courtroom doors. That Han did actual work with the money afforded to him, he said, was "reflected in his two years of probation." 

Much of the trouble in sentencing Han stemmed from the intangibility of his fraud. The former professor purported to have legitimately completed research using some of the money.

In the NSF's eyes, this detail didn't matter; Han gained the funds inappropriately to begin with.

It's "very difficult to pinpoint how" the funds were spent, the assistant U.S. attorney said, a process that was made even more difficult by the existence of many bank accounts and grants received by Han.

Nonetheless "he rigged the system," Koster added.

For Simon, the usage of the research funds was a major mitigating factor, along with Han's clean criminal record and a score of supportive letters the judge received from students, colleagues and acquaintances of Han. The fact that there was "virtually" no chance of Han committing fraud again also lessened the severity of the judge's sentencing.

Han's personal character, too, served to shorten his sentence, Simon said. His attorneys filed a sentencing memorandum in July that emphasized Han's rise from a difficult childhood through hard work and determination.

The 62-year-old, who has never entered the criminal justice system before, was born in Wuhan, China, soon after the Communist Party took control.

"The Han family is Christian and were persecuted in China for their religious beliefs," the court documents said. Han's grandfather, a minister, was imprisoned. His parents were forced out of their careers, which left 3-month-old Han with his grandmother while the boy's parents worked in government service.

"When Professor Han was 8 years old, Chinese Red Guards confiscated his grandmother's house as part of the 'Cultural Revolutions.' The family fled, and a local peasant farmer took them in," Han's attorneys wrote. "For the next five years, Professor Han lived with three generations of his family in abject poverty. Seven family members lived together in one room with a dirt floor. When Professor Han turned 13, he was sent to the Gobi Desert to live and work with his parents — whom he had met only a few times."

While there, according to his attorneys, Han was able to enter high school, where he was largely self-taught, and graduated at 16. He worked as a peasant farmer for a year and as a construction worker for three years.

At 20, the Chinese government restored universal education. Han earned bachelor's and master's degrees in metallurgy at two technical universities in China. He was an assistant professor at a university in Beijing for several years before he was accepted into a doctoral program in materials science at Oxford University, where he earned a doctorate.

Meanwhile, Han's wife, Lu Shao, moved to England, where their first daughter, Lucy, was born. She was accepted into a master's program in Minnesota in 1995, and Han reunited with his family in 1997 after his post-doctoral work. Han worked at Oak Ridge National Laboratory, and Shao as a software engineer.

Han was hired as a professor in the Department of Mechanical Engineering Technology at Purdue in 2007.

Han "published more than 200 articles, mentored dozens of Purdue students, led Purdue colleagues in over 30 research projects funded by public and private sponsors and is the go-to person for solving light metal processing issues in manufacturing," the memo said. Several former students and colleagues wrote letters to the judge on Han's behalf.

By pleading guilty, the memo said Han acknowledged he "knowingly and intentionally submitted false and misleading information to the NSF regarding a 2014 time sheet for work attributed to his daughter Lucy and that this fraudulent submission caused the NSF to transmit certain funds to Hans Tech," according to the memo, which disputed "nefarious implications" that the government asserted.

Both of the couple's daughters, according to the sentencing memo, attended school and worked in their parents' businesses. Han earned tenure in 2010 and took early retirement on Aug. 1 this year, shortly after pleading guilty.

"You made tenure very quickly," Simon said, sifting through the many memorandums and letters he received prior to Monday's hearing. Simon noted Han's mentoring of students, his birth into poverty, the religious discrimination Han faced in China and that Han is a "good, decent man by all accounts."

These letters served as a "little window" into Han's character for the judge. But Han's crime, and the fact that his defrauding took NSF grant money away from some faceless researcher elsewhere, made the entire case a "zero-sum game" in Simon's eyes.

But in their own sentencing memo prior to the hearing, government attorneys argue that Han pleaded guilty to one count while denying key facts in the allegations — and he waited until the last legal minute to take the plea deal.

Instead, Han "executed the scheme so well that he almost got away with it; were it not for a (government) investigator creating an algorithm designed to flag grant recipients claiming to carry out potentially dangerous research in residential areas, he would not have been caught," they wrote.

Instead of leniency because of Han's education and previous good work, the government argued for a greater sentence because they allege he used his influence to take advantage of government research money from which other small businesses might have benefited.

Yet as the judge said several times throughout the hearing, Monday's case was an unusual one. He said the federal guidelines suggesting several years in federal prison "overstated" the severity of the NSF's loss.

The institution never expected to receive Han's grant money back anyway, Simon said, and the loss is made more intangible by Han's research and the positive outcomes in which it resulted.

Koster, the assistant U.S. attorney, and Simon engaged in a short discussion on the nature of how Han spent his grant money, and how the government investigated where those funds went. The judge was hung up at one point on the leasing of a residential property, the garage of which was reportedly used as a laboratory for Hans Tech. 

"We don't believe it is true," Koster said, referring to the purported usage of the West Lafayette's property for official research.

"What would be the purpose?" Simon asked, sounding befuddled as he rested his head on one hand. 

The government can't "go back in time," Koster said repeatedly throughout the conversation. After investigating the home, which was occupied by different residents by the time the government looked into the case, the only remnant of anything laboratory-related was a single plug similar to one that might be used to charge an electric car, Koster said.

The residence also could have been used for housing Han and Shao's daughters, rented out to nearby college students or dormant for all the government knew, but the house purchased in 2007 using $70,000 of NSF money was not believed to be used for research purposes, Koster said. The government believes Han used a laboratory at Purdue for his research work.

"I just don't understand it," Simon said, before moving on to questioning Han's defense over the residence's use.

Schertler said the defense had evidence that the garage was used as a lab, with the interior of the home used partially for office space, and he said it rested on the government to prove otherwise. 

Simon did say that it seemed "hanky" to be paying off one's own mortgage, as Shao was listed as the landlord after purchasing the home and paying herself $3,000 in rent every month, per court documents.

Both representatives for the government and the defense brought forward examples of previous cases that involved a husband and wife gaining funds inappropriately and receiving differing sentences. Schertler chose cases in which the defendants received lighter probation periods; the U.S. attorney highlighted cases where the defendant received prison time.

The judge said he took both set of examples into account, though he noted that both sides could spend much time "cherry-picking" any number of similar cases to prove their point.

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