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November 2001
Vol. 10, No. 11,
pp 45–46.
Regulations and You
The long arm of the lab laws

Committing fraud in a chemical laboratory can be hazardous to your freedom.

opening art
DAN SHERBO
Knock, knock.” “Who’s there?” goes a familiar childhood refrain. When the answer from the other side of the laboratory door is “Open up, U.S. Marshals!”, the day has probably taken a turn for the worse.

Cases of laboratory fraud have rocked the scientific world from time to time, occurring in both commercial and academic settings. When the data used to gain approvals and permits for the manufacture, distribution, and sale or discharge into the environment of various chemical products turns out to be questionable, our faith in the regulatory system and the decisions that regulators make becomes seriously challenged.

The most infamous case of fraud occurred at a toxicology laboratory in the late 1970s and involved the firm Industrial Bio-Test (IBT). IBT was a leading contract toxicology facility for the safety testing of numerous pesticides, food additives, and drugs. At the time, IBT conducted approximately 40% of all U.S. toxicological testing, and the result of the fraud investigation forced the retesting of literally thousands of industrial chemicals. Three company officers were found guilty of mail fraud and making false statements to the government. Finally, after a six-month trial, one defendant was sentenced to a year in prison followed by four years probation; two others were sentenced to six months in jail each and two years probation.

Cleaning Up the Lab
The most significant fallout from the IBT scandal was the establishment of Good Laboratory Practices (GLP) regulations by the FDA that became finalized in 1979. In 1983, the EPA established similar guidelines for pesticide toxicology studies and, in 1989, extended them to cover all research data submitted for the purposes of pesticide registration.

The first major case of lab fraud to occur after the establishment of GLPs began in 1990 and involved Craven Labs, a commercial pesticide residue chemistry laboratory. An employee in Craven’s Quality Assurance unit notified a corporate sponsor of fraudulent practices in a nationwide pesticide residue-testing program. This allegation was promptly reported to the EPA and triggered a two-year investigation that resulted in the 1992 criminal indictment of the company’s president and three employees. The charges ranged from mail fraud to making false statements and concealing material facts to obstructing federal agency proceedings.

The criminal investigation of Craven Labs involved the Department of Justice’s Environmental Crimes Division, the U.S. Attorney’s office in Texas, the EPA’s Criminal Investigation Division, and the EPA’s Office of Prevention, Pesticides, and Toxic Substances. The relevant employees of every company that had conducted analyses at Craven Labs were extensively interrogated to determine whether or not they had colluded with the lab in generating false data. (In fact, no company was found to have conspired with the lab.) Most, if not all, current and prior employees of the lab were also interrogated. The investigation uncovered widespread data manipulation that began at least as early as 1980 and involved numerous pesticides.

The eventual indictment accused Craven Labs of secretly using a variety of “tricks” to falsify pesticide residue tests; the president and owner of the lab was accused of teaching the tricks to the employees. Specifically, the data manipulations included “overspiking” (i.e., varying sample injection volumes), dialing peaks using the zero control knob, diluting or concentrating standards, using methodologies that differed significantly from contracted methods, and keeping two sets of laboratory notebooks—one set containing the actual raw data and a second set containing falsified data shown only to the sponsor and the EPA. Before the trial even started, 11 employees agreed to plead guilty to various felony and misdemeanor counts and cooperate with federal investigators.

An Even Bigger Case
The Results of Fraud
If you commit lab fraud, what can you expect to be charged with?

If the results of your fraudulent analyses are

  • sent through the U.S. mail or by a commercial interstate carrier, the charge is mail fraud;
  • sent via facsimile, you will be charged with wire fraud;
  • presented to the U.S. government, its agencies, or departments, attempting to defraud the United States is the offense; or
  • pesticide-related, then there are additional federal statutes that may have been violated.

In addition to the charges just cited, you might be charged with making false statements, concealing material facts, and obstructing federal agency proceedings. For further information regarding enforcement laws, visit www.fda.gov/opacom/laws/addlenf.htm. Or, if you’d like to report your knowledge of a lab fraud, you can do that online at www.epa.gov/oigearth/feedhot.htm.

On September 5, the EPA announced that, as a result of increased allegations of laboratory misconduct, it planned to expand its criminal fraud investigations. The specific areas of the agency’s concern are available online at www.epa.gov/oigearth/labfraud.pdf.

It is often true that everything is bigger in Texas, but unfortunately, this statement now includes the biggest case of laboratory fraud in the last century. It is estimated that more than 59,000 projects and 250,000 separate tests (GC and GC/MS) worth more than $35 million were affected by work conducted by Intertek Testing Services Environmental Labs operating in Texas. (Intertek has a worldwide network of approximately 280 testing laboratories that collectively employ more than 9000 people.) The alleged fraud was first uncovered in 1997 when the lab reported spurious results in analyzing a double-blind, performance evaluation sample. Further review of the raw data revealed massive manipulation of the instrument calibrations. Then, in 1998, EPA investigators confiscated lab documents and computers. By September 2000, 13 employees of Intertek were indicted for falsifying test results from thousands of Superfund sites. The indictment recounted a long history of internal fraud allegations that had been brought to the attention of the lab’s management. Those named in the charges ranged from a former vice president to the actual bench-level lab analysts who carried out the assessments. Together, if convicted on all counts, they face possible imprisonment of up to 155 years and more than $7 million in fines. (The full criminal indictment of their operation—USA v. Jeffus, et al.—is available at www.txnd.uscourts.gov/notcases.htm.)

The Intertek defendants ultimately were alleged to have altered the calibration data for their instruments by manually reintegrating peak areas in an effort to hide purposefully maladjusted calibrations. (This technique is referred to as peak “juicing” or “shaving” and involves the calculated adding and subtracting of various peak areas.) According to an article in the September 22, 2000, Dallas Morning News, investigators uncovered the data manipulations using Intertek’s own software; their systems tracked every data change made by the staff technicians and scientists.

A Long Road
One should not think that fraud charges are quickly resolved. In the Craven case, for example, the initial allegations were made to the EPA in August 1990. The EPA then announced the start of its criminal investigation in March 1991, but the grand jury didn’t hand down an indictment until September 1992. The first trial to be conducted ended in February 1993, when a witness spoke to a juror, thus forcing a mistrial. A month-long retrial then occurred in November 1993, with three defendants finally pleading guilty and one being acquitted. The lab owner himself was not then sentenced until February 1994.

Based on this case, one might estimate that the Intertek case is still a couple of years from completion. In addition, Intertek is under investigation at two other laboratory locations: New Jersey and Puerto Rico. Thus far, Intertek has spent more than $10 million on its legal defense in the Texas case.

Ethics and Fraud
The EPA defines laboratory fraud as “the deliberate falsification of analytical and quality assurance results where failed method and contractual requirements are made to appear acceptable.” The most prevalent form of fraud involves the manipulation of data that is intended to demonstrate that a laboratory has conducted its analyses using properly calibrated instruments when, in fact, it has not. These data are actually the easiest to alter and/or fabricate because no actual test sample is involved. Furthermore, these data can be altered or otherwise enhanced both electronically and manually. In the Intertek case, for example, technicians were accused of manually removing the standard edit flags from the computer data files to cover their tracks. (The lack of such flags is one of the clues that ultimately raised investigators’ suspicions.) Time traveling is another favorite fraudulent practice, wherein the dates of sample receipt and analysis are altered. As an example, if a sample from a Superfund site cannot be analyzed within a required time period—typically 14 days—an environmental lab might fraudulently alter the analysis dates, thus affecting the validity of the data but allowing crucial deadlines to appear to have been met.

Laboratory fraud is an extremely expensive burden borne by the regulated community and the regulatory agencies. The magnitude is such that it is effectively impossible to calculate the losses in time and money that occur when fraud is discovered. For example, in just the Intertek case, $35 million worth of analyses have been compromised. The programs affected include Superfund, the Resource Conservation and Recovery Act, Air Toxics, well water and groundwater monitoring, underground storage tank cleanup, and the National Pollutant Discharge and Elimination System, as well as various pesticide programs. This figure, of course, does not include the tens of millions of dollars spent by Intertek’s clients to collect the samples in the first place, nor does it include the millions of dollars in mounting legal costs for both Intertek and the U.S. government.

Preventing laboratory fraud ultimately comes down to a matter of ethics. For any organization to avoid fraudulent practices, its management must promote a strong sense of integrity and ethical behavior among employees. In today’s ever-competitive business environment, there are extreme pressures to get the data “out the door”, meet contract deadlines, and stay in business. Sometimes business pressures, accompanied by a fear of failure, can lead people to compromise their ethical values regarding truth and honesty in the performance of their jobs.


Roger A. Novak has a Ph.D. from the University of Houston and is a chemical consultant. Send your comments or questions regarding this article to tcaw@acs.org or the Editorial Office 1155 16th St N.W., Washington, DC 20036.

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