The Money Trail: Did New Jersey University Misspend Federal Funds?

"Any evidence of fraud or abuse regarding DHS funding will be immediately referred to the DHS office of the Inspector General," an agency spokesman said in response to questions. Stevens Institute officials told ABC News that they were unaware of any inquiry, and they believe the recent legal settlement resolved any questions about the school's bookkeeping. "I think the settlement makes clear that all the necessary financial requirements and safeguards have been put in place," said Pete McDonough, a consultant who has advised the university during the settlement process.

"Nothing about the settlement had anything to do with Homeland Security money," he added. Menendez aides noted that, while he and other New Jersey lawmakers took an active role in pursuing earmarks for Stevens, they would have played a far smaller role in pursuing federal grants for the school. Still, Afshin Mohamadi, Menendez's press secretary, said the senator will monitor the Homeland Security matter and is now taking immediate steps to make certain all the defense department funds he helped Stevens secure have been properly accounted for.

"The senator takes seriously this news about DHS scrutiny of one particular grant and will review its findings when complete," Mohamadi said. "In the meantime, our staff will proactively contact the Department of Defense project manager in New Jersey who oversees the ongoing project that involves Stevens to ensure that it is progressing smoothly."

Mohamadi said the senator was aware, through news reports, that there were warning signs about possible financial troubles at Stevens.

In 2008, Stevens was forced to pay the Internal Revenue Service $750,000 in penalties and back taxes from its various subsidiaries, according to court records. In May of that year, a former associate vice president of the university pleaded guilty to embezzling approximately $264,000 from the U.S. Department of Education's Upward Bound program, money that was supposed to be used to help prepare disadvantaged inner-city New Jersey children for college.

During this period, Stevens aggressively pursued federal support.

The university has spent more than $1.2 million on lobbying in Washington since 2007, according to the Center for Responsible Politics.

The university also hired a former Menendez aide to lobby for funds, though Menendez staffers noted it was a different Stevens lobbyist who approached their office about the federal earmarks. At the same time, Stevens officials have been prolific donors to New Jersey lawmakers. Raveche, the Stevens University president, and his wife have donated more than $17,000 to Menendez's campaign accounts over the past two decades, campaign finance reports show.

Questions about the fate of the money secured for Stevens have surfaced just as Congress has begun to consider concrete steps to curtail the use of earmarks. Melanie Sloan, executive director of the advocacy group Citizens for Responsibility and Ethics in Washington, said lax vetting of earmark recipients has long been a concern with the way members of congress dole out taxpayer money.

"There's no scrutiny ever," Sloan said. "There's literally no vetting to make sure the people who get the earmarks are qualified to provide the government with what they've been tasked with. This gets to the heart of the problem with earmarks."

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