Former Oklahoma State University researcher sentenced in fraud case

A former research executive accused by Oklahoma State University of hatching a large-scale fraud scheme avoided a prison sentence this week and instead will serve time in home confinement under the supervision of the Federal Bureau of Prisons. 

In Oklahoma City federal court, Daniel Webster Keogh, 52, the former contract operator of university-owned OSU-Multispectral Laboratories, was ordered to serve 180 days of home confinement and pay back more than $3 million after pleading guilty to making false statements to obtain a federally backed loan from First Pryority Bank, and transferring federal funds without authorization.

Chief Judge Timothy D. DeGiusti also ordered Keogh to a term of supervised release for four years, which is to include 104 hours of community service during the first year. 

Prosecutors sought an 18-month prison sentence.

Previous coverage:OSU sues over alleged fraud

Alleged schemes involved clothing shop, misappropriation of loans

In a case that spanned more than a decade, prosecutors accused Keogh of telling loan officers at the Tulsa-area bank the money would be used to buy equipment described as a “battery or set of batteries” to be installed at OSU-UML,  but instead, he used the proceeds to fund research and the development of a utility-scale electromechanical battery.

Keogh and his company, Triton Scientific LLC, defaulted on the loan in December 2012, according to court documents. 

In one alleged scheme, OSU claimed a company owned by Keogh’s wife, Danielle Keogh, 41, billed Triton, which in turn billed OSU-UML for financial services that were actually costs associated with inventory for Liberte — an upscale women's clothing shop she opened in Oklahoma City. 

OSU sued Keogh, his wife and several companies linked to them, alleging they used complex fraud schemes to divert money from the OSU-owned company that was engaged in sensitive national security research.

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The lawsuit was settled in Kay County District Court, with several Keogh-linked companies agreeing to have an $8 million judgment entered against them. Keogh and the Keogh Group LLC agreed to be responsible for an $875,000 judgment.

While prosecutors claimed Keogh misled First Pryority Bank about the nature of the battery project to get a loan, his defense attorneys said the bank president’s statements to federal investigators show the executive understood the project. 

In a previous motion to dismiss the case, Keogh’s lawyers claimed prosecutors were under pressure from OSU to file charges against him, to gain leverage in the school’s civil lawsuit. 

Under such pressure, prosecutors instructed government investigators to revise interview notes and statements from various key witnesses, including officials at the Lawrence Livermore National Laboratory in northern California, where the battery development was to occur, Keogh’s defense team asserted in court filings. 

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Defense attorneys accused prosecutors of urging prior Livermore officials’ statements to be changed from building a battery “prototype” to the construction of “risk reduction hardware.” 

While prosecutors argued that research and development loans weren’t eligible for loan guarantees through a USDA Rural Development program, Keogh’s defense team argued that prosecutors were feeding USDA witnesses their own view of the regulations, which, according to the defense, “came into existence nearly a half-decade after the loan was taken out, and the regulations in place at the time contained no prohibition on research and development.”

DeGiusti denied the motion for dismissal. In an eight-page order, DeGiusti wrote that Keogh’s claims were raised in an untimely manner, did not appear to be well-grounded in fact and did not warrant further investigation.

Danielle Keogh pleaded guilty to making false statements to a financial institution. She was sentenced to three years of supervised release and ordered to pay back roughly $758,000.