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Yiheng “Percival” Zhang, a former Virginia Tech biotech scientist, walks into federal court in September.

A judge has found a former Virginia Tech professor guilty of federal grant fraud, the U.S. attorney’s office announced Monday.

Guilty verdicts for biotech scientist Yiheng “Percival” Zhang included one count of conspiracy to defraud the government, three counts of making false statements and one count of obstruction.

He was acquitted of 19 other counts, including all 12 counts of wire fraud in his indictment. U.S. District Judge Michael Urbanski released the verdicts in a 77-page ruling Thursday but did not set a date for sentencing.

The ruling comes more than five months after Zhang’s trial in September 2018.

Zhang, 47, of Blacksburg, resigned from his 12-year university post in 2017 after being arrested by the FBI. He had been a celebrated faculty member in biological systems engineering, including for potentially lucrative work on sweeteners. The government accused Zhang, founder and chief scientific officer of Cell-Free Bioinnovations Inc. of Blacksburg, and Zhiguang Zhu, its chief technology officer and principal investigator, of scheming from January 2014 to May 2016 to obtain grant funds while violating program rules.

Grant proposals submitted by Cell-Free Bioinnovations underwent four days of courtroom scrutiny at Zhang’s bench trial, at which he did not testify. The National Science Foundation and Department of Energy operate programs designed to spur private-sector innovation with grants, but prosecution evidence showed violations of program rules that required all grant money be spent on the exact work outlined in the application. The prosecution’s chief accusation, that Zhang applied for money to pay for research he had already completed in order to use it for unfunded research work, was upheld by the judge. Authorities said grants paid to the company reached $1.1 million.

In addition, evidence showed improper withholding of certain grant funds from the university. The obstruction charge said Zhang falsified time sheets to impede the investigation.

The defense argued that a former Cell-Free Bioinnovations interim CEO who reported Zhang to law enforcement manipulated an inexperienced government case agent. The agent then conducted a flawed investigation, according to Zhang’s lawyer, who asked the judge to acquit Zhang. Attorney Peter Zeidenberg declined to comment Monday.

Zhang, a naturalized citizen born in China, has been free on bond since about three months after his arrest. Preparations for sentencing in a felony case can take one and a half to two months.

Separately, Zhang has been the target of a civil action by the former company official that accuses him and the company of improperly sharing valuable research with the Tianjin Institute of Industrial Biotechnology in China, part of the country’s academy of sciences. Zhang had a consulting agreement with the institute during his latter years with Virginia Tech, work he disclosed to university officials. Judge Norman Moon, who has been handling the civil case in Charlottesville federal court, commented on the importance of Zhang’s work. “Sugar tastes good. But it’s unhealthy. So, companies and scientists explore how to efficiently change its structure. The idea is to make a sugar variant that tastes great but is less unhealthy. Zhang and Cell-Free were engaged in this endeavor,” Moon wrote.

Zhang was not charged in the criminal case with misappropriation of trade secrets or economic espionage, placing those issues raised by the civil action off-limits at his trial.

Congress showed interest in Zhang shortly after his arrest, when it called on the university to submit case records to the House Committee on Science, Space and Technology. Tech said it would comply. The following spring, the committee held a hearing, titled “Scholars or Spies: Foreign Plots Targeting America’s Research and Development,” focused not on Zhang but on the issue of foreign espionage targeting U.S. academic research.

Charges are still pending against Zhiguang Zhu, who was not present for the trial. Court papers filed earlier in the case described him as a fugitive who might be in China working at the Tianjin Institute. Zhu is “apparently beyond the jurisdiction of the court,” last week’s ruling said.

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Jeff Sturgeon covers business, banking, transportation and federal court. Phone: (540) 981-3251. Email: jeff.sturgeon@roanoke.com. Mail: 201 W. Campbell Ave., Roanoke, VA 24011.

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