Criminal Probe Targets Research Links at Stanford : Investigation: The allegations center on the relationship between the university and the Navy agency that oversees its federal funding.

Amid allegations that Stanford University had a sweetheart deal with the government agency overseeing its federal research funds, the Navy has opened a criminal investigation into the school’s relationship with the supervising Office of Naval Research, university officials confirmed Tuesday.

“Our attorneys called and were told that a file had been opened,” said Stanford spokesman Larry Horton. He said the Naval Investigative Service, which investigates allegations of criminal behavior inside the Navy, was spearheading the probe. Navy officials could not be reached for comment.

The probe--the fourth in recent months into Stanford’s government-backed research spending--comes four months after a blistering memo by an Office of Naval Research official expressing concern that the university had engaged in criminal acts that were sanctioned by superiors in his agency.

Responding to mounting criticism, the university announced last week that it would repay taxpayers about $500,000 in claims charged to research overhead during the past 10 years.

Among those charges, university and federal officials said, were thousands of dollars worth of flowers, antiques, wine and other furnishings for the university president’s home and two other Stanford-owned residences.

The $500,000 is only a tiny portion of the nearly $600 million the university received from the federal government during the 1980s to cover the indirect costs of federally funded research. Stanford--which has consistently denied any wrongdoing--defended the claims as legitimate expenses because the three residences are often used to entertain faculty, including those involved with research projects.

University President Donald Kennedy said, however, that Stanford would voluntarily withdraw the claims because they had drawn so much unfavorable attention.

Stanford’s research overhead rates are among the largest in the nation for federally funded projects. The university charges 74 cents for every dollar the government spends on research there, meaning that taxpayers must pay the school $1.74 million for a $1-million research project.

That rate--and high overhead for similar research at other schools--has for years been the subject of critical debate. Last year, however, an inspector for the Office of Naval Research drew attention to Stanford when he began to question the school’s accounting methods and the items charged off as overhead. The Office of Naval Research monitors payments for all government research.

The scrutiny, by Paul Biddle, the resident representative for the Navy’s research office at Stanford, has led to investigations by a House subcommittee, the Office of Naval Research’s inspector general and the General Accounting Office.

Stanford spokesman Horton said he believes Biddle’s concerns also sparked the current probe.

Horton referred to a 27-page memo written in October by Biddle to his superiors. In it, Biddle charged that senior officers in his organization had historically given special treatment to Stanford, and had stepped in whenever the university’s accounting came into question.

When Biddle questioned such oversight, his memo said, “senior management cast a blind eye to significant infractions by (Stanford) and ‘shot the messenger instead.’ ” He added that he was singled out for blame by other Navy officials for his criticism of the Navy-Stanford relationship.

Nonetheless, Biddle concluded, “there could be concern for . . . the likelihood of criminal conspiracy, criminal acts, civil violations and ethics infractions” because of Stanford’s relationship with the agency charged with its oversight.

Horton stressed that the memo “made certain allegations, and allegations are not evidence.” He said no agency has charged Stanford with wrongdoing.