A $500,000 University investigation into alleged financial mismanagement resulted in the Jan. 7 resignation of Dennis Polla, head of the University’s biomedical institute.
The investigation found Polla mishandled private and federal funds while billing the federal government inappropriately. He resigned from his post, but he will still remain employed at the University as a researcher.
The evidence of wrongdoing could worsen the University’s tenuous standing with its largest research sponsor, the National Institutes of Health.
In September, The Minnesota Daily reported University auditors were conducting an internal investigation into Polla’s financial transactions. On the same day of the article’s publication, the University made their investigation public and brought in Institute of Technology Dean H. Ted Davis to supervise the accounting of Polla’s research projects.
Polla mismanaged departmental funds almost from the start of his appointment in January 1998, sources told the Daily. He overspent several federal grants, including two military grants, bringing those accounts into deficit by putting the money into unrelated projects.
The Daily also obtained an e-mail message Polla sent to colleagues on Sept. 15, two days after the initial article, in which he denied allegations that he took advantage of University funds, facility and personnel for his own gain.
Polla called the article “one-sided” and defended his practice of cross-transferring and overspending research funds.
The nationally recognized researcher’s practices were seen in a different light by investigators from PricewaterhouseCoopers, Minneapolis-based law firm Dorsey and Whitney and independent accountant Mary Jepperson. They discovered Polla inappropriately spent $110,000 of the more than $3.4 million in private and federal funds he received.
Though no evidence exists that Polla stole or embezzled funds for personal gain, poor accounting records left the University unable to determine whether he mismanaged another $450,000.
The evidence of mismanagement adds another notch to the University’s already poor reputation regarding research funds.
In 1995, the National Institutes of Health branded the University with “exceptional” status, a sanction imposed on organizations proven to have poor business practices. The NIH slapped the University with the probation because of a series of high-profile financial problems mostly related to the illegal distribution of an experimental anti-organ-rejection drug, ALG.
Once an organization is identified as exceptional, the NIH closely monitors management of all grants.
As a result of the NIH’s supervision, University researchers have less control over the use of their funds. NIH approval is important to the University because the organization accounts for more than a third of the school’s $350 million in annual sponsored research.
Last October, NIH officials visited the University to determine whether or not to change the University’s status. The 11-member committee reported their findings to the NIH in December and an official decision on a possible change should come this month.
Christine Maziar, vice president of research and dean of the Graduate School, said the recent problems will have no effect on the organization’s upcoming decision.
The investigation cost Polla more than his University post: He lost a prestigious $150,000 endowment named for the founder of Medtronic, Earl Bakken, and his salary was reduced from $139,363 to $126,694 a year.
Polla has worked at the University for the last 12 years and is a national expert on microchip technologies. His workload places him in the top 10 percent of the school’s 3,000 principal researchers, Maziar said.
University General Counsel Mark Rotenberg said the school will have to pay back $110,000 to the federal government with the possibility of further retribution if federal authorities decide to conduct their own investigation.

Craig Gustafson covers the Medical School and welcomes comments at [email protected]. He can also be reached at (612) 627-4070 x3233.