One of the members of the research team, Dong-Pyou Han, a native of South Korea, has pleaded not guilty in federal court to four counts of making false statements in research reports.
He is free on bond awaiting trial scheduled for Sept 2.
The research team, led by biomedical sciences professor Michael Cho, was awarded USD 6.8 million to be paid over five years by the NIH, but it won't see the last payment. The team previously received grants totalling USD 7.6 million.
"NIH makes funding decisions based on scientific merit of the proposed research to eligible organisations/institutions. The researchers are eligible to apply for future NIH grant funding through their institutions just as other researchers may apply," the agency said in an emailed statement.
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University spokesman John McCarroll said the team, which consists of 10 researchers, has sufficient funding to continue its work.
According to the indictment filed last month in US District Court in Des Moines, Han's misconduct dates to when he worked at Case Western Reserve University in Cleveland under Cho, who was leading a team testing an experimental HIV vaccine on rabbits.
Starting in 2008, Cho's team received initial NIH funding. Cho reported soon that his vaccine was causing rabbits to develop antibodies to HIV, which was considered a major breakthrough in HIV/AIDS vaccine research by NIH officials and the research community.