At the end of 2005, Robert D. Felner was riding high. A well-paid dean at the University of Louisville, he had just secured a $694,000 earmarked grant from the U.S. Department of Education to create an elaborate research center to help Kentucky's public schools. The grant proposal, which Mr. Felner had labored over for months, made some impressive promises. On paper this all seemed plausible: From 1996 until 2003, Mr. Felner directed the University of Rhode Island's education school, where he helped create a well-regarded statewide research center. To put it gently, Mr. Felner did not duplicate that feat at Louisville. By the spring of 2008, all but $96,000 of the grant had been spent, but none of the tasks listed in Mr. Felner's proposal had been accomplished. Late in May 2008, he told his colleagues that he had been hired as chancellor of the University of Wisconsin-Parkside, effective August 1. During his final weeks at Louisville, Mr. Felner pressed his luck one last time. Even though only $96,000 remained in the account, he implored Louisville officials to approve a $200,000 subcontract with a nonprofit organization in Illinois that had already received $450,000 from the grant. Perhaps, he suggested, the university could draw on a special fund that had been established by the daughter of a former trustee. The Illinois group, Mr. Felner said, had been surveying students and teachers in Kentucky. That survey would "let us give the feds something that should make them very happy about the efficiency and joint commitment of the university to doing a good job with an earmark, as I know we will want more from this agency," he wrote in an e-mail message on June 18. Two days later, Mr. Felner's offices were raided by federal agents who took away his files and laptops. He was questioned for hours by a U.S. Postal Service inspector and a member of the University of Louisville's police department. That weekend he called Wisconsin officials: Sadly, he wouldn't be coming to Parkside after all. In October a federal grand jury indicted Mr. Felner on nine counts of mail fraud, money laundering, and tax evasion. According to the indictment, the Illinois nonprofit group, known as the National Center on Public Education and Prevention, was simply a shell that funneled money into the personal bank accounts of Mr. Felner and Thomas Schroeder, a former student of his and the group's "executive director." Prosecutors say the two men siphoned away not only the $694,000 earmarked grant, but also $1.7-million in payments from three urban school districts, money that ought to have gone to the legitimate public-education center that Mr. Felner had created in Rhode Island. Mr. Felner and Mr. Schroeder now await trial on charges that could send them to prison for decades. No trial date has been set. Some of Mr. Felner's former colleagues insist that he should have been stopped long before the spring of 2008. They say the university coddled Mr. Felner and turned a blind eye to his grant management, in part because the doctoral program in education rose impressively in the annual "U.S. News & World Report" rankings after his arrival.