They are removing conditions ("strings") from federal grant money and simultaneously taking a large cut to fund the university's general operations.
They are not laundering general money, they are doing a very specific thing here.
They are not laundering general money, they are doing a very specific thing here.
If I’m a grant giver, I want my money to go towards the consumables of research, not fund CapEx that can be used for someone else’s research. If I’m a lab, I want/need fancy and reusable equipment, which is excluded in the grant terms.
Some of the grant money goes to “university administration” (pick your term) because the university gets a cut. The university administration pays salaries, endowments, whatever with that money. They also buy that durable equipment that was excluded in the contract from their “general fund”, washing the connection to the original grant.
Suppose you want to get karma for a low-effort take on an engineering forum. If you say, for example, "academia is just like the mafia," the low-effort will be immediately recognized and down-voted.
Alternatively, you can make an assertion that is outside of the scope of engineering. Like "this is actually money laundering." Engineers don't have the expertise to assess that, but they will happily carry on a discussion of whatever process you describe for that misnomer.
Voila! Your karma has been granted.
Now you just have to devote a tiny tiny amount of time and energy downstream to clarify that you weren't talking about "actually money laundering" in the sense of, you know, "general money", but rather something else entirely.
In my analogy, that tiny tiny amount of time and energy is like the lab equipment that the university provides to the poor little grant recipient.
First, it makes the common mistake of comparing a graduate student stipends are low, while failing to assign any value at all to tuition. Many Ph.D.s are supported by grants, and their tuition is covered and is not taxed. That doesn't mean the tuition has no value, nor that money isn't exchanged to pay for that tuition. Real money is used to pay for that, and it provides a number of benefits to the student including access to the campus and all associated resources (libraries, gyms, labs, events, technology, workspaces, etc.)
People working at McDonalds don't have access to those resources from their job, so it's unfair to not include that when calculating their total compensation. When you do, they come out a lot better than low level drug dealers, as this article tries to argue.
It goes on to argue how graduate students are precariously employed. Quite the opposite, Ph.D. students are usually funded for 3-4 years under a grant. At least in the US, I don't know of many other jobs with guaranteed 4 year contracts, especially entry level. Most places are at-will and you can be fired on the spot. Ph.D. students are regarded as students, and therefore often aren't fired when they make mistakes (even big ones), because it's expected that their role is to learn.
That's another thing, is that this article focuses primarily on how the Ph.D. student is shortchanged by not being paid (in dollars) as much as a low-level employee at a corporation, but it doesn't spend any time on how such employees have different expectations. Ask a Ph.D. student if they want more money, and they say "Hell yes!" tell them they have to wear a uniform and arrive at 7:00am to open the lab, and they're fired if they're late twice, and every second of their day will be scheduled and tracked, they will be suddenly less enthusiastic at the prospect of making a couple extra bucks.
When you give some one money with legally recognized conditions then the organization has to honor those conditions. e.g donate money to a charity and tell them that it is to be used purchasing pens then that is all that money can be used for.
So if I understand correctly the 'scheme' here is that Lab A applies for and receives a grant that has stipulation X. As part of this process a portion of that grant goes to the hosting university without that stipulation. The university is free to spend that money however they wish, including providing some funds to Lab A for things that they really need but were not provided for under the grant.