Settlement Agreement — United States ex rel. GNGH2, Inc. v. Azumi, LLC, et al.

Summary

A Settlement Agreement among the United States, acting through the Department of Justice on behalf of the Small Business Administration; Azumi, LLC and affiliated restaurant companies (the Azumi Entities); and the relator GNGH2, Inc., in United States ex rel. GNGH2, Inc., v. Azumi, LLC, et al., No. 22-cv-11822 (D. Mass.). The United States contends that the Azumi Entities received Second Draw PPP loans in excess of the corporate group limit, and the Azumi Entities otherwise deny the allegations of the civil action. They agree to pay the United States $3,602,423, of which $1,801,211.50 is restitution, plus interest at five percent (5%) from May 15, 2025. Conditioned upon receiving that amount, the United States shall pay $360,242.30 to the relator, and the Azumi Entities pay the relator $2,205.00 for expenses, fees and costs.

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SETTLEMENT AGREEMENT

This Settlement Agreement (“Agreement”) is entered into among the United
States of America, acting through the United States Department of Justice and on behalf
of United States Small Business Administration (collectively the “United States”);
Azumi, LLC; Zuma NYC, LLC; Zuma Las Vegas, LLC; Zuma Japanese Restaurant
Miami, LLC; Inko Nito Garey St., LLC; and Beach Chu Hallandale, LLC (collectively,
the “Azumi Entities”); and GNGH2, Inc. (“Relator”) (hereafter collectively referred to as
“the Parties”), through their authorized representatives.

RECITALS

A. The Azumi Entities are limited liability companies, each of which operates
a restaurant in the United States of America and each of which is either fully or partially
owned by Azumi Limited.

B. The United States Small Business Administration (“SBA”) is an
independent agency of the United States government that provides aid, counsel, and
assistance to small businesses and entrepreneurs. The Coronavirus Aid, Relief, and
Economic Security Act (“CARES Act”), Section 1102, vested the SBA with the
responsibility of managing the Paycheck Protection Program (“PPP”) under the SBA’s
7(a) Loan Program. The PPP was a federal program that provided emergency relief to
small businesses affected by the COVID-19 pandemic. See 15 U.S.C. § 636(a)(36).

c. The SBA administered the PPP and guaranteed loans that were made
according to PPP rules. To apply for PPP funding, a business or entity had to agree to

comply with the PPP rules.
D. On October 24, 2022, Relator filed an action in the United States District
Court for the District of Massachusetts captioned United States ex rel. GNGH2, Inc., v.
Azumi, LLC, et al., No. 22-cv-11822, pursuant to the qui tam provisions of the False
Claims Act, 31 U.S.C. § 3730(b) (the “Civil Action”). Following the Effective Date of
this Agreement, the United States will file a notice of intervention in part for purposes of
settlement.

E. The United States contends it has civil claims against the Azumi Entities
for submitting or causing the submission of false claims to the SBA arising from the
Azumi Entities’ applications for certain PPP loans disbursed in 2021 (“Second Draw”) of
the PPP, and their receipt of funds from and forgiveness of those loans. In particular, the
SBA imposed a limit on the total amount of funding a single “corporate group” could
receive during the Second Draw of the PPP. See Business Loan Program Temporary
Changes; Paycheck Protection Program Requirements Corporate Groups and Non-Bank
and Non-Insured Depository Institution Lenders, 85 Fed. Reg. 26324 (May 4, 2020); 86
Fed. Reg. at 3720. The United States contends that the Azumi Entities received Second
Draw PPP loans in excess of the corporate group limit.

F, The Azumi Entities admit, acknowledge, and accept responsibility for the
following facts:

1. Under the PPP interim final rules promulgated by the SBA, the Azumi
Entities are members of a single “corporate group.”

2. On various dates in or about February 2021 through March 2021, each of
the Azumi Entities applied for and received a Second Draw PPP loan for

which they were individually eligible.
3. Except for Inko Nito Garey St. LLC, which repaid its Second Draw PPP
loan, each of the Azumi Entities applied for and received forgiveness for
its Second Draw PPP loan.

4, The Azumi Entities collectively received and were granted forgiveness
for Second Draw PPP loans in a total amount that exceeded the Second

Draw PPP corporate group limit.

The foregoing conduct described in paragraph F, including subparagraphs, is referred to
below as the Covered Conduct.

G. Relator claims entitlement under 31 U.S.C. § 3730(d) to a share of the
proceeds of this Settlement Agreement and to Relator’s reasonable expenses, attorneys’
fees and costs.

H. Except for the facts set forth above in paragraph F as the Covered
Conduct, the Azumi Entities expressly deny the allegations of the Civil Action.

In consideration of the mutual promises and obligations of this Agreement, the
Parties agree and covenant as follows:

TERMS AND CONDITIONS

1. The Azumi Entities collectively shall pay to the United States $3,602,423
(“Settlement Amount”), of which $1,801,211.50 is restitution, plus interest at a rate of
five percent (5%) from May 15, 2025, and continuing through the date of payment, no
later than ten (10) days after the Effective Date of this Agreement by electronic funds
transfer pursuant to written instructions to be provided by the Office of the United States
Attorney for the District of Massachusetts. Each of the Azumi Entities is jointly and

severally liable for the full Settlement Amount.
2. Conditioned upon the United States receiving the Settlement Amount and
as soon as feasible after receipt, the United States shall pay $360,242.30 to Relator by
electronic funds transfer (“Relator’s Share”).

3. Within ten (10) days of the Effective Date of this Agreement, the Azumi
Entities shall pay to Relator the sum of $2,205.00 for expenses and attorneys’ fees and
costs pursuant to 31 U.S.C. § 3730(d). Immediately upon execution of this Agreement,
Relator shall provide wire instructions to the Azumi Entities in order to effectuate this
payment.

4. Subject to the exceptions in Paragraph 6 (concerning reserved claims)
below, and upon the United States’ receipt of the Settlement Amount plus interest due
under Paragraph 1, the United States releases each of the Azumi Entities and their
respective current and former parent corporations or entities, subsidiaries, related entities,
affiliates, successors, and assigns, from any civil or administrative monetary claim the
United States has for the Covered Conduct under the False Claims Act, 31 U.S.C. §§
3729-3733; the Administrative False Claims Act (formerly known as the Program Fraud
Civil Remedies Act), 31 U.S.C. §§ 3801-3812; or the common law theories of breach of
contract, payment by mistake, unjust enrichment, and fraud.

5. Subject to the exceptions in Paragraph 6 below, and upon the United
States’ receipt of the Settlement Amount, plus interest due under Paragraph 1, Relator,
for itself and for its heirs, successors, attorneys, agents, and assigns, fully and finally
releases each of the Azumi Entities and their respective current and former parent
corporations or entities, subsidiaries, related entities, affiliates, successors, and assigns,

from any civil monetary claim the Relator has on behalf of itself or on behalf of the
United States for the Covered Conduct or any other matters Relator asserted or that it
could have asserted in the Civil Action.

6. Notwithstanding the releases given in Paragraph 4 of this Agreement, or
any other term of this Agreement, the following claims and rights of the United States are
specifically reserved and are not released:

a. Any liability arising under Title 26, U.S. Code (Internal Revenue
Code);

b. Any criminal liability;

c. Except as explicitly stated in this Agreement, any administrative
liability or enforcement right, or any administrative remedy,
including the suspension and debarment rights of any federal
agency,

d. Any liability to the United States (or its agencies) for any conduct
other than the Covered Conduct;

e. Any liability based upon obligations created by this Agreement;
and

f. Any liability of individuals.

ih, Relator, on behalf of itself and its heirs, executors, administrators,
affiliates, successors, attorneys, agents, and assigns, shall not object to this Agreement
but agree and confirm that this Agreement is fair, adequate, and reasonable under all the
circumstances, pursuant to 31 U.S.C. § 3730(c)(2)(B). Conditioned upon Relator’s
receipt of the Relator’s Share, Relator and its heirs, successors, attorneys, agents, and

assigns fully and finally release, waive, and forever discharge the United States, its
agencies, officers, agents, employees, and servants, from any claims arising from the
filing of the Civil Action or under 31 U.S.C. § 3730, and from any claims to a share of
the proceeds of this Agreement and/or the Civil Action.

8. Relator, for itself and for its heirs, executors, administrators, affiliates,
successors, attorneys, agents, and assigns, fully and finally releases each of the Azumi
Entities, and each of their respective officers, directors, managers, members, agents,
attorneys and employees, from any liability to Relator arising from the filing of the Civil
Action, or under 31 U.S.C. § 3730(d) for expenses or attorneys’ fees and costs.

9. The Azumi Entities waive and shall not assert any defenses the Azumi
Entities may have to any criminal prosecution or administrative action relating to the
Covered Conduct that may be based in whole or in part on a contention that, under the
Double Jeopardy Clause in the Fifth Amendment of the Constitution, or under the
Excessive Fines Clause in the Eighth Amendment of the Constitution, this Agreement
bars a remedy sought in such criminal prosecution or administrative action.

10. The Azumi Entities fully and finally release the United States, its
agencies, officers, agents, employees, and servants, from any claims (including attorneys’
fees, costs, and expenses of every kind and however denominated) that the Azumi
Entities have asserted, could have asserted, or may assert in the future against the United
States, its agencies, officers, agents, employees, and servants, related to the Covered
Conduct, the Civil Action, or the United States’ investigation or prosecution thereof.

11. The Azumi Entities fully and finally release Relator from any claims
(including attorneys’ fees, costs, and expenses of every kind and however denominated)

that the Azumi Entities have asserted, could have asserted, or may assert in the future
against the Relator, related to the Civil Action and Relator’s investigation and
prosecution thereof.
12. The Azumi Entities agree to the following:

a. Unallowable Costs Defined: All costs (as defined in the Federal

Acquisition Regulation, 48 C.F.R. § 31.205-47) incurred by or on behalf of the
Azumi Entities, and its present or former officers, directors, employees,
shareholders, and agents in connection with:

(1) the matters covered by this Agreement;

(2) the United States’ audit(s) and civil investigation(s) of the
matters covered by this Agreement;

(3) the Azumi Entities’ investigation, defense, and corrective
actions undertaken in response to the United States’
audit(s) and civil investigation(s) in connection with the
matters covered by this Agreement (including attorneys’
fees);

(4) the negotiation and performance of this Agreement;

(5) the payment the Azumi Entities makes to the United States
pursuant to this Agreement and any payments that the
Azumi Entities may make to Relator, including costs and
attorneys fees,

are unallowable costs for government contracting purposes (hereinafter referred to as

Unallowable Costs).
b. Future Treatment of Unallowable Costs: Unallowable Costs will
be separately determined and accounted for by the Azumi Entities, and the Azumi
Entities shall not charge such Unallowable Costs directly or indirectly to any contract
with the United States.

c. Treatment of Unallowable Costs Previously Submitted for
Payment: Within 90 days of the Effective Date of this Agreement, the Azumi Entities
shall identify and repay by adjustment to future claims for payment or otherwise any
Unallowable Costs included in payments previously sought by the Azumi Entities or any
of its subsidiaries or affiliates from the United States. The Azumi Entities agrees that the
United States, at a minimum, shall be entitled to recoup from the Azumi Entities any
overpayment plus applicable interest and penalties as a result of the inclusion of such
Unallowable Costs on previously submitted requests for payment. The United States,
including the Department of Justice and/or the affected agencies, reserves its rights to
audit, examine, or re-examine the Azumi Entities’ books and records and to disagree with
any calculations submitted by the Azumi Entities or any of its subsidiaries or affiliates
regarding any Unallowable Costs included in payments previously sought by the Azumi
Entities, or the effect of any such Unallowable Costs on the amount of such payments.

14. | This Agreement is intended to be for the benefit of the Parties only.

15. | Within ten (10) business days of the receipt of the payments described in
Paragraphs 1 and 3, above, the Relator and the United States shall sign and file in the
Civil Action a Joint Notice of Dismissal of the Civil Action pursuant to Rule 41(a)(1).
The Joint Notice of Dismissal shall state that: (1) claims for the allegations described in

the Covered Conduct are dismissed with prejudice to the United States; (2) all other
claims in the Civil Action, including claims under 31 U.S.C. §§ 3729-3733, shall be
dismissed without prejudice to the United States; and (3) all claims in the Civil Action
shall be dismissed with prejudice as to Relator.

16. Except as expressly provided for in Paragraph 3, each Party shall bear its
own legal and other costs incurred in connection with this matter, including the
preparation and performance of this Agreement.

17. Each Party to this Agreement represents that the signatory below is
authorized to bind the Party on whose behalf it executes this Agreement, and that it freely
and voluntarily enters in to this Agreement without any degree of duress or compulsion.

18. This Agreement is governed by the laws of the United States. The
exclusive jurisdiction and venue for any dispute relating to this Agreement is the United
States District Court for the District of Massachusetts. For purposes of construing this
Agreement, this Agreement shall be deemed to have been drafted by all Parties to this
Agreement and shall not, therefore, be construed against any Party for that reason in any
subsequent dispute.

19. This Agreement constitutes the complete agreement between the Parties.
This Agreement may not be amended except by written consent of the Parties.

20. The undersigned counsel represent and warrant that they are fully
authorized to execute this Agreement on behalf of the persons and entities indicated
below.

21. This Agreement may be executed in counterparts, each of which

constitutes an original and all of which constitute one and the same Agreement.
22. This Agreement is binding on the Azumi Entities’ successors, transferees,
heirs, and assigns.

23. This Agreement is binding on Relator’s successors, transferees, heirs, and
assigns.

24. All parties consent to the United States’ disclosure of this Agreement, and
information about this Agreement, to the public.

25. This Agreement is effective on the date of signature of the last signatory to
the Agreement (Effective Date of this Agreement). Facsimiles of signatures shall

constitute acceptable, binding signatures for purposes of this Agreement.

THE UNITED STATES OF AMERICA

Digitally signed by Kimya
i i Saied
Kimya Saied pace: 2025.06.20

14:15:32 -04'00'
BY:

DATED:

Kimya Saied

Trial Attorney

Benjamin Wei

Senior Trial Counsel

Commercial Litigation Branch
Civil Division

United States Department of Justice

Julien M. Mundele

Assistant United States Attorney
District of Massachusetts

DATED: BY:

10
AZUMI ENTITIES - DEFENDANTS

< 25

&
Sven Koch

Azumi LLC

Sven Koch

Zuma NYC LLC

Sven Koch

Zuma Las Vegas LLC

Sven Koch

Zuma Japanese Restaurant Miami LLC

DATED: a [Alaa BY: SEA.

Sven Koch -
Inko Nito Garey St. LLC

Beach Chu Hallandale LLC

énnifer SKort

Counsel for Azumi Entities

11
GNGH2, INC. - RELATOR

24/2

David Abrams
GNGH2, Inc.
Relator

12


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