Complaint for Violations of the False Claims Act, 31 U.s.c — No. 5:22-cv-00659 (Dkt. 1, W.D. Tex.)
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Qui tam Complaint for Violations of the False Claims Act, 31 U.S.C. §§ 3729, et seq., Case No. 5:22-cv-00659-FB, Document 1, filed 06/23/22, in the U.S. District Court for the Western District of Texas. Plaintiff-Relator Jesus Nunez-Unda sues Lafayette RE Management LLC, Brandywine Homes USA LLC, and Thibault Adrien on behalf of the United States. The complaint states that the relator seeks treble damages and civil penalties for deceiving the Small Business Administration to receive approximately $675,882 in Paycheck Protection Program loans. The prayer for relief asks for penalties of not less than $12,537 and not more than $25,076 for each violation, and the complaint demands a jury trial. The signature block names Max E. Rodriguez of Pollock Cohen LLP.
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“Complaint for Violations of the False Claims Act, 31 U.s.c — No. 5:22-cv-00659 (Dkt. 1, W.D. Tex.).”
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Case 5:22-cv-00659-FB Documenti1 Filed 06/23/22 Pagel fy L E f)
CONFIDENTIAL AND UNDER SEAL—QUI TAM COMPLAINT JUN 2 3 2022
CLERK, U.S. DISTRICT :
IN THE UNITED STATES DISTRICT COURT FOR THABSTERN DISTRICT OF
WESTERN DISTRICT OF TEXAS
UNITED STATES OF AMERICA, ex ret 6p So C F
JESUS NUNEZ-UNDA, COMPLAINT FOR VIOLATIONS
OF THE FALSE CLAIMS ACT,
Plaintiff-Relator, 31 U.S.C. §§ 3729, et seq.
v. JURY TRIAL DEMANDED
LAFAYETTE RE MANAGEMENT LLC, FILED IN CAMERA
BRANDYWINE HOMES USA LLC, and AND UNDER SEAL
THIBAULT ADRIEN, PURSUANT TO
31 U.S.C. § 3730(b)(2)
Defendants.
INTRODUCTION
1. Qui tam Plaintiff-Relator Jesus Nunez-Unda (“Relator”), through his
undersigned attorneys, hereby brings this action pursuant to the False Claims Act, 31
U.S.C. §§ 3729, et seq. (“FCA”) on behalf of the United States of America against
Lafayette RE Management LLC; Brandywine Homes USA LLC (together, the “Entity
Defendants”); and Thibault Louis Philippe Adrien (the “Individual Defendant”),
(collectively, “Defendants”). The claims asserted in this Complaint are based on the facts
and information set forth below, and upon information and belief, unless otherwise
stated.
2. Relator sues Defendants to recover treble damages, civil penalties, and all
other appropriate relief on behalf of the United States for deceiving the United States
Small Business Administration (“SBA”) to receive approximately $675,882 in Paycheck
Protection Program (“PPP”) loans guaranteed by the SBA, using those funds to enrich
themselves.
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3. The PPP loans were made to the Entity Defendants based on their
representations that the loans were necessary due to economic uncertainty and that they
would be used in the manner prescribed by Congress and the SBA pursuant to the PPP
program. But Defendants never needed the PPP money to retain jobs in the manner
required by the SBA, and they made false representations in the applications both for
the loans and for forgiveness.
4, In particular, Adrien, who dominates the operations and decision making
of the Entity Defendants, used the PPP funds for his own ends not authorized by the PPP
program including, among other things, pursuing corporate expansion—funding the
expenses associated with a complex and ultimately unsuccessful attempted corporate
acquisition—acquiring new staff, and investing in new infrastructure, which would
primarily benefit him as the majority shareholder of the Entity Defendants.
5. Adrien saw the PPP program as an opportunity to get free money from the
government that allowed him to invest in his businesses. This money was not necessary
due to economic uncertainty. Instead, it would allow him to leverage the Entity
Defendants in whatever aggressive ways he saw fit, all without having to put an
additional dime of his own money into his own businesses to ensure his employees would
keep getting paid.
6. All the while, this free money allowed Adrien to continue to fund his own
lavish lifestyle through LLC member distributions to his partners and himself that, but
for the PPP money, would have been impossible to do while also paying employees,
investing in new corporate infrastructure, and bankrolling the failed acquisition.
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7. Defendants’ business—single-family rental and property management—
has experienced a boom since the pandemic began. Throughout 2020, much of the
economy remained dislocated and millions of American businesses and middle-class
families suffered economic hardship because of the pandemic. But the 2,700 middle-class
households in the Entity Defendants’ portfolio—168 of which are located in the San
Antonio area of this District—had higher occupancy rates, more leases renewed, and
tenants paying higher rents.
8. Defendants knew about these trends in real time and knew the Entity
Defendants did not need the government’s help when they applied for PPP loans. Adrien
(the CEO and principal owner of the Entity Defendants) had access to real-time data on
occupancy of and rent collections for the Entity Defendants’ properties, as well as data
on market-wide trends, the sum of which showed that single-family residential real
estate was performing and would perform well during the pandemic.
9. Indeed, Adrien was so confident in the performance of single-family
property rentals during the pandemic that even before applying for the PPP loans, he
was already pitching his investors to pile even more money into the sector, through
investing in public securities of competitors and building new communities and units.
One of Lafayette’s partners—a multinational private equity firm with over $300 billion
in assets under management—even told Adrien on April 14, 2020 that “their conviction
for the asset class has only increased in the last few days” and that Lafayette should
“take advantage of the current situation, and go and find more [single-family residential]
communities from homebuilders” because “[tJhey ... have witnessed strong leasing
activity in the last few weeks, and similar collection numbers” to pre-pandemic years.
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10. Adrien also submitted payroll documentation that included fake employees
who never actually worked at Lafayette; his housekeeper; and others who were foreign
nationals employed by Lafayette based on student visas obtained through papered
American online “graduate programs” who do not satisfy USCIS guidelines for working
under those visas.
11. The PPP program was intended to protect small businesses facing historic
and existential disruptions of their businesses and dangers to the livelihoods of their
employees, not to grant private equity fund managers free money to further build and
consolidate their wealth. Defendants abused this historic and important program—all
the while receiving record profits from the middle-class American families renting their
homes—and in doing so have violated, inter alia, the False Claims Act.
PARTIES
I Relator — Jesus Nunez-Unda
12. Relator graduated with a degree in economics from the Tecnoldgico de
Monterrey in Mexico; earned an MSc at HEC Paris in 2005; and received an MBA from
The University of Chicago in 2011.
18. Relator also has years of financial industry experience working at global
financial institutions, such as Lehman Brothers in London, HSBC Securities in New
York, and Goldman Sachs & Co. in New York and Mexico City.
14. ‘Relator is a former employee of Defendant Lafayette, having worked there
from October 2019 until May 2021 under the title of Partner. In that capacity, he worked
on various components of investment management and investment strategy for
Lafayette.
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15. Relator worked closely with CEO Adrien.
16. Relator was asked by Adrien to prepare the Entity Defendants’ PPP
applications using supporting payroll materials provided to him by Adrien and Isabelle
Levilain, the Entity Defendants’ Director of Human Resources.
17. In or about November 2020, Relator was again asked by Adrien to prepare
Lafayette’s PPP loan forgiveness applications. Once again, Relator relied on supporting
payroll materials provided to him by Adrien and Levilain.
18. Relator did not understand at the time the nature of the fraud alleged
herein, because he had no formal training or background in human resources nor access
to the payroll systems, and never had access to Lafayette’s financial statements.
19. Relator ceased to be employed by Lafayette on June 20, 2021.
Il. Entity Defendants
A. Lafayette RE Management LLC
20. Lafayette RE Management LLC is an LLC formed in Delaware, with its
principal place of business at 853 Broadway, 5th Floor, New York, New York.
21. Adrien founded Lafayette in 2011 and serves as its Chief Executive Officer
(“CEO”) and Managing Member.
22. Lafayette is a private asset manager that invests in residential real estate
and owns and operates a series of LLCs for the same purpose.
23. Lafayette is majority owned by Adrien, but has three other minority
members.
24, Lafayette’s members and Adrien’s associates and/or partners include,
Julien Fabre, Louis Villa, and Michael Ogrinz.
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25. Lafayette manages more than $900 million in gross assets through its own
funds via on-shore and off-shore investment vehicles, as well as a joint investment
vehicle, Lafayette Communities, managed on behalf of The Carlyle Group Inc.
26. The chart below, which appears on page 8 of Lafayette’s 2020 Annual
report, outlines the footprint of Lafayette’s 2,700+ homes across ten markets at the end
of 2020:
Nashville
Hen Atlanta
31.4%
Jacksonville
20.7%
Tampa
Orlando
64%
27. The single-family homes owned by Lafayette affiliated funds are targeted
to middle-class families. On April 14, 2020, Adrien sent a communication to investors
where he stated that the portfolio’s properties had an “average rent [per home] of $1,338
per month....”
28. Upon information and belief, the four active investment vehicles managed
by Lafayette as a General Partner are Lafayette Longview (“Longview”), Lafayette
Housing Recovery III, Lafayette Land, and Lafayette Communities (a joint-venture with
The Carlyle Group).
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29. Lafayette members Villa and Ogrinz are board members of Longview along
with Adrien, Joel Roberto, Edouard Guerrand-Hermes, and Jacques-Antoine Ormond.
380. Lafayette generates recurring revenue through a “management fee” for all
its funds as a fixed percentage based on the quarterly value of its assets under
management, which are predominantly single-family homes.
31. Lafayette’s investor roster includes Xavier Niel via NJJ Group, the Frére-
Bourgeois Holding Company via Compagnie Nationale a Portefeuille S.A (CNP), the
Guerrand-Hermes Family via Jakyval S.A., Eurobail S.A., 1875 Finance, the Hamlin
Family via LBCW Holdings, Premier Investissement, and other predominantly European
ultra high-net-worth investors.
32. The relationship between Adrien, the Entity Defendants, and their various
investment vehicles, subsidiaries, and partners is reflected by the organizational chart
below:
j Lafayette Members: Thibault Adrien
Villa, Fabre, Ogrinz
Majority owner (~75%+), managing member Majority owner (~90%+), managing member
~25% est. PPP Entities
ry Lafayette RE Brandywine H
jing Ogrinz, Villa, re, : Manages assets of funds (buys and Property management (collects
sells homes, oversees POL rent, fixes homes, leases homes),
Operator) and receives fees in receives 7% of rental fees in return
return
Lafayette Longview 100%
an% (Owns homes)
Lafayette Fund 3
Hamilton Acquisition (Owns homes)
Holdings LLC
(Vehicle to make
acquisition)
Lafayette Communities
(more homes)
POL Operator LLC Tue CarLyLe Grour
(Operating Co to own LOOM ACTURNATIVE ASSET MANACLMONT
Money Contributions / Asset management (Investment
Ownership decisions)
Operating Companies J Lafayette Members Investing Entities
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37. Upon information and belief, all of Lafayette’s net income is distributed to
its members.
38. Onor about April 10, 2020, Lafayette applied for a PPP loan.
39. Lafayette’s PPP loan was approved on or about April 21, 2020, and Adrien
on behalf of Lafayette executed the PPP loan note on or about April 24, 2020.
40. During 2020, occupancy and collections on the portfolio of single-family
homes managed by Lafayette, and owned directly or indirectly by Lafayette affiliated
funds, were at least stable against pre-pandemic benchmarks and in some cases were at
all-time highs. On or about April 10, 2020 and in the weeks that followed when
subsequent loan notes and forgiveness applications were submitted, Lafayette did not
face any unusual risk or economic uncertainty that placed its solvency or ability to pay
its employees at risk.
B. Brandywine Homes USA LLC
41. Brandywine Homes USA LLC is an LLC formed in Delaware, with its
principal place of business at 2107 N. Decatur Road, Suite 210, Decatur, Georgia.
42. Brandywine is majority owned by Adrien.
43. On information and belief, Brandywine’s CEO Jackie Lee and Lafayette’s
Vice-President Liya Mo each own or are in the process of vesting minority interests in
Brandywine.
44. Brandywine manages the properties in which Lafayette invests, including
but not limited to those in the Western District of Texas, through an office opened in San
Antonio in or about April 2020.
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45. Brandywine manages properties in at least eight metropolitan areas, as
shown in the chart below, which appears on page 22 of Lafayette’s 2020 Annual Report:
Chart 6: Brandywine Home Under Management by Market
= Atlanta
= Tampa
= Jacksonville
= Memphis
= Orlando
= San Antonio
= Houston
= Fort Lauderdale
46. Brandywine receives as revenues of 7% of the rent collected from the homes
in the portfolio.
47. Onor about April 10, 2020, Brandywine first applied for a PPP loan. That
application was rejected.
48. After the rejection, on or about April 24, 2020, Brandywine applied again
for a PPP loan.
49. On or about May 19, 2020, Brandywine’s PPP application was approved.
On information and belief, Adrien similarly executed the PPP loan note on Brandywine’s
behalf shortly thereafter.
50. During 2020, occupancy and collections on the portfolio of single-family
homes managed by Brandywine were at least stable against pre-pandemic benchmarks
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and in some cases were at all-time highs. On or about April 10, 2020, and in the weeks
that followed when subsequent loan notes and forgiveness applications were submitted,
Brandywine did not face any unusual risk or economic uncertainty that placed its
solvency or ability to pay its employees at risk.
I. Individual Defendant — Thibault Adrien
51. Thibault Adrien is the CEO and managing member of Lafayette.
52. Adrien founded Lafayette in 2011.
53. On information and belief, Adrien owns about 75% of Lafayette.
54. Adrien founded Brandywine in 2014.
55. Adrien is also the managing member of Brandywine, of which he owns
about 90%.
56. Prior to founding Lafayette, Adrien was Vice President of the Private
Equity Group of Fortress Investment Group, and before that a Mergers & Acquisitions
Analyst at Lehman Brothers in London, United Kingdom.
57. Prior to that, Adrien was an attorney at Ashurst LLP in Paris, France.
58. Adrien received a post-graduate degree in Business & Tax Law from Paris
II University.
59. Adrien is a French national and has been a New York City resident since
at least Lafayette’s founding in 2011, residing under an investor visa. On information
and belief, he currently resides at 520 LaGuardia Place 3N, New York, New York.
60. Adrien dominates the decision-making and operations of the Entity
Defendants and is the Founder and Managing Partner of both entities.
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61. Adrien operates on a “need to know” basis, keeping employees and partners
in the dark about what he is doing and why he is doing it.
62. On information and belief, Adrien’s domination of the Entity Defendants
has caused frequent instances of abuse, harassment, and other wrongdoing, including
but not limited to religious, racial, and gender discrimination against employees,
harassment, willfully breaching agreements, and making misrepresentations to
investors.
63. On information and belief, few, if any, employees at the Entity Defendants
have the necessary information or clout to fully understand Adrien’s decisions or
challenge them.
64. Adrien is the signatory on the Entity Defendants’ PPP loan and loan
forgiveness applications.
JURISDICTION AND VENUE
65. This Court has subject matter jurisdiction under 28 U.S.C. §§ 1331 and
1345 because this action involves a federal question and the United States is a plaintiff.
This Court also has subject matter jurisdiction under 31 U.S.C. § 3732(a).
66. The Court may exercise personal jurisdiction over Defendants under 31
U.S.C. § 3732(a) because they transact business within this District.
67. Venue is proper in this District under 31 U.S.C. § 3732(a) because
Defendants transact business within this District. Venue is also proper under 28 U.S.C.
§ 1391().
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68. In particular, Lafayette transacts business within this District by owning,
directly or indirectly, investment properties in the district, as well as participating in the
evaluation of potential properties and purchase of properties in the District.
69. In particular, Brandywine transacts business within this District by
managing properties owned directly or indirectly by Lafayette in the District.
70. In particular, Adrien transacts business within this District by virtue of his
role as a CEO and/or managing member of the Entity Defendants.
71. This Complaint is not based on a public disclosure as defined in 31 U.S.C.
§ 3730(e). Relator sues as the original source of information regarding Defendants’
violations of the FCA, given that Relator has direct and independent knowledge of the
information on which the allegations are based and/or knowledge that is independent of
and materially adds to any allegations or transactions that may have been publicly
disclosed (although Relator knows of no such public disclosure).
72. Noallegation in this Complaint is based on a public disclosure of allegations
or transactions in a federal criminal, civil, or administrative hearing in which the
Government or its agent is a party; in a congressional, Government Accountability Office,
or other federal report, hearing, audit, or investigation; or from the news media. Rather,
Relator is the original source under 31 U.S.C. § 3730(e)(4).
THE FEDERAL FALSE CLAIMS ACT
73. The FCA makes it unlawful for any person to submit, directly or indirectly,
false or fraudulent claims for payment to the Government. See 31 U.S.C. §§ 3729, et seq.
Originally enacted in 1863, the FCA was substantially amended in 1986 by the False
Claims Amendments Act. The 1986 amendments enhanced the Government’s ability to
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recover losses sustained because of fraud against the United States. Relator alleges
liability primarily under three of the FCA’s seven liability provisions.
74. First, the FCA’s “presentment” provision, 31 U.S.C. § 3729(a)(1)(A),
imposes liability when a defendant (a) made, or caused to be made, a claim, (b) that was
false or fraudulent, (c) while knowing of its falsity.
75. Second, the FCA’s “false records or statements” provision, 31 U.S.C.
§ 3729(a)(1)(B), imposes liability when a defendant (a) made, used, or caused to be made
or used, a record or statement, (b) that was knowingly false, and (c) that was material to
a false or fraudulent claim.
76. Third, the FCA’s “conspiracy” provision, 31 U.S.C. § 3729(a)(1)(C), imposes
liability when a defendant conspires to commit a violation of the FCA.
77. The “knowledge” element of the FCA is defined as (1) “actual knowledge of
the [falsity of the] information”; (2) “deliberate ignorance of the truth or falsity of the
information”; or (3) “reckless disregard of the truth or falsity of the information” provided
to the Government. 31 U.S.C. § 3729(b)(1)(A). No specific intent to defraud need be
shown. 31 U.S.C. § 3729(b)(1)(B).
78. Under the FCA, the term “claim” means any request or demand for money,
whether under a contract or otherwise, presented to an officer, employee, or agent of the
United States. 31 U.S.C. § 3729(b)(2)(A)G@). A “claim” is also a request or demand for
money made to a contractor or other recipient if (a) the money is to be spent or used on
the Government’s behalf or to advance a Government program or interest and (b) if the
Government provides, has provided, or will reimburse such contractor or other recipient
for any portion of the money requested or demanded. 31 U.S.C. § 3729(b)(2)(A)qi).
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79. The FCA defines “materia ” objectively to mean “having a natural tendency
to influence, or be capable of influencing, the payment or receipt of money or property.”
31 U.S.C. § 3729(b)(4). The Supreme Court reaffirmed the natural tendency materiality
test—even as to subsection (a)(1)(A), which does not explicitly use the term—and
described a holistic approach to analyzing it. See Universal Health Servs., Inc. v. United
States ex rel. Escobar, 579 U.S. 176, 181 (2016).
80. The FCA empowers private persons who have information regarding a false
or fraudulent claim against the Government to sue on the Government’s behalf and to
share in any recovery. 31 U.S.C. § 3730(b).
FACTUAL ALLEGATIONS
IV. The CARES Act and the PPP Program
81. To curb the spread of COVID-19, federal, state, and local governments
implemented public health measures with substantial consequences for businesses.
82. Many small businesses were temporarily closed.
83. To help companies affected by the spread of COVID-19, the Coronavirus
Aid, Relief, and Economic Security Act (“CARES Act”) created emergency relief for
businesses affected by the COVID-19 crisis. See Pub. Law 116-136.
84. Among other programs, the CARES Act created a low-interest (1.00%)
Paycheck Protection Program (“PPP”)! loan as a part of the Small Business
Administration’s existing section 7(a) loan program, which allowed many small
businesses to apply for loans through private financial institutions.
1 See generally https://www.sba.gov/funding-programs/loans/covid-19-relief-
options/paycheck-protection-program (last accessed June 21, 2022).
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85. Like other section 7(a) loans, PPP loans are initially funded by authorized
private lenders, with repayment guaranteed by the SBA to make the loans easily saleable
on the secondary market.
86. To encourage lenders to make these loans, and to do so quickly, the SBA
gave lenders delegated authority to underwrite and issue the loans based solely on the
borrower's certifications and imposed on the lenders only minimal document review
requirements. 85 Fed. Reg. 20811-01, Part III.3.a.iv. and b.
87. To qualify for forgiveness, PPP loan proceeds must be used for authorized
business purposes within the “loan forgiveness covered period,” which is the 24-week
period beginning on the disbursement date (except that, for loans made before June 5,
2020, the borrower may elect to use the original 8-week period that was defined in the
law in force at that time). 85 Fed. Reg. 36308-01, 36310 Part III.c. (revising 85 Fed. Reg.
20811, 20813 Part III.2.n.).
88. Within 10 months after the loan forgiveness covered period, the borrower
may seek partial or full loan forgiveness by submitting to the lender an application for
forgiveness and documentation showing that the funds were used for approved purposes
during the requisite period of time.
89. Upon approval of the forgiveness application by the lender and the SBA,
the SBA then pays the loan in full.
90. The CARES Act allowed PPP loan proceeds to be used for payroll,
continuation of group health care benefits and insurance premiums, salaries and other
compensation, rent, utilities, and interest on prior debt. 15 U.S.C. § 636(a)(36)(F)Q).
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91. Congress left further details to the SBA, directing that the agency should
issue guidance and regulations implementing the PPP program within 30 days. Pub. Law
116-136 § 1106(&).
92. On April 2, 2020, the SBA promulgated and published on its website the
First Interim Final Rule implementing the PPP program, which was published in the
Federal Register two weeks later. See Business Loan Program Temporary Changes;
Paycheck Protection Program, 85 Fed. Reg. 20811-01 (Apr. 15, 2020) (effective Apr. 15,
2020); 85 Fed. Reg. 36308 (noting earlier publication on SBA website).
93. Two months later, upon passage of the June 5, 2020 Paycheck Protection
Program Flexibility Act of 2020 (“Flexibility Act”), the SBA promulgated its Revisions to
First Interim Final Rule. See Business Loan Program Temporary Changes; Paycheck
Protection Program—Revisions to First Interim Final Rule. 85 Fed. Reg. 36308-01 (June
16, 2020) (various effective dates).
94. In broad terms, the Flexibility Act and Revisions to First Interim Final
Rule:
i. expanded the time during which the loan proceeds could be spent (from
eight weeks to 24 weeks after disbursement, which are now defined as the
“loan forgiveness covered period”);
ii. expanded the payment deferment period (from six months after
disbursement to final determination by the SBA of an application for
forgiveness timely submitted within 10 months after the “loan forgiveness
covered period”); and
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lili. extended the maturity date from two years to five years for loans made on
or after June 5, 2020 (and also allowed a five-year maturity on earlier loans
upon agreement of the lender and borrower).
95. In these rules, the SBA explained that “[t]he actual amount of loan
forgiveness will depend, in part, on the total amount of [eligible costs incurred] over the
loan forgiveness covered period.” 85 Fed. Reg. 20811, 20813 Part III.2.0. as revised by 85
Fed. Reg. 36308-01, 36311 Part III.d (effective Mar. 27, 2020).
96. Inthe First Interim Final Rule, the SBA initially explained that although
the list of authorized uses for PPP loan proceeds in the CARES Act applied, “at least 75
percent of the PPP loan proceeds shall be used for payroll costs.” 85 Fed. Reg. 20811-01,
20814 Part III.2.r. The Revisions to First Interim Final Rule, however, retrospectively
changed this requirement to 60% and allows partial forgiveness of the loan so long as at
least 60% of the forgiven amount was used for payroll costs incurred during the requisite
time period. 85 Fed. Reg. 36308-01, 26310-11 Part III.d. (revising 85 Fed. Reg. 20811,
20813-14 Part III.2.0.) (eff. Mar. 27, 2020).
97. The SBA also explained that “payroll costs” do not include “compensation
of an individual employee in excess of an annual salary of $100,000.” 85 Fed. Reg. 20811-
01, 20813 Part II.2.g.ii.
98. If PPP loan proceeds are used for “unauthorized purposes,” the SBA “will
direct” that the money be returned, and if it is knowingly used for unauthorized purposes,
the SBA warns that additional liability, including “charges for fraud,” may apply. 85 Fed.
Reg. 20811-01, 20814 Part ITI.2.s.
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99.
CONFIDENTIAL AND UNDER SEAL—QUI TAM COMPLAINT
To apply for a PPP loan in April 2020, as Defendants did, the SBA required
an applicant’s representative to certify in good faith that:
i.
il.
iv.
The applicant was in operation on February 15, 2020 and had employees
for whom it paid salaries and payroll taxes or paid independent contractors,
Current economic uncertainty makes this loan request necessary to support
the ongoing operations of the applicant.
The funds will be used to retain workers and maintain payroll or make
mortgage interest payments, lease payments, and utility payments; I
understand that if the funds are knowingly used for unauthorized purposes,
the Federal Government may hold me legally liable such as for charges of
fraud. As explained above, not more than 25 percent of the loan proceeds
may be used for non-payroll costs.
Documentation verifying the number of full-time equivalent employees on
payroll as well as the dollar amounts of payroll costs, covered mortgage
interest payments, covered rent payments, and covered utilities for the
eight week period following this loan will be provided to the lender....
I further certify that the information provided in this application and the
information provided in all supporting documents and forms is true and
accurate in all material respects. I understand that knowingly making a
false statement to obtain a guaranteed loan from SBA is punishable under
the law ....
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CONFIDENTIAL AND UNDER SEAL—QUI TAM COMPLAINT
vi. I acknowledge that the lender will confirm the eligible loan amount using
tax documents I have submitted. I affirm that these tax documents are
identical to those submitted to the Internal Revenue Service. I also
understand, acknowledge, and agree that the Lender can share the tax
information with SBA’s authorized representatives .... 85 Fed. Reg. 20811-
01, 20814 Part III.2.t. (emphasis added).?
100. Lenders began accepting applications for PPP loans on April 3, 2020.°
V. LAFAYETTE AND BRANDYWINE SECURE PPP LOANS
101. As explained above, on or about April 10, 2020, Lafayette applied for a PPP
loan.
102. After its first application was rejected, on or about April 24, 2020,
Brandywine applied for a PPP loan.
103. On both applications, Adrien was the signatory for the Entity Defendants.
Adrien, on behalf of both Lafayette and Brandywine, made all the necessary certifications
for the application, including as relevant here:
2 On June 16, 2020, after the certifications at issue here, the SBA revised its
interim final rule to allow (1) up to 40 percent of loan proceeds to be used for
permissible non-payroll purposes and (2) revised documentation requirements. 85 Fed.
Reg. 36308-01, 36311 Part III-f.
3 See O’Connell et al., Following messy start, enormous Paycheck Protection
Program shows signs of buttressing economy, Wash. Post. (Jun. 10, 2020), at
https://www.washingtonpost.com/business/2020/06/09/how-effective-is-ppp-small-
business/ (last accessed June 22, 2022).
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ii.
iil.
iv.
104.
CONFIDENTIAL AND UNDER SEAL—QUI TAM COMPLAINT
“All SBA loan proceeds will be used only for business-related purposes as
specified in the loan application and consistent with the Paycheck
Protection Program;”
“Current economic uncertainty makes this loan request necessary to
support the ongoing operations of the Applicant;”
“The funds will be used to retain workers and maintain payroll or make
mortgage interest payments, lease payments, and utility payments, as
specified under the Paycheck Protection Program Rule; I understand that
if the funds are knowingly used for unauthorized purposes, the federal
government may hold me legally liable, such as for charges for fraud;” and
“I further certify that the information provided in this application and the
information provided in all supporting documents and forms is true and
accurate in all material respects.”
On or about April 24, 2020, Lafayette’s PPP application for $335,000 was
approved. On or about May 19, 2020, Brandywine’s PPP application for $340,882 was
approved.
105.
The Lafayette PPP loan funds were deposited into Lafayette’s operating
bank account at Wells Fargo (account ending # 8046) and co-mingled with the rest of the
company’s cash balances and deposits.
106.
The Brandywine PPP loan funds were deposited into Brandywine’s
operating bank account at Wells Fargo (account ending in #6206) and co-mingled with
the rest of the company’s cash balances and deposits.
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107. Adrien was the signatory for the Entity Defendants in their execution of
the loan notes for the PPP loans. In signing the notes—Lafayette on or about April 24,
2020 and Brandywine on or about May 19, 2020—Adrien acknowledged, as relevant here,
that:
i. “Borrower is in default under this Note if Borrower ... [dJoes not disclose,
or anyone acting on their behalf does not disclose, any material fact to
Lender or SBA;”
ii. “By signing below, Borrower certifies, represents, warrants, and agrees”:
a. “All certifications, authorizations, and representations made by
Borrower and/or the authorized representative of Borrower in the
Paycheck Protection Program Borrower Application Form (SBA
Form 2483) submitted to Lender remain true and accurate as of
the date of this Note;” and
b. “No parts of the proceeds of such Loan will be used for personal,
family or household purposes.”
VI. DEFENDANTS’ VIOLATIONS OF THE FALSE CLAIMS ACT
108. The PPP loans were fraudulently induced. Defendants never needed the
PPP money to create or retain jobs in the manner required by the SBA, and made false
representations in the application to represent otherwise.
109. As described above, between or about April 10 and April 24, 2020, to obtain
the PPP loans, Adrien, on behalf of the Entity Defendants, certified that “[c]urrent
economic uncertainty makes this loan request necessary to support the ongoing
operations of the Applicant.”
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110. Later, between or about April 24 and May 19, 2020, Adrien executed loan
notes certifying that “All certifications, authorizations, and representations made by
Borrower and/or the authorized representative of Borrower in the Paycheck Protection
Program Borrower Application Form (SBA Form 2483) submitted to Lender remain true
and accurate as of the date of this Note.”
111. When Adrien made these certifications in April and/or May 2020 on behalf
of the Entity Defendants, they were not true and Defendants knew they were false when
made based on real time data, historical performance, and market-wide trends.
112. Adrien viewed the PPP loans to the Entity Defendants as an opportunity to
get free money from the government that allowed him to invest in his businesses without
having to invest any more of his own money in these entities.
113. Adrien, who dominates the operations and decision making of the Entity
Defendants, used the PPP funds for his own ends to invest in the growth of his
businesses—through attempted acquisitions, staffing, and corporate infrastructure not
authorized by the PPP program—which would primarily benefit him as the majority
shareholder of the Entity Defendants—and fund the expenses associated with a complex
and ultimately unsuccessful attempted corporate acquisition that would have resulted in
millions of dollars of profits to Adrien personally and his associates.
114. Lafayette was able to hire new high-dollar employees while maintaining its
distributions to Adrien and other members and funding an attempted acquisition, all
without any additional contribution from Adrien or other investors. Clearly, there was
no current economic uncertainty; to the contrary, the economics were quite certain and
positive.
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A. Defendants falsely certify that the loans are necessary.
115. While COVID-19 was significantly disruptive for a great number of
industries, single-family real estate—Defendants’ bread and butter—experienced a
boom.
116. As explained above, when applying for the PPP loans, Defendants—with
Adrien as signatory—had to certify that “[c]Jurrent economic uncertainty makes this loan
request necessary to support the ongoing operations of the Applicant.”
117. The Entity Defendants’ revenues were not at risk and they did not face any
economic uncertainty on or about April 10, 2020. They also did not face any economic
uncertainty later in April and/or May 2020 when Adrien executed the PPP loan notes,
which required him to re-certify that his prior certifications concerning economic
necessity were still accurate, when they in fact were not accurate.
118. In other words, Defendants’ PPP loan certifications concerning necessity
due to economic uncertainty were knowingly false.
1. Proposed Equity Investments with “Excess Capital” in
March and April 2020
119. By late March 2020, Defendants were sufficiently confident in the business’
outlook that Adrien, Relator, and other Lafayette employees were preparing
presentations to external investors pitching ways to take advantage of the housing
sector's strength by investing in underpriced stocks and/or other securities of publicly
listed competitors.
120. Between March 30 and 31, 2020, Relator, Adrien, Thibaud Favier (an
associate at Lafayette), and Armand Silly (an analyst at Lafayette) exchanged emails
concerning economic projections to include in a presentation to the Longview board of
Case 5:22-cv-00659-FB Documenti1 Filed 06/23/22 Page 25of51
CONFIDENTIAL AND UNDER SEAL—-QUI TAM COMPLAINT
directors to propose a new strategic investment in the stock of Invitation Homes, Inc.
121. On April 7, 2020, that presentation concerning the proposal that Longview
invest in INVH was sent to the Longview board.
122. On April 8, 2020, Adrien followed up privately with Benoit Robertz, a
Longview investor and partner at Compagnie Nationale 4 Portefeuille (“CNP”), a Belgian
private investment firm with assets worth about €2 billion euros:
Subject: Fwd: INVH
Date: Wednesday, April 8, 2020 at 12:42:01 PM Eastern Daylight Time
From: Thibault Adrien
To: Jesus Nunez Unda, Thibaud Favier, Armand Silly
Attachments: INVH_April2020_Pitch_Long_Draft v8.pptx, INVH_Simplified Valo model_Laf_4.6.20.xIsx
Forwarded message ~~
From: Thibault Adrien <thibault@lafayette-re.com>
Date: Wed, Apr 8, 2020 at 10:50 AM
Subject: Fwd: INVH
To: Benoit Robertz <bro! enp.b
123. In that email, in a mixture of French and English,‘ Adrien included the
investment highlights of the INVH opportunity with the aim of convincing Robertz to co-
invest with Lafayette. Adrien told Robertz that the presentation was a follow-up of a
previous conversation, “mostly technical” and that, although it did not talk “too much
about the fundamentals, basically what we see is that:”
4 Based on Relator’s advanced level of French comprehension, communications by the
Defendants or third parties in French (or a mixture of French and English) are
translated in uncertified form here.
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Short term:
- Collections for April are in line at 75% collection rate on the 6th of the month
- May should be supported by unemployment benefits until end of July
--> we should avoid the short term catastrophe
- Rent levels: unless the virus gets out of control we think landlords will stick to their headline rents and offer
concessions as a bridge. They will experience more delinquencies and 2020 will be bad, but 2021's starting point will
be the same as 2020's.
- Anecdotes of tenants cancelling their move out. We should have good retention rates in the next few months
{excluding forced move out situations)
- Leasing activity remains strong despite the lockdown, for us and our peers.
- Anecdotes of tenants moving out of crowded MF building towards SFH - people want more space
- Homeownership is going to go back down and for a while.
--> need for space + more renters overall: bullish for SFR
Ata dispo si tu as plus de questions
Thibault
124. While the proposal for Longview to invest in INVH was under
consideration, on April 14, 2020, Adrien sent another email to the Longview board,
explaining that they were “monitoring” the “opportunity” and he “wanted to give [the
board] an update.” He explained that INVH was “an additional source of diversification
for Lafayette Longview” and that “the current market dislocation”’—in other words, the
Covid-19 market crash—presented “a great opportunity to diversify our SFR investments
by getting exposure to [INVH’s] portfolio....”
125. In that same email, Adrien added that he “just got off the phone with a
principal at [The] Carlyle [Group], he was reporting to me that their conviction for the
asset class has only increased in the last few days. They want us to take advantage of the
current situation, and go and find more SFR communities from homebuilders. They ...
have witnessed strong leasing activity in the last few weeks, and similar collection
numbers.”
126. Upon information and belief, The Carlyle Group's principal referred to in
the email is Scott Weir, Adrien’s main point of contact for the joint venture of The Carlyle
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CONFIDENTIAL AND UNDER SEAL—QUI TAM COMPLAINT
Group and Lafayette, Lafayette Communities, which invests in newly built single-family
home communities.
127. Joel Roberto, another Longview director, replied the next day, April 15,
2020, thanking Adrien for his analysis and explaining that he “hadn’t expected to
consider putting Longview’s excess cash into publicly listed securities....”
128. Ultimately, Longview’s board, including Villa, Ogrinz, Roberto, Ormond,
and Guerrand-Hermes approved deploying some of Longview’s capital into INVH, but
the purchase did not materialize as the stock quickly recovered given the sector’s
underlying strength and first quarter 2020 positive results to the markets.
2. Positive Market Signals in the Single Family Real-Estate
Rental Market
129. Ona similar timeline, as early as April 13, 2020, competitors in the single-
family residential real estate business including, for example, American Homes 4 Rent,
were reporting historically strong occupancy and rent collection rates to the public
markets. No unusual bulge in rent delinquency nor deferral requests materialized for
these companies.
130. Lafayette was seeing similar signals and, as shown above, was reporting
those signals to investors to take advantage of the market dislocation and invest even
more capital in the single-family residential real estate sector.
131. These signals—which Adrien and others could see contemporaneously in
real-time data—were later confirmed by Lafayette’s financial reports. According to
Lafayette’s annual report, in the first quarter of 2020, the home portfolio performed
strongly and was on an upward trend as measured by occupancy and renewals compared
to the last quarter of 2019. Certainly, none of these datapoints signaled unusual solvency,
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CONFIDENTIAL AND UNDER SEAL—QUI TAM COMPLAINT
delinquency, or other issues that would have required the Entity Defendants to need the
PPP loans.
132.
A table, which appears on page 44 of Lafayette’s 2020 Annual Report and
is reproduced below, illustrates that every quarter of 2020 had healthy occupancy, strong
renewal rates, high rent collection, and above inflation rent increases across multiple
geographies:
Chart 31: SFR Key Performance Indicators
Rent Increase Q120 Q220 Q320 Q420 FY20 MimCollection Q120 Q220 Q320 Q420 FY20
Atlanta 6.0% | 5.7% | 5.6% | 5.3% | 5.7% | [Atlanta 94.7% | 94.1% | 95.4% | 95.0% | 94.8%
Tampa 6.1% | 5.1% | 4.1% | 7.0% | 5.5% Tampa 97.5% | 96.5% | 96.7% | 98.0% | 97.2%
Jacksonville | 5.4% | 5.5% | 4.3% | 4.9% | 5.0% Jacksonville} 94.8% | 92.5% | 95.8% | 96.0% | 94.8%
Orlando 6.3% | 4.8% 3.9% 4.7% 5.1% Orlando 96.9% | 92.5% | 91.3% | 94.3% | 93.7%
Ft
Ft Lauderdale] 0.0% | 5.0% | 0.6% | 4.5% | 3.0% Lauderdale | 895% | 91.7% | 81.0% | 78.7% | 84.2%
Memphis 3.8% | 3.1% | 5.0% | 2.5% | 3.4% Memphis | 79.8% | 85.7% | 113.5% | 102.9% | 94.9%
Indianapolis | 3.8% | 3.0% | 2.4% na 3.0% Indianapolis| 95.1% | 92.3% | 97.1% | 90.1% | 93.6%
W. Avg 5.9% | 5.2% | 4.8% | 5.5% | 5.4% | |W. Avg 95.0% | 93.8% | 95.0% | 95.2% | 94.6%
Renewal Rate Q120 Q220 Q320 Q420 FY20 Occupancy Q120 Q220 Q320 Q420 EOY20
Atlanta 87.3% | 79.5% | 74.2% | 81.3% | 80.4% Atlanta 94.9% | 98.5% | 97.6% | 97.8% | 97.9%
Tampa 81.3% | 74.4% | 82.8% | 86.0% | 80.4% Tampa 96.9% | 97.8% | 98.8% | 98.1% | 98.2%
Jacksonville | 75.5% | 75.0% | 71.1% | 68.8% | 72.6% Jacksonville] 94.1% | 96.6% | 95.3% | 95.8% | 96.2%
Orlando 52.9% | 51.0% | 50.0% | 50.0% | 51.3% Orlando 94.7% | 95.9% | 94.1% | 94.3% | 95.3%
Ft é 5
Ft Lauderdale] 20.0% | 20.0% | 60.0% | 58.3% | 44.4% Lauderdale | 957% | 91-5% | 83.0% | 75.4% | 77.8%
Memphis 40.0% | 60.0% | 100.0% | 83.3% | 68.0% Memphis | 96.8% | 96.8% | 100.0% | 100.0% | 100.0%
Indianapolis | 75.0% | 73.3% | 50.0% | na | 68.0% Indianapolis| 90.9% | 90.9% | 93.9% | 97.0% | 97.0%
IW. Avg 76.1% | 71.5% | 72.6% | 75.8% | 74.0% | |W. Avg 95.2% | 97.2% | 96.5% | 96.2% | 96.6%
133. Adrien relayed to Relator and others that he and others at Lafayette and
Brandywine were checking this real-time data on AppFolio, Brandywine’s accounting
and property management software platform, in the spring of 2020, and knew or should
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CONFIDENTIAL AND UNDER SEAL—QUI TAM COMPLAINT
have known—consistent with what was later shown by the annual report—that
vacancies were not rising above usual levels. |
134. In addition, Adrien stayed in close communication with two executives who
were also paying close attention to this data. Heidi Coppola (SVP of Operations at
Lafayette) and Jackie Lee (CEO of Brandywine) both looked at this real time data on the
portfolio’s performance and, upon information and belief, communicated the updates to
Adrien on a daily or near-daily basis.
185. Another Lafayette executive, Maylis de Lacoste—the company’s marketing
director5—launched and maintained marketing campaigns to attract new tenants into
Lafayette’s properties under management, especially its new development communities,
and tracked engagement and customer acquisition from those marketing strategies in
real time.
3. Defendants’ Revenue Model Assured They Would Survive—
and Thrive—during the Pandemic
136. Lafayette, as an asset manager for its investment funds’ properties,
received management fees based on a fixed percentage of the value of the funds’ assets
under management.
137. In addition to Lafayette’s stable revenues as an asset manager, its
ownership of an 11.5% stake in Longview resulted in additional revenues of
approximately $460,000 over the course of 2020 through Longview’s semi-annual
distributions.
5 Maylis de Lacoste was also the director of marketing and business development for
Brandywine.
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138. Brandywine, similarly, received a management fee based on a fixed
percentage of the rent collected from Lafayette properties for which it provided services.
139. In other words, if the underlying home portfolio’s occupancy and rent
collection were stable or rising, and the value of the underlying properties remained
stable or went up, the Entity Defendants stood to make the same or more money
throughout the COVID-19 crisis than they were making before.
140. The chart below, which appears on page 25 of Lafayette’s 2020 Annual
Report, illustrates that every quarter of 2020 has higher occupancy and more lease
renewals than the same quarter in 2019:
Chart 7: Occupancy and renewals
98% 100%
97%
96% —_————— 80%
95% — 60%
94%
92% 20%
91%
90% 0%
1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 3Q 2020 4Q 2020
Gam Core Occupancy << —=Core Renewal rate
141. In contradiction to all these positive indicators, summarized by Adrien’s
rosy analysis to his board in early and mid-April 2020 and his pledge to take advantage
of “market dislocation” by aggressively investing in INVH and other ventures, on April
27, 2020, when emailing a representative at Wells Fargo about the status of
Brandywine’s loan application, Adrien asked for “support / follow up” because “[t]his
entity needs the SBA support asap.”
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4, Omission of Lafayette’s Longview Distributions from PPP
Application Supporting Materials
142. Importantly, Longview’s ability to make distributions (to Lafayette and
others) is directly dependent on receiving rents from the underlying single-family homes.
Accordingly, in addition to the real-time data indicating no economic concern or
uncertainty, Adrien also knew that Longview was on track to distribute millions of
dollars of dividends to its members including Lafayette. In other words, Lafayette was
on track to receive hundreds of thousands of dollars in distributions from Longview a few
months after applying for the PPP loan because there had been no unusual economic
impact on rent collection.
143. The income statement below was submitted to the SBA Lender as part of
the PPP loan application:
Lafayette RE Management LLC - Cash P&L as of 4/21/2020
YTD 2020
Total Revenues 823,839
Payroll (609,592)
Amex (31,741)
Misc (996)
Rent (64,485)
Total expenses (706,813)
Pre-Tax Income 117,026
144. An email dated April 21, 2020 confirms that Adrien prepared this income
statement personally in response to a request from Ready Capital, the financial
institution that processed Lafayette’s PPP application.
145. Neither this income statement nor any other document submitted in
support of the PPP application disclosed to the lender or the SBA that Lafayette was
about to receive Longview 2020 dividend distributions, which would essentially double
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the revenue figure. That extra revenue would then be passed on proportionally through
distributions to Adrien and the other members of Lafayette.
146. This income statement also omitted Lafayette’s distribution of
approximately $475,525, equivalent to its 11.5% ownership of Longview, from Longview’s
2019 investment profit distribution.
147. Upon information and belief, Longview’s 2019 Investment Profits
distribution to investors, including Lafayette’s 11.5% share, occurred in the first quarter
of 2020. The February 6, 2020 presentation to Longview’s board, see supra ]{ 34-35,
stated on page 2 that Longview “intend{s] to distribute the full amount of Investment
Profit [$4.135 million] as quickly as possible.”
148. This distribution was not disclosed to Ready Capital or the SBA.
B. The Individual Defendant directs Entity Defendants to use PPP
proceeds for unlawful purposes.
149. As explained above, Adrien, in his domination of the Entity Defendants, did
not think of, apply for, or use the PPP money to support employees of a business paused
or otherwise struggling in the early days of the COVID-19 pandemic.
150. Rather, Adrien, through the Entity Defendants, saw the opportunity to get
free money from the government that would allow him to continue to enrich himself as
an owner while also pursuing aggressive and expensive corporate acquisitions that, but
for the PPP loans, would not have been possible without putting up more of his own
money.
151. In other words, the PPP money freed Adrien up to aggressively spend the
Entity Defendants’ cash on other pursuits without putting in any additional monies of
his own.
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1. Expenses Related to a Corporate Acquisition
152. Starting in or about November 2019, Lafayette sought to acquire Patch of
Land, a large national mortgage loan originator.
153. At that time, Lafayette and Patch of Land executed a non-disclosure
agreement.
154. After due diligence led by Relator, on or about March 3, 2020, Lafayette
submitted an initial offer to acquire Patch of Land. When the COVID-19 crisis escalated
later in March 2020, Lafayette’s process to acquire Path of Land was put on hold.
155. But then, after being approved for and receiving the PPP loans, in or about
June 2020, Lafayette re-engaged in its efforts to acquire Patch of Land. This timing is
not a coincidence.
156. Between June 2020 and May 2021—when Lafayette finally reached a deal
with Prudential Global Investment Management (“PGIM”), a subsidiary of Prudential
Financial, Inc., to partner in the Patch of Land acquisition—Lafayette incurred
substantial third-party expenses related to legal fees, due diligence, and financing of the
potential acquisition.
157. Lafayette incurred more than $1.3 million in such expenses, approximately
a third of Lafayette’s average annual revenue. Lafayette advanced these expenses itself,
because it had not yet reached a deal with PGIM or any other investing partner to defray
that cost.
158. In other words, as Adrien freely admitted to Relator in Slack messages, the
PPP loan proceeds were free money he could use to invest in the Entity Defendants and
grow these businesses. Further, the loan proceeds were an indispensable part of Adrien’s
ability to pursue the protracted, expensive, and ultimately unsuccessful acquisition of
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Patch of Land without having to invest additional working capital himself as the
managing (and majority) member.
159. Thus, Lafayette’s PPP loan proceeds were not economically necessary to
support their ongoing operations when those representations were made in the PPP
application and loan note.
160. Instead, Lafayette’s PPP loan helped it to fund an aggressive and failed
corporate acquisition which would have resulted, if successful, in a multi-million-dollar
windfall for Adrien and his partners. This was not a permissible use of a PPP loan.
2. Personal Distributions from the Entity Defendants
161. During the course of the pandemic, Adrien continued to take distributions
and cash advances from the Entity Defendants, on at least a quarterly or more frequent
basis.
162. Because Lafayette was also pursuing the Patch of Land acquisition,
incurring all the associated expenses of that potential acquisition upfront, and paying its
employees and members, Adrien’s distributions to himself and other owners of the Entity
Defendants during 2020 would have been impossible without the PPP loans.
163. As explained above, Lafayette, which has an 11.5% stake in Longview,
received approximately $460,000 in semi-annual 2020 distributions from Longview’s
profits, which then would be substantially “passed through” to Lafayette’s members,
including Adrien.
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CONFIDENTIAL AND UNDER SEAL—QUI TAM COMPLAINT
164. The table below, which appears on page 45 of Lafayette’s 2020 Annual
Report, illustrates that Longview distributed $4 million over the course of the year to
investors, including Lafayette and Adrien’s own personal investment vehicle Mangrove
US LLC:
Chart 26: Longview Investment Recap
Investment Recap Fund 1 Fund 2 GP Total
Original Capital 41,825 40,310 82,135)
Excluding 2018 Sellers (15,818) (8,495) (24,313)
Adjusted Original Capital 26,008 31,815 57,823
Distribution - 2014 (16,634) - (16,634)
Distribution - 2018 - (1,788) (1,788)
Net Invested Capital at Merger 9,374 30,028 - 39,402
Net Step up at Merger 22,756 17,452 10,383 50,592
Merger Book Value 32,130 47,480 10,383 89,994
Merger Multiple over Net Cost Basis 3.4x 1.6x
Cash on Cash Multiple since inception 1.9x 1.5x
Gross IRRs 18.2% 15.4%
Since Merger into Longview
Cash Distribution - August 2019 (1,535) (2,269) (496) (4,300)
Cash Distribution - July 2020 (714) (1,055) (231) (2,000)
Cash Distribution - December 2020 (714) (1,055) (231) (2,000)
12/31/2020 NAV 34,442 50,896 11,131 96,469
Cash Return - Since Merger 9.2% 9.2% 9.2% 9.2%
Capital Appreciation Return - Since Merger 7.2% 7.2% 7.2% 7.2%)
Total Returns - Since Merger 16.4% 16.4% 16.4% 16.4%
Total Returns - Since Inception 108% 79%
165. On information and belief, as explained above, Longview issued the first
distribution in the first quarter of 2020, and Lafayette’s share would in turn be passed
through to its investors, including Adrien.
166. However, on information and belief, Lafayette would not have received its
second semiannual Longview distribution until much later in 2020, long after Lafayette
had received its PPP loan.
167. On information and belief, because Lafayette’s cash balances were
commingled in a single operating bank account, during the second and/or third quarters
of 2020, Lafayette would have needed to use funds from the PPP loans to cover deal
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expenses and/or Adrien’s personal distributions, even if it later received additional
capital.
168. This flexible misuse of the PPP funds was not an appropriate use of the
loan funds consistent with the law or Lafayette and Adrien’s certifications in the loan
application and note.
3. Funding Key Hires and Infrastructure Projects
169. According to Lafayette’s 2020 annual report, over the course of the year,
“Brandywine opened four new offices, improved operating metrics, attained 35% YoY
growth in number of properties under management and rolled out a new employee
compliance and training program.”
170. As mentioned above, Lafayette and Brandywine's director of marketing,
Maylis de Lacoste, significantly increased the marketing budget of both companies to
attract more customers, especially to Lafayette’s new development “build for rent”
communities, and rolled out a client relationship management (CRM) platform to
monitor engagement and customer acquisition from those marketing efforts.
171. Lafayette’s 2020 annual report also explained that Brandywine “rolled out
a more robust employee compliance and training program” and made other “upgrades in
both systems and people....”
172. Large-scale investment, such as opening four new offices, one of which is
located in San Antonio, would not have been possible but for the PPP funds Brandywine
received from the federal government.
173. In or about 2021, Lafayette also hired three new senior executives:
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174. As described in Lafayette’s 2020 Annual Report, Brad Stanis “has over 12
years of experience in land acquisitions and development, with 8+ years at Lennar, one
of the nation’s most prominent homebuilders.”
175. As described in Lafayette’s 2020 Annual Report, Josh Nathan “spent 11
years at Cerberus Capital Management, with the last 4 at FirstKey Homes (Cerberus’
portfolio company) as a Senior Vice President, overseeing real estate acquisitions and
asset management.”
176. As described on his LinkedIn profile, Cyrus Shahabi spent the last eight
years working at prestigious organizations such as McKinsey & Co and Gramercy Fund
Management. He is a graduate of Yale University and of the Wharton School at The
University of Pennsylvania.®
177. These new Lafayette executives received significant six-figure salaries.
178. Because the business was as strong as ever, Lafayette and Brandywine’s
PPP loan proceeds were not economically necessary to support their ongoing operations
when those representations were made in the PPP application and loan note.
179. Instead, the PPP loan proceeds allowed Defendants to invest in the
expansion of their business through hiring new executives and investing in new
infrastructure, neither of which are permissible purposes for PPP loans.
C. Adrien lists fake employees in support of the PPP application.
180. In addition to the misrepresentation of economic necessity for the Entity
Defendants’ PPP loans, Defendants listed at least two fake employees of Lafayette, each
6 https://www.linkedin.com/in/cyrusshahabi/
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with personal connections to Adrien, in supporting payroll documentation prepared for
Lafayette’s PPP application.
1. Thomas Coleman
181. Thomas E. Coleman isa friend and former colleague of Adrien’s from a prior
business before Adrien founded Lafayette.
182. Coleman is a minority investor in Lafayette.
183. In or about 2019, Adrien held discussions with Coleman and another
financial executive, T.D., to launch a commercial real estate lending joint venture and
join Lafayette as employees. In or about late February or early March 2020, that plan
was abandoned. Relator understood at the time that Coleman was not hired by Lafayette.
184. On or about November 23, 2020, Lafayette submitted its PPP loan
forgiveness application on SBA Form 3508.
185. Relator, using the payroll materials provided to him and at Adrien’s
direction, filled out a Microsoft Excel template spreadsheet provided by the lender that
would calculate the necessary payroll information for “PPP Schedule A,” an attachment
to the loan forgiveness application requiring the borrower to disclose the payroll costs for
which it sought forgiveness from the SBA.
186. Among the payroll used to calculate that forgiveness amount, Relator was
directed to include certain of Lafayette’s payroll costs from May 2020, including $3,289.39
in “Forgiveness Eligible Payroll Cost” for Coleman, including wages, benefits, taxes, and
other costs.
187. Lafayette disclosed its “Cash Compensation” on Line 1 of Schedule A to be
$143,725.78, including the amount from May 2020 for Coleman.
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188. Lafayette disclosed its Cash Compensation on Line 4 of Schedule A to be
$183,193.70, which included the amount from May 2020 for Coleman.
189. Adrien had “hired” Coleman at Lafayette with an annual salary of $23,400.
190. Coleman was listed as an employee in a payroll report dated April 6, 2020,
which was generated to support Lafayette’s application for its PPP loan.
191. However, Coleman was not a real employee of Lafayette. Coleman did no
work for Lafayette. He did not execute a standard non-disclosure agreement like all other
Lafayette employees, did not use a Lafayette email address, and had no access to
Lafayette’s Dropbox account or any of its internal files.
192. Nevertheless, Coleman was listed as an employee whose salary supported
Lafayette’s PPP loan application.
198. Relator, noticing that Coleman was a listed employee whom he had never
seen in the office, observed working on behalf of Lafayette, or interacted with in any way
in such a capacity, later asked Adrien about Coleman and whether he had indeed been
hired. This occurred within a few weeks after Relator submitted the loan forgiveness
application as he was instructed to do by Adrien.
194. Adrien explained to Relator that he added Coleman to the Lafayette payroll
as a favor so that Coleman could receive benefits from Lafayette while he was
unemployed.
195. Inthe same conversation, Adrien also said that Coleman “reimbursed” him
for the money Lafayette incurred paying for his salary and benefits.
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196. Despite listing Coleman as a Lafayette employee in support of the PPP
application and forgiveness, neither Lafayette nor Adrien disclosed these material facts
to the SBA.
2. Adrien Requests PPP Money to Pay his Housekeeper as an
Employee of Lafayette
197. In or about 2019, Adrien “hired” his housekeeper, identified here by the
initials “M.M.,” as an “employee” of Lafayette.
198. M.M. appeared on the same April 6, 2020 payroll report generated in
support of Lafayette’s PPP application with an annual salary of $27,040.
199. Most of the time, M.M. could not and did not work for Lafayette, because
she was working in Adrien’s home as a housekeeper and nanny.
200. In or about the summer of 2019, when Adrien’s wife and children were out
of the country and/or on vacation, M.M. came to Lafayette’s office from approximately
9am — lpm every weekday.
201. When M.M. came to the office part-time during the summer of 2019, she
sat at a desk near Relator. For significant portions of the day, she would sit at her desk,
doing nothing. Occasionally, M.M. would pick up a photocopy from a printer and deliver
it to Adrien at his desk, or order lunch. None of these activities justified her salary.
202. M.M. did not execute a standard Lafayette NDA despite being exposed to
investors’ personal information and Lafayette’s proprietary information.
203. Upon information and belief, Adrien’s primary motivation for hiring M.M.
while his family was away on vacation was to reduce his out-of-pocket personal expenses
and have Lafayette cover her compensation.
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204. Despite listing M.M. as a Lafayette employee in support of the PPP
application, neither Lafayette nor Adrien disclosed these material facts to the SBA.
D. Adrien includes foreign nationals, working in the United States
based on Adrien’s manipulation and abuse of the immigration
system, on PPP Application Payroll.
205. Adrien’s employment practices include hiring recent graduates from elite
European business schools to work full time for Lafayette under short-term work visas
and F-1 student visas intended for students in American universities.
206. All of Lafayette’s employment procedures are managed exclusively by
Adrien and Levilain. No other employees interact with payroll providers or immigration
advisors, except when applicable to an employee’s personal case.
207. Adrien and his partners promise these students the American Dream, but
instead pay them substandard wages and trap them in their employment at Lafayette by
enrolling them in a little-known university’s online graduate program, on which they are
dependent for their visas and ability to remain and work in the U.S.
208. Adrien primarily targets his recruitment efforts at HEC Paris, in France,
and specifically on non-French graduates from emerging markets, as Adrien perceives
such nationals, including those of Pakistani, Indian, Brazilian, and Moroccan national
origins, to be more dependent on Lafayette’s ability to provide a visa to enter and work
in the U.S., and thus more willing to accept lower salaries and inferior treatment than a
U.S. national.
209. The payroll file submitted to the SBA for Lafayette’s PPP Loan application
includes a number of foreign nationals on such short-term work and F-1 student visas,
including an employee identified here by the initials “R.A.”
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210. R.A. originally came to the U.S. on a short-term work visa obtained by
Lafayette. After R.A. failed to obtain an H-1B work permit, Adrien then obtained a F-1
student visa for him by enrolling him in a graduate program at Harrisburg University
(Pennsylvania), with the sole objective of keeping him in the U.S. while working for
Lafayette.
211. Lafayette would cover the tuition costs and associated expenses of these
employees’ enrollment and attendance at Harrisburg University in a Project
Management Master’s program, meanwhile paying the employees at below-market rates.
212. Graduates from leading European business schools such as HEC Paris and
ESSEC would have no need or economic incentive to pursue another master’s degree at
Harrisburg University but for the F-1 visa.
213. In fact, Lafayette employees that have been enrolled in this program like
R.A do not even list their Harrisburg University education in their LinkedIn profiles or
Lafayette website bios.
214. Because the graduate program was unnecessary and unrelated to the
“students” work at Lafayette, the program did not satisfy relevant United States
Citizenship and Immigration Services (“USCIS”) and/or Immigration and Customs
Enforcement (“ICE”) guidelines for Curricular Practical Training (“CPT”) under F-1
visas.
215. R.A. (and others employed by Lafayette but not listed in the payroll files
submitted in support of the PPP application) were enrolled in “work study” graduate
programs to justify their F-1 visas, and ability to remain legally in the U.S., pressuring
them to continue working for Lafayette under CPT for non-market salaries.
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216. For example, R.A. who is listed in Lafayette’s website as an employee who
“supports the fund controller with financial reporting and management,” graduated from
HEC Paris in 2019 and came to the U.S. to work at Lafayette on a short-term work visa.
His role and responsibilities are inconsistent with guidelines issued by ICE on CPT.
217. Guidance issued by ICE on CPT” states that CPT “[m]ust relate directly to
the student’s major area of study and be an integral part of the school’s established
curriculum.” However, Harrisburg University’s Masters in Project Management® (“the
Harrisburg Program”) “leads to a Master of Science degree that prepares the student for
career advancement in the field of project management and for positions such as program
manager, project manager, project coordinator, lead project engineer, Agile project
manager, or ScrumMaster.”
218. In fact, the “Program Concentrations” of the Harrisburg Program, stated
on its website as, “Agile Lean, Biotechnology, Human-Centered Interaction Design,
Individualized,”® are unrelated to any function an employee could possibly perform
within a real-estate asset manager such as Lafayette, and are clearly disconnected from
R.A.’s role at Lafayette.
https://www.ice.gov/sites/default/files/documents/Fact%20sheet/2019/CurricularPractica
8 https://www.harrisburgu.edu/programs/ms-project-management/
9 Id.
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219. R.A., as well as many other foreign nationals that have been brought to
work at Lafayette under this short-term work visa scheme modus operandi, were
students of Ogrinz’s at HEC Paris, where he serves in the faculty.
220. Having secured at least one employee who was, in sum and substance,
illegitimate with a fraudulent visa, Adrien and Lafayette then applied for a PPP loan to
“protect” his paycheck.
221. Despite listing R.A. as a Lafayette employee in support of the PPP
application, neither Lafayette nor Adrien disclosed these material facts to the SBA.
CAUSES OF ACTION
COUNT I - Violation of 31 U.S.C. § 3729(a)(1)(A)
(Presentation of False Claims for Payment)
(Against All Defendants)
222. Relator repeats and re-alleges the allegations set forth in the preceding
paragraphs, as if fully set forth herein.
223. This a claim for treble damages and penalties under the FCA.
224. The FCA, 31 U.S.C. § 3729(a)(1)(A), imposes liability upon those who
knowingly present or cause to be presented false claims for payment or approval.
225. Through the acts described above and otherwise, Defendants knowingly
presented, or caused to be presented, materially false or fraudulent claims for payment
or approval to the United States by applying for and receiving PPP loans guaranteed by
the SBA, which loans Defendants certified (expressly in their loan applications, loan
notes, and implicitly by accepting and retaining the loan proceeds) were necessary to
support ongoing operations due to current economic uncertainty, despite the fact that
they knew or should have known that the loan proceeds were not necessary to support
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ongoing operations due to current economic uncertainty, in violation of 31 U.S.C. §
3729(a)(1)(A).
226. In addition, Defendants knowingly presented, or caused to be presented,
materially false or fraudulent claims for payment or approval to the United States by
applying for and receiving PPP loans guaranteed by the SBA, which loans Defendants
certified (expressly in their loan applications, loan notes, and implicitly by accepting and
retaining the loan proceeds) would be used for authorized purposes despite the fact that
they knew or should have known that the loan proceeds would not be used, and in fact
were not used, for those authorized purposes in violation of 31 U.S.C. § 3729(a)(1)(A).
227. These false claims were later remade and/or reaffirmed when Defendants
certified in their PPP loan notes that “All certifications, authorizations, and
representations made by Borrower and/or the authorized representative of Borrower in
the Paycheck Protection Program Borrower Application Form (SBA Form 2483)
submitted to Lender remain true and accurate as of the date of this Note.”
228. Subsequent false claims were then made in Lafayette’s application for loan
forgiveness, signed by Adrien, due to, inter alia, his certification on behalf of Lafayette
that the money for which Lafayette sought loan forgiveness “was used to pay costs that
are eligible for forgiveness,” when in fact Lafayette and Adrien knew or should have
known that they sought loan forgiveness for ineligible expenses, including wages,
benefits, and other costs.
229. Each of the false or fraudulent claims submitted, or caused to be submitted,
by Defendants is a separate violation of 31 U.S.C. § 3729(a)(1)(A).
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230. The United States was unaware of the false or fraudulent nature of the
claims Defendants submitted or caused to be submitted.
231. The false or fraudulent claims Defendants knowingly submitted or caused
to be submitted to the United States were material to the United States’ decisions to
approve and guarantee the loans.
232. Had the United States actually known of the false or fraudulent nature of
the claims, it would have been prohibited by law from making corresponding payments.
233. Because of these false or fraudulent claims Defendants submitted or caused
to be submitted, the United States has been damaged in an amount to be determined at
trial.
COUNT II - Violation of 31 U.S.C. § 3729(a)(1)(B)
(Use of False Statements Material to False Claims)
(Against All Defendants)
234. Relator repeats and re-alleges the preceding paragraphs as if fully set forth
herein.
235. This is a claim for treble damages and penalties under the FCA.
236. The FCA, 31 U.S.C. § 8729(a)(1)(B), imposes liability upon those who
knowingly make, use, or cause to be made or used false records or statements material
to a false or fraudulent claim.
237. Through the acts described above and otherwise, Defendants knowingly
made, used, or caused to be made or used false records or statements material to the
payment of false or fraudulent claims in violation of 31 U.S.C. § 3729(a)(1)(B).
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238. For purposes of obtaining or aiding to obtain payment or approval of PPP
loans guaranteed by the SBA, Defendants knowingly made or used, or caused to be made
or used, false or fraudulent records or statements.
239. Specifically, Defendants made or used, or caused to be made or used, false
certifications by certifying (expressly in their loan applications, loan notes, and implicitly
by accepting and retaining the loan proceeds) that the loans were necessary to support
ongoing operations due to current economic uncertainty, despite the fact that they knew
or should have known that the loan proceeds were not necessary to support ongoing
operations due to current economic uncertainty, in violation of 31 U.S.C. § 3729(a)(1)(B).
240. In addition, Defendants made or used, or caused to be made or used, false
certifications by certifying (expressly in their loan applications, loan notes, and implicitly
by accepting and retaining the loan proceeds) that the loan proceeds would be used for
authorized purposes despite the fact that they knew or should have known that the loan
proceeds would not be used, and in fact were not used, for those authorized purposes in
violation of 31 U.S.C. § 3729(a)(1)(B).
241. These false certifications were later remade and/or reaffirmed when
Defendants certified in their PPP loan notes that “All certifications, authorizations, and
representations made by Borrower and/or the authorized representative of Borrower in
the Paycheck Protection Program Borrower Application Form (SBA Form 2483)
submitted to Lender remain true and accurate as of the date of this Note.”
242. In addition, Lafayette and Adrien made or used, or caused to be made or
used, false certifications by, in seeking loan forgiveness, certifying that the loan amount
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for which forgiveness was requested was used, inter alia, to pay costs eligible for
forgiveness.
243. Defendants’ false certifications and representations were made for the
purpose of ensuring that the United States guaranteed the loans and paid the false or
fraudulent claims in connection with the loans, which was a reasonable and foreseeable
consequence of Defendants’ statements and actions.
244. Each false record, certification, and/or application submitted to the PPP
lender and/or the government in support of Defendants’ applications for PPP loan
issuance and/or forgiveness, and which resulted in the above-described false or
fraudulent claims submitted to the government, is a separate false record or statement
and a separate violation of 31 U.S.C. § 3729(a)(1)(B).
245. The United States was unaware of the falsity of the records, statements,
and claims Defendants made or submitted and, because of the inaccuracy of these records
or statements, authorized payments to be made, made such payments, and has been
damaged.
246. The false records or statements were knowingly made by Defendants in
connection with their applications for PPP loan issuance and/or forgiveness and were
material to the United States’ decisions to guarantee the loans and to make payments in
connection with those loans.
247. Had the United States actually known of the false nature of Defendants’
representations, it would have been prohibited by law from making corresponding
payments.
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248. Because of these false records or statements, the United States paid claims,
resulting in damages to the United States in an amount to be determined at trial.
COUNT III - Violation of 31 U.S.C. § 3729(a)(1)(C)
(Conspiracy)
(Against All Defendants)
249. Relator repeats and re-alleges the preceding paragraphs as if fully set forth
herein.
250. This is a claim for treble damages and penalties under the FCA.
251. The FCA, 31 U.S.C. § 3729(a)(1)(C), imposes liability upon those who
conspire to commit a violation of another sub-section of the FCA.
252. Defendants knowingly, in reckless disregard, and/or in deliberate
ignorance of the truth conspired between themselves, with their employees and
administrators, and others, to violate the FCA in the manner set forth in Counts I and II
above.
258. In particular, Defendants conspired to submit, or caused to be submitted,
materially false or fraudulent claims for payment or approval to the United States by
applying for and receiving PPP loans guaranteed by the SBA, which loans Defendants
certified (expressly in their loan applications, loan notes, and implicitly by accepting and
retaining the loan proceeds) were necessary to support ongoing operations due to current
economic uncertainty, despite the fact that they knew or should have known that the
loan proceeds were not necessary to support ongoing operations due to current economic
uncertainty.
254. In addition, Defendants conspired to submit, or caused to be submitted,
false or fraudulent claims related to applying for and receiving PPP loans guaranteed by
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the SBA, which loans Defendants certified (expressly in their loan applications, loan
notes, and implicitly by accepting and retaining the loan proceeds) would be used for
authorized purposes despite the fact that they knew or should have known the loan
proceeds would not be so used, and in fact were not used for those authorized purposes.
255. Defendants also conspired to knowingly make, use, or cause to be made or
used, false records or statements in applying for and receiving PPP loans guaranteed by
the SBA, which false records or statements were material to false or fraudulent claims
for payment submitted to the government concerning those loans.
256. Had the United States actually known of the false or fraudulent nature of
Defendants’ representations and claims, it would have been prohibited by law from
making corresponding payments.
257. Because of these conspiracies, and the resulting false or fraudulent claims
Defendants submitted or caused to be submitted, the United States paid the claims,
resulting in damages to the United States in an amount to be determined at trial.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff-Relator demands and prays that judgment be entered
against Defendants, jointly and severally, as to the claims as follows:
i. ordering that Defendants cease and desist from violating the FCA;
ii. directing that each Defendant pay an amount equal to three times the
amount of damages the United States has sustained because of such
Defendant’s actions;
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iii. directing that each Defendant, pursuant to the FCA, pay penalties of not
less than $12,537 and not more than $25,076 for each Defendant’s violation
of the FCA;
iv. granting Plaintiff-Relator the maximum amount allowed under 31 U.S.C.
§ 3729 and/or any other applicable provision of law;
Vv. directing that each Defendant, jointly and severally, pay Plaintiff-Relator’s
fees and costs, including attorneys’ fees, as provided by the FCA;
vi. directing that each Defendant pay interest on all sums ordered paid;
vii. _ ordering that Plaintiff-Relator recover such other relief as the Court deems
just and proper; and
viii. granting such other and further relief as the Court deems just and proper.
REQUEST FOR TRIAL BY JURY
Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Relator hereby
requests a trial by jury.
Dated: June 22, 2022 POLLOCK COHEN LLP
/s/ Max E. Rodriguez
Max Rodriguez (N.Y. Attorney # 5422811)
Adam Pollock* (N.Y. Attorney # 4518833)
60 Broad Street, 24th Floor
New York, NY 10004
(212) 337-5361
max@pollockcohen.com
adam@pollockcohen.com
*to be admitted pro hac vice
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