Complaint — United States ex rel. Sidesolve, LLC v. Taiji Group USA, Inc. (No. 5:24-cv-00098)

Summary

A qui tam complaint filed under seal by relator Sidesolve LLC on behalf of the United States against Taiji Group USA, Inc., Case 5:24-cv-00098-KDB-SCR, in the U.S. District Court for the Western District of North Carolina, Statesville Division, filed April 9, 2024 as Document 2. It asserts violations of the False Claims Act, 31 U.S.C. §§ 3729 et seq. The complaint alleges that the defendant, a paper tube manufacturer in Conover, North Carolina, is owned by a parent company created in China with significant operations there, and so was ineligible for the Second Draw PPP loan of $271,165 approved by Wells Fargo Bank on March 27, 2021, which was forgiven for a total of $274,189. It also lists a First Draw loan of $254,415. The relator seeks treble damages, civil penalties and a relator’s share, and demands a jury trial.

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ewe FILED

r...... CHARLOTTE, NC

IN THE UNITED STATES DISTRICT COURT APR 09 2024
FOR THE WESTERN DISTRICT OF NORTH CAROLIN&-
UNITED STATES OF AMERICA )
ex rel. SIDESOLVE, LLC, )
) Case No. 5:24 -cV- i ha AdB
Plaintiff-Relator, ) FILED UNDER SEAL
)
)
TAIJI GROUP USA, INC., )
)
Defendant. )
COMPLAINT

1. Relator Sidesolve LLC (“Relator”) brings this action on behalf of itself and
the United States of America against defendant Taiji Group USA, Inc. for
violations of the federal False Claims Act, 31 U.S.C. §§ 3729 et seq.

pa This action seeks to recover funds that were loaned to Defendant through
the federal Government's Paycheck Protection Program (“PPP”) and forgiven as a
result of false applications.

3. Sidesolve LLC is a company that uses data to investigate large-scale
corporate fraud. Its goal is to use the technology it is developing to protect
individuals on private healthcare plans. It is currently developing its technology
using public databases. It uses computational statistics to match entities across
multiple resources such as databases, social media, corporate filings, and other

sources. From this broader picture, it finds fraud leads, which it follows up with a

Case 5:24-cv-00098-KDB-SCR Document2_ Filed 04/09/24 Page1of9
more traditional manual investigation. In sum, Sidesolve LLC uses its expertise
and proprietary technology to both collect the scattered pieces of the fraud puzzle
and also to put them together into a complete picture of the alleged fraud.

4. While searching for potential PPP loan fraud in data released by the SBA,
Sidesolve came across Taiji Group USA Inc., a subsidiary of the Chinese company
Wuxi Taiji Paper Industry Company. Taiji Group USA had obtained forgiveness
of $274,189 for a Second Draw PPP loan, but because its owner is based in and

operates in China, it was not eligible for the loan.

JURISDICTION AND VENUE

o: This Court has jurisdiction over this action pursuant to 31 U.S.C. § 3732(a)

and 28 U.S.C. §§ 1331, 1345,

6. Venue is proper in this district under 28 U.S.C. §§ 1391(b) and 31 U.S.C. §

3732(a), as the defendant resides or transacts business in this jurisdiction and

violations of the False Claims Act described herein occurred in this district.
PARTIES

7s Defendant Taiji Group USA, Inc. (“Taiji Group”), a paper tube

manufacturer, has a principal address of 405 Wortha Herman Road SW,

Conover, NC 28613. At all relevant times, its president has been Meizong Yin.

8. Wuxi Taiji Paper Industry Co., Ltd. (“Wuxi Taiji”) is located at Chunyu

Road, Tuanjie Avenue, Dongting Town, Xishan Economic Development Zone,

Case 5:24-cv-00098-KDB-SCR Document2_ Filed 04/09/24 Page 2 of 9
Wuxi City, Jiangsu Province, P. R. China. At all relevant times, its president has
also been Meizong Yin.

9, Upon information and belief, Wuxi Taiji is the parent company of Taiji
Group.

10. For example, Wuxi Taiji’s website states that it has plants throughout
China and also in North Carolina, and that Taiji Group USA Inc. is one of its
“branches.”

11. 2013 news articles! similarly cited Wuxi Taiji as the firm investing in the
Conover factory, including quoting President Yin.

12. Alternatively, Taiji Group’s website explains that “TAIJI Chemical Fiber
Equipment LLC was founded in 1994 and has established branches in Qindao,
Wuxi, Yantai, Zhuhai, Fujian, Nanxun and Shaoxin. In 2013 TAT] Group USA
also became the first Chinese paper tube manufacturer in the USA.” Wuxi Taiji
was also founded in 1994 and has facilities in those same locations, and so, upon
information and belief, TAIJI Chemical Fiber Equipment LLC (“Taiji Chemical”)
and Wuxi Taiji are either the same company or affiliated.

13. Regardless, whether Wuxi Taiji or Taiji Chemical owns Taiji Group, Taiji

' https:/ / www.areadevelopment.com/newsitems/1-28-2013/ taiji-paper-
industry-company-us-headquarters-conover-north-carolina4892493.shtml; see
creating-about-80-jobs/article_ba5151d6-66f4-11e2-8579-001 9bb30f31a.html;

https://www.commerce.nc.gov/sync-archive-0492013/open

Case 5:24-cv-00098-KDB-SCR Document2_ Filed 04/09/24 Page 3of9
Group is owned by an entity created in the People’s Republic of China and with

significant operations in China.

THE PAYCHECK PROTECTION PROGRAM

14. During the COVID-19 pandemic, Congress passed the Coronavirus Aid,
Relief, and Economic Security Act (“CARES Act”). Section 1102 of the CARES
Act contains a program called the Paycheck Protection Program (“PPP”), a
program administered by the U.S. Small Business Administration (“SBA”) to
provide economic relief to small businesses nationwide adversely impacted by
the coronavirus pandemic.

15. Section 1102 of the CARES Act temporarily permitted SBA to guarantee
100% of the PPP loans. Section 1106 of the CARES Act provided for forgiveness
of up to the full principal amount of qualifying loans guaranteed under the PPP.
16. The CARES Act gives lenders delegated authority to process loan
applications for PPP funding. SBA allowed lenders to rely on certifications of the
borrowers in order to determine eligibility of the borrower and use of loan
proceeds, and to rely on specified documents provided by the borrower to
determine qualifying loan amount, and eligibility for loan forgiveness.

17. The Economic Aid Act (P.L. 116-260, in the Consolidated Appropriations
Act of 2021), authorized and funded a Second Draw PPP Loan program.

18. For Second Draw PPP Loans, lenders were compensated by the federal

Case 5:24-cv-00098-KDB-SCR Document2_ Filed 04/09/24 Page 4of9
government via processing fees based on the balance of the financing
outstanding at the time of final disbursement, in the amount of five (5) percent
for loans of more than $50,000 and not more than $350,000, and in the amount of
three (3) percent for loans above $350,000.

19. In general, the maximum amount borrowers could borrow was calculated
by aggregating payroll costs from the previous year, with annual employee
salaries capped at $100,000. The borrower then calculated the average monthly
payroll cost and multiplied that amount by a factor of 2.5.

20. Each borrower certified on the Second Draw loan applications that they
were eligible to receive the loan under the program guidelines and that their
applications and supporting documentation were accurate.

21. Borrowers were able to seek forgiveness of the loans if the funds were
used for eligible payroll costs, payments on business mortgage interest

payments, rent, or utilities.

PPP LOAN SCHEME

22. Taiji Group USA, Inc. was approved for a First Draw PPP loan of $254,415
by Wells Fargo on May 1, 2020. It reported 45 jobs. The entire loan amount, plus
interest, was forgiven.

23. Taiji Group USA, Inc. was approved for a Second Draw PPP loan of

$271,165 by Wells Fargo Bank on March 27, 2021. It reported 50 jobs. The entire

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Case 5:24-cv-00098-KDB-SCR Document2_ Filed 04/09/24 Page 5of9
loan amount, plus interest, was forgiven, a total of $274,189.

24.

Pursuant to 15 U.S.C. § 636(a)(37)(iv)(I)(cc), the term “eligible entity” for

PPP Second Draw Loans did not include any business concern or entity:

20.

(AA) for which an entity created in or organized under the laws of
the People’s Republic of China or the Special Administrative Region
of Hong Kong, or that has significant operations in the People’s
Republic of China or the Special Administrative Region of Hong
Kong, owns or holds, directly or indirectly, not less than 20 percent
of the economic interest of the business concern or entity, including
as equity shares or a capital or profit interest in a limited liability
company or partnership; or

(BB) that retains, as a member of the board of directors of the
business concern, a person who is a resident of the People’s Republic
of China...

Version one of the PPP Second Draw Borrower Application Form, effective

January 8, 2021, required the applicant to certify in good faith that, inter alia:

26.

The Applicant is eligible to receive a loan under the rules in effect at
the time this application is submitted that have been issued by the
Small Business Administration (SBA) and the Department of the
Treasury (Treasury) implementing Second Draw Paycheck
Protection Program Loans under Division A, Title 1 of the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
and the Economic Aid to Hard-Hit Small Businesses, Nonprofits,
and Venues Act (the Paycheck Protection Program Rules).

The applicant was also required to “certify in good faith” by initialing that:

The Applicant is not a business concern or entity (a) for which
an entity created in or organized under the laws of the
People’s Republic of China or the Special Administrative
Region of Hong Kong, or that has significant operations in the
People’s Republic of China or the Special Administrative
Region of Hong Kong, owns or holds, directly or indirectly,

Case 5:24-cv-00098-KDB-SCR Document2_ Filed 04/09/24 Page6of9
not less than 20 percent of the economic interest of the
business concern or entity, including as equity shares or a
capital or profit interest in a limited liability company or
partnership; or (b) that retains, as a member of the board of
directors of the business concern, a person who is a resident of
the People’s Republic of China.

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, including under 18 USC 1001 and 3571 by
imprisonment of not more than five years and/or a fine of up
to $250,000; under 15 USC 645 by imprisonment of not more
than two years and/or a fine of not more than $5,000; and, if
submitted to a federally insured institution, under 18 USC
1014 by imprisonment of not more than thirty years and/or a
fine of not more than $1,000,000.

Subsequent versions of the application form had similar certifications.

These certifications were false when made by Taiji Group because, at the

time of the application, it was owned by a parent company created in China and

with significant operations in China.

Taiji Group should be required to repay the loan, interest, and processing

fees, with penalties.

COUNT I
VIOLATIONS OF 31 U.S.C. § 3729
FALSE CLAIMS ACT

Case 5:24-cv-00098-KDB-SCR Document2_ Filed 04/09/24 Page 7 of 9
30. Relator hereby incorporates and realleges all other paragraphs as if fully
set forth herein.

31. Asset forth above, Defendant knowingly presented or caused to be
presented false or fraudulent claims for payment or approval, in violation of 31
U.S.C. § 3729(a)(1)(A).

32. As set forth above, Defendant knowingly made, used, or caused to be
made or used, false records or statements material to numerous false claims, in
violation of the False Claims Act, 31 U.S.C. § 3729(a)(1)(B).

33. Due to Defendant’s conduct, the United States Government has suffered
substantial monetary damages and is entitled to recover treble damages and a
civil penalty for each false claim, record, or statement. 31 U.S.C. § 3729.

34. Relator is entitled to reasonable attorneys’ fees, costs, and expenses. 31
U.S.C. § 3730(d)(1).

PRAYER FOR RELIEF

WHEREFORE, Relator prays for judgment against Defendant:
(a) awarding the United States treble damages sustained by it for each of
the false claims;
(b) awarding the United States a maximum civil penalty for each of the

false claims and statements;

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Case 5:24-cv-00098-KDB-SCR Document2_ Filed 04/09/24 Page 8 of 9
(c) awarding Relator the maximum relator’s share of the proceeds of this
action and any alternate remedy or the settlement of any such claim;

(d) awarding Relator litigation costs and reasonable attorneys’ fees and
expenses; and

(e) granting such other relief as the Court may deem just and proper.

DEMAND FOR JURY TRIAL

Relator hereby respectfully demands trial by jury on all issues and counts

triable as of right before a jury.

North Carolina Bar Number?39966
HKM Employment Attorneys LLP
3623 Latrobe Drive, Unit 122
Charlotte, NC 28211

Telephone: (980) 734-3851
spanyanouvong-rubeck@hkm.com

Jason Marcus (applying for pro hac vice)
Georgia Bar No. 949698

Bracker & Marcus LLC

3355 Lenox Road, Suite 660

Atlanta, Georgia 30326

Telephone: (770) 988-5035

Facsimile: (678) 648-5544
Jason@fcacounsel.com

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