Complaint — GNGH2 v. Carolina Herrera Ltd (E.D. Va.)

Summary

A qui tam Complaint Under the False Claims Act, 31 U.S.C. §§ 3729 et seq., in United States of America ex rel. GNGH2 Inc. v. Carolina Herrera Ltd and Puig USA Inc., Case 1:24-cv-01856-RDA-WBP, in the United States District Court for the Eastern District of Virginia, Alexandria Division, filed October 21, 2024 and dated October 18, 2024. Relator GNGH2 Inc. alleges that the defendants obtained second-draw PPP loans, $2,000,000 to Carolina and $1,689,007 to Puig US, while certifying on Form 2483-SD that they were not owned by an entity with significant operations in the People's Republic of China. It alleges that the defendants were subsidiaries of Puig Brands SA, which has significant operations in China, and exceeded SBA size standards. The relator seeks judgment of $6,206,833.32 against Carolina and $4,069,403.52 against Puig US.

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“Complaint — GNGH2 v. Carolina Herrera Ltd (E.D. Va.).” Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-no-1-24-cv-01856-dkt-1-e-d-va-2e2621bf71/, SHA-256 969a559eafe7c2dced04db784b56464458832fbf8997bfecce9a9a0c69c8e8f0.

Full text

Case 1:24-cv-01856-RDA-WBP Document 1 Filed 10/21/24 Page 1 of 7 PageID# 1

Damon R. Miller (VSB #98308)
3998 Fair Ridge Dr., #250
Fairfax, VA 2203 1
(703) 591-9829
dmiller@benglasslaw.com

United States District Court
Eastern District of Virginia - Alexandria Division

) TO BE FILED UNDER
United States of America ex rel. ) SEAL PURSUANT TO
GNGH2 Inc., ) 31 U.S.C. 3730(b)(2)
Plaintiff-Relator, )
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CAROLINA HERRERA LTD; and ) Complaint Under the \/v fb.P
PUIG USA INC., ) False Claims Act
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Defendants. )

Plaintiff-Relator, complaining of the Defendants by its attorney, Damian R.

Miller, respectfully sets forth and alleges as follows:

Complaint Under the False Claims Act, 31 U.S.C. §§ 3729 et seq.

1. Qui tam Relator GNGH2 Inc., by and through counsel, individually and on

behalf of the United States of America files this Complaint against CAROLINA

HERRERA LTD. ("Carolina") and PUIG USA INC. ("Puig US") to recover

damages, penalties, and attorney's fees for violation of the False Claims Act, 31

U.S.C. §§ 3729 et seq.
Case 1:24-cv-01856-RDA-WBP Document 1 Filed 10/21/24 Page 2 of 7 PageID# 2

I. Nature of the Case

2. This is a false claims act claim. The Qui Tam Plaintiff and Relator, GNGH2

Inc. ("Relator"), alleges that the Defendants fraudulently obtained CARES Act

disaster relief by means of fraudulent certifications of eligibility. As set forth in

more detail below, second-round PPP funding is barred to entities which are owned

by concerns with significant operations in the People's Republic of China and to

entities which exceed size standards.

II. Parties

3. Carolina is a Delaware business corporation with a principal place of

business in New York County, New York.

3a. Puig US is a New York business corporation with a principal place of

business in New York County, New York.

4. The Relator, GNGH2 Inc. ("Relator" or "Plaintiff') is a New Jersey

corporation with a principal office in Bergen County, New Jersey.

III. Compliance with Requirements of Suit

5. This matter will be filed under seal pursuant to 31 U.S.C. Section 3730(b)

and at or about the same time, a copy of the Complaint, any Sealing Order, and

Relator's disclosure of evidence will be served on the Department of Justice and

the United States Attorney for the District in which this matter has been filed .

2
Case 1:24-cv-01856-RDA-WBP Document 1 Filed 10/21/24 Page 3 of 7 PageID# 3

6. Relator will not serve the Complaint or any other papers in this matter until

and unless it becomes unsealed. Thus, if the Complaint is served on the

Defendant, it means that the matter has been duly unsealed.

IV. Jurisdiction and Venue

7. This Court has jurisdiction pursuant to 31 U.S.C. Section 3732(a) which

provides that this type of action may be brought in any district where any

Defendant resides or transacts business. In this case, the loans at issue in this

matter were obtained through HSBC Bank in McLean, Virginia.

V. Background

8. Throughout most of 2020 and continuing into 2021, the United States was

faced with a large scale outbreak of the virus commonly known as "Coronavirus"

and "COVID-19." (the "Coronavirus Epidemic").

9. In addition to the Coronavirus Epidemic itself, the United States was faced

with large scale outbreaks of panic and hysteria as a result of the Coronavirus

Epidemic.

10. All of the above has resulted in major economic disruption and as a result

Congress enacted the Coronavirus Aid, Relief, and Economic Security Act,

commonly known as the "CARES Act."

11. The CARES Act contains a provision which permitted qualifying business

which were affected by the foregoing disruption to obtain forgivable disaster loans.

3
Case 1:24-cv-01856-RDA-WBP Document 1 Filed 10/21/24 Page 4 of 7 PageID# 4

12. The CARES Act was subsequently amended to provide for a second round

of disaster funding. Significantly, an applicant is ineligible for such funding if is

owned by a concern with significant operations in the People's Republic of China

or if, when combined with its affiliates, it exceeds applicable size standards.

13. The Defendants in this matter are firms which design and sell fashion

products such as clothing, perfumes, and accessories. They received second-draw

PPP disaster relief as follows:

Defendant Date Amount Loan # Forgiven

Carolina 2/11/2021 $2,000,000 7106568408 8/9/2021

Puig US 2/5/2021 $1,689,007 3610038403 12/6/2021

14. Thus, on or about the above dates, Defendants completed Form 2483-SD

which required them to certify as follows:

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, 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

15. This certification was false when made as set forth below.

16. At all times relevant to this matter, the Defendants were a subsidiaries of an

entity known as Puig Brands SA which has significant operations in China.

4
Case 1:24-cv-01856-RDA-WBP Document 1 Filed 10/21/24 Page 5 of 7 PageID# 5

Additionally, the Defendants and their affiliates did not conform to the SBA's

applicable size standards in contradiction to another certification.

17. Moreover, the foregoing information is available on the websites of the

Defendants and/or their corporate parent.

18. Thus, Defendants' authorized representatives must have been either aware of

this information or reckless in regards to same.

19. Thus, Defendants made fraudulent representations when it completed form

2483-SD and certified eligibility in respect of the above matters.

20. As a result of these statements, the Defendants received (and the United

States paid) substantial funds to which they would not otherwise have been

entitled.

VI. (Count I) Violation of the False Claims Act

21. The False Claims Act imposes liability on a person or entity who

"knowingly makes, uses, or causes to be made or used, a false record or statement

material to a false or fraudulent claim" 31 U.S.C. Section 3729(a)(l)(B)

22. The Courts have held that this can include false statements regarding

eligibility to participate in a program. See United States ex rel. Kirk v. Schindler

Elevator Corp., 601 F.3d 94, 116 (2d Cir. 2010), rev'd on other grounds, 131 S.Ct.

1885 (2011) ("[C]laims may be false even though the services are provided as

claimed if, for example, the claimant is ineligible to participate in the program.")

5
Case 1:24-cv-01856-RDA-WBP Document 1 Filed 10/21/24 Page 6 of 7 PageID# 6

23. Thus, the Defendants' certifications of eligibility violated the False Claims

Act because they were false and required for eligibility for disaster relief.

VII. Relief Sought

24. On behalf of the government, Relator is seeking judgment for triple damages

and civil penalties set forth in 31 U.S.C. Section 3729.

25. The United States paid some $2,008,944.44 in principal and interest in

respect of the Carolina loan, together with processing fees in the amount of

$60,000.

26. The United States paid some $1,305,797.63 in principal and interest in

respect of the Puig US loan, together with processing fees in the amount of

$50,670.21

[continued on next page]

6
Case 1:24-cv-01856-RDA-WBP Document 1 Filed 10/21/24 Page 7 of 7 PageID# 7

27. Accordingly, Relator seeks judgment in the amount of $6,206,833.32

against Defendant Carolina and $4,069,403.52 against Defendant Puig US,

together with costs, attorney's fees, interest, civil penalties, an appropriate qui tam

award, and such other and further relief as the Court deems just.

Respectfully submitted,

Damon Miller, Attorney at Law (VSB #98308)
Attorney for Relator
GNGH2 Inc.

3998 Fair Ridge Dr., #250
Fairfax, VA 22031
(703) 591-9829
dmiller@benglasslaw.com

Dated: Fairfax, Virginia
October 18, 2024

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