Complaint for Violations of Federal False Claims Act — Relator LLC v. West Coast Dental Services (Document 1)
Summary
Complaint for Violations of Federal False Claims Act in United States of America ex rel. Relator LLC v. West Coast Dental Services, Inc., et al., Case 2:22-cv-03816-MRA-MAR, in the U.S. District Court for the Central District of California, filed 06/03/22 as Document 1 in camera under seal pursuant to 31 U.S.C. § 3730(b)(2). Relator LLC alleges that the defendants obtained millions of dollars in PPP proceeds and used them for personal gain such as all-cash real estate purchases instead of payroll. It alleges that Corp 1 received a first-round PPP loan of $7,343,628.00 stating 477 employees, then moved most employees to affiliated entities that collected their own first-round loans, and obtained a second-round loan of $1,043,518.00 stating 131 employees. The complaint is dated June 1, 2022 and signed /s/ Anoush Hakimi.
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“Complaint for Violations of Federal False Claims Act — Relator LLC v. West Coast Dental Services (Document 1).”
Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-no-2-22-cv-03816-dkt-1-c-d-cal-2752676932/
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Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 1 of 36 Page ID
#:1
t= I L ~: U
1 Anoush Hakimi(SBN 228858)
2 anoush(a~handslaw roup.com
Peter Shahriari(SBN 237074) 1011 JUP~ —3 PM is 2~r
3 peter(cr~,handslawgroup.com ~:t ~ { ~ ~~ s ~t ~ t , #, ,_ ~,~
4 THE LAW OFFICE OF HAKIMI & SHAH~~'~ ~
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1800 Vine Street _ ~~,
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5 Los Angeles, CA 90028 p/4jp
6 Telephone:(888)635-2250
Facsimile: ~213)402-2170 ~ ~~~ ~- ;~ ;
7
Attorneys for Plaintiff-Relator, fi.+ .,s o~a"i.~~
8
RELATOR,LLC '~'~ ~f `~'
9
10 UNITED STATES DISTRICT COURT
11 CENTRAL DISTRICT OF CALIFORNIA
12
UNITED STATES OF AMERICA, Case No.
13
14 Plaintiff,
COMPLAINT FOR VIOLATIONS
15 ex rel. RELATOR LLC,a California
OF FEDERAL FALSE CLAIMS
limited liability company,
16 ACT
17 Relator,
FILED IN CAMERA UNDER SEAL
18 v. PURSUANT TO 31 U.S.C. §
3730(b)(2)
19 WEST COAST DENTAL SERVICES,
20 INC., a California corporation, COHEN DO NOT PLACE ON PACER
SEDGH MANAVI & PAKRAVAN
21 DENTAL CORPORATION,a
California corporation, SOL COHEN JURY TRIAL DEMANDED
22
SEDGH DDS INC., a California
23 corporation, SOLEYMAN COHEN
24 SEDGH DDS INC., a California
corporation, SOL COHEN SEDGH
25 DENTAL CORPORATION,a
26 California corporation, PAKRAVAN
DENTAL CORPORATION,a
27 California corporation, FARID
28 PAKRAVAN PROFESSIONAL
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 2 of 36 Page ID
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DENTAL CORPORATION,a
2 California corporation, CITY REAL
ESTATE HOLDING,LLC,a
3 California limited liability company,
4 SOLEYMAN COHEN-SEDGH,an
individual, FARID PAKRAVAN,an
5 individual, and FARHAD MANAVI,an
6 individual; and
DOES 1-10,
7
8 Defendants.
9
10
11
Plaintiff-Relator, RELATOR LLC (hereinafter referred to as "Plaintiff')
12
complains of Defendants WEST COAST DENTAL SERVICES,INC., a
13
14 California corporation, COHEN SEDGH MANAVI & PAKRAVAN DENTAL
15
CORPORATION,a California corporation, SOL COHEN SEDGH DDS INC., a
16
California corporation, SOLEYMAN COHEN SEDGH DDS INC., a California
17
18 corporation, SOL COHEN SEDGH DENTAL CORPORATION,a California
19
corporation,PAKRAVAN DENTAL CORPORATION,a California corporation,
20
FARID PAKRAVAN PROFESSIONAL DENTAL CORPORATION,a
21
22 California corporation, CITY REAL ESTATE HOLDING,LLC,a California
23
limited liability company,SOLEYMAN COHEN-SEDGH,an individual, FARID
24
PAKRAVAN,an individual, and FARHAD MANAVI,an individual; and Does 1-
25
26 10(each,individually a "Defendant," and collectively "Defendants"), and alleges as ~
27
follows:
28
2
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 3 of 36 Page ID
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1
I. INTRODUCTION
3
=~ 1. This is a case about a handful of wealthy businessmen exploiting and
5 defrauding The United States Government by embezzling millions of dollars from
6
an aid program intended to help working families. These wealthy businessmen
7
8 defrauded the government for their own personal, unjust and unlawful enrichment,
9 at a time of national emergency.
10
2. Plaintiff-Relator, Relator LLC on behalf ofthe United States of
11
12 America brings this action to recover treble damages, civil penalties, and costs
13 under the False Claims Act("FCA"), 31 U.S.C. §§ 3729-33, and to recover
14
damages and other monetary relief under the common law and equitable theories of
15
16 unjust enrichment and payment by mistake.
17
3. This action arises from false and deceptive statements and claims that
18
the Corporate Defendants (as defined below) and their owners, officers and
19
20 shareholders, the Individual Defendants(as defined below), listed in the caption
21
(collectively "Defendants"), knowingly presented to, or caused to be presented to,
22
the United States and the United States Small Business Administration("SBA")
23
24 and lenders acting on the SBA's behalf, in violation ofthe FCA and common law.
25 ~~
4. The Individual Defendants, among other things, used the Corporate
26
Defendants to unlawfully obtain millions of dollars ofPPP Proceeds(as defined
27
28
3
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 4 of 36 Page ID
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1 below), and unlawfully misappropriated such proceeds for their own personal gain.
5. In their applications, the Corporate Defendants stated that they would
J
4 use 100% of the PPP Proceeds for payroll. They did not use the received PPP
5 Proceeds for payroll, quite the opposite. The Defendants laid off or shuffled most of
6
their employees among affiliated entities and instead used the PPP Proceeds for
7
8 personal gain, such as all cash real estate purchases.
9 6. The Defendants made many material false statements in their PPP
10
applications, including the use of proceeds, number of employees, and retention of
11
12 employees.
13 7. The scheme is summarized in this way: Defendants received a large
14
first-round PPP loan for all of their 477 employees through one entity (Corp 1, as
15
defined below), then shortly thereafter moved most of these employees off the
16
company payroll onto other affiliated companies' payrolls which are inactive shell
17
corporations owned and controlled by the Individual Defendants. The shell
18
corporations(Corp 2 —Corp 7, defined below) then also collected first-round PPP
19
loans for these same employees, allowing for duplicate loans while also reducing
20
21 the number of employees (less than 300)in the original company (Corp 1) and
22 thereby allowing it to qualify for asecond-round PPP loan. Defendants did not use
23 the loans (all of which were forgiven by the SBA)for payroll as required, but rather
24 embezzled the money for personal gain like real estate purchases.
25 8. In executing on this scheme, the first-round loan obtained by Corp 1 in
26
2020 was with one bank (Idaho First Bank)and Corp 1's second-round loan as well
~~
as all of the other loans of the other Corporate Defendants(Corp 2 through Corp 7)
28
4
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 5 of 36 Page ID
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1 which were all obtained in 2021 were with a different lender(A 1 Ocapital, LLC).
9. Prior to the start of the pandemic the Individual Defendants, through
4 Corp 1, owned and operated a number of dental offices in California.
10. The PPP funds were not used for eligible purposes. During the course
h
of the pandemic, the Individual Defendants individually and through various
7
8 corporate entities owned and controlled by the Individual Defendants, used these
9 ill-gotten PPP proceeds to purchase lavish multi-million-dollar second and third
10
homes and numerous single-family residences for speculative real estate investment
I1
12 in all-cash offers.
13 1 1. Rather than protect the paychecks of their employees, the Defendants
14
terminated (or shuffled around) most of their workers (about 75% ofthem) and
15
16 instead used government money for their own gain, to speculate on real estate
17 during a national and global health crisis.
18
II. THE PARTIES
19
12. Plaintiff Relator LLC, is a California limited liability company with its
20
21 principal place of business in Los Angeles, California.
22
13. Defendant West Coast Dental Services, Inc., is a California
23
corporation ("Corp 1") with its principal place of business at 12121 Wilshire Blvd., ~
24
25 Suite 1111, Los Angeles, California 90025.
26
14. During round 1 of the paycheck protection program, Corp 1 applied
~~
for a PPP loan for $7,343,628.00. They were approved on Apri127, 2020 by the
?x
5
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 6 of 36 Page ID
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1 SBA for an amount of $7,343,628.00. The loan was facilitated by Idaho First Bank.
2
Corp 1 received 100% of the approved amount. The SBA forgave $7,428,331.00 of
3
4 this loan on June 25, 2021. On its application for this loan, Corp 1 stated that they
5 had 477 employees with an average salary of $73,898.00 per year. This loan
6
hereafter referred to as the "Corp 1 Round 1 Loan."
7
8 15. During round 2 of the paycheck protection program, Corp 1 requested
9 a PPP loan for $1,043,518.00. They were approved on February 14, 2021 by the
10
SBA for an amount of$1,043,518.00. The loan was facilitated by AlOcapital, LLC.
11
12 Corp 1 received 100% of the approved amount. The SBA forgave $1,055,182.53 of
13 this loan on March 31, 2022. On its application for this second-round loan, Corp 1
14
stated that they only had 131 employees with an average salary of $38,236.00 per
15
16 year. This loan hereafter referred to as the "Corp 1 Round 2 Loan." In other words,
17 between the time oftheirfirst-round loan and their second-round loan they had
18
terminated(or shuffled around)346, or roughly 73.4% oftheir employees.
19
20 16. Defendant Cohen Sedgh Manavi & Pakravan Dental Corporation, is a
21
California corporation ("Corp 2") with its principal place of business at 12121
22
Wilshire Blvd., Suite 1111, Los Angeles, California 90025.
23
24 17. During round 1 ofthe paycheck protection program, Corp 2 requested
25
a PPP loan for $1,995,000.00. They were approved on February 24, 2021 by the
26
SBA for an amount of$1,995,000.00. The loan was facilitated by AlOcapital, LLC.
27
28
6
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 7 of 36 Page ID
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1 Corp 2 received 100% of the approved amount. The SBA forgave $2,014,130.14 of
this loan on February 14, 2022. On its application for this loan, Corp 2 stated that
J
4 they had 218 employees with an average salary of $43,927.00 per year. This loan
hereafter referred to as the "Corp 2 Loan." Plaintiff alleges that Corp 2's 218
6
employees were actually Corp 1 employees that were fraudulently listed on Corp
7
8 2's books so that Corp 1 could show less than 300 employees for its second-round
9 PPP application and so that the Defendants could receive additional first-round
10
proceeds for these same Corp 1 employees through Corp 2.
11
12 18. Defendant Sol Cohen Sedgh Dds Inc., is a California corporation
1 3 ("Corp 3") with its principal place of business at 12121 Wilshire Blvd., Suite 1111,
14
Los Angeles, California 90025.
1>
16 19. During round 1 of the paycheck protection program, Corp 3 requested
17 a PPP loan for $267,612.00. They were approved on March 27, 2021 by the SBA
18
for an amount of $267,612.00. The loan was facilitated by AlOcapital, LLC. Corp 3
19
20 received 100% of the approved amount. The SBA forgave $270,068.16 of this loan
21 on March 3, 2022. On its application for this loan, Corp 3 stated that they had 23
22
employees with an average salary of $55,849.00 per year. This loan hereafter
23
24 referred to as the "Corp 3 Loan." Plaintiff alleges that Corp 3's 23 employees were
25
actually Corp 1 employees that were fraudulently listed on Corp 2's books so that
26
Corp 1 could show less than 300 employees for its second-round PPP application
27
28
7
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 8 of 36 Page ID
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1 and so that the Defendants could receive additional first-round proceeds for these
same Corp 1 employees through Corp 3.
4 20. Defendant Soleyman Cohen Sedgh Dds Inc., is a California
corporation ("Corp 4") with its principal place of business at 12121 Wilshire Blvd.,
6
Suite 1 ll 1, Los Angeles, California 90025.
7 ~
8 21. During round 1 of the paycheck protection program, Corp 4 requested
c~
a PPP loan for $148,481.00. They were approved on March 25, 2021 by the SBA
10
for an amount of $148,481.00. The loan was facilitated by A l Ocapital, LLC. Corp 4
11
12 received 100% of the approved amount. The SBA forgave $1.49,676.98 of this loan
13 on January 21, 2022. On its application for this loan, Corp 4 stated that they had 18
14
employees with an average salary of $39,595.00 per year. This loan hereafter
1>
16 referred to as the "Corp 4 Loan." Plaintiff alleges that Corp 4's 18 employees were
17 actually Corp 1 employees that were fraudulently listed on Corp 4's books so that
18
Corp 1 could show less than 300 employees for its second-round PPP application
19
?0 and so that the Defendants could receive additional first-round proceeds for these
21 same Corp l employees through Corp 4.
~~
22. Defendant Sol Cohen Sedgh Dental Corporation, is a California
23
24 corporation ("Corp 5") with its principal place of business at 12121 Wilshire Blvd.,
25
Suite 1111, Los Angeles, California 90025.
26
~~ 23. During round 1 of the paycheck protection program, Corp 5 requested
~x
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 9 of 36 Page ID
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1 a PPP loan for $173,235.00. They were approved on March 30, 2021 by the SBA
2
for an amount of $173,235.00. The loan was facilitated by A l Ocapital, LLC. Corp 5
3
4 received 100% of the approved amount. The SBA forgave $174,758.52 of this loan
5 on February 17, 2022. On its application for this loan, Corp 5 stated that they had
6
15 employees with an average salary of $55,435.00 per year. This loan hereafter
7
8 referred to as the "Corp 5 Loan." Plaintiff alleges that Corp 5's 15 employees were
9 actually Corp 1 employees that were fraudulently listed on Corp 5's books so that
10
Corp 1 could show less than 300 employees for its second-round PPP application
ll
12 and so that the Defendants could receive additional first-round proceeds for these
13 same Corp 1 employees through Corp 5.
14
24. Defendant Pakravan Dental Corporation, is a California corporation
15
16 ("Corp 6") with its principal place of business at 12121 Wilshire Blvd., Suite 1111,
17 Los Angeles, California 90025.
18
25. During round 1 ofthe paycheck protection program, Corp 6 requested
19
20 a PPP loan for $199,616.00. They were approved on March 30, 2021 by the SBA
21
for an amount of $199,616.00. The loan was facilitated by A l Ocapital, LLC. Corp 6
22
received 100% of the approved amount. The SBA forgave $201,448.09 of this loan
23
24 on March 4, 2022. On its application for this loan, Corp 6 stated that they had 13
25
employees with an average salary of$73,704.00 per year. This loan hereafter
26
referred to as the "Corp 6 Loan." Plaintiff alleges that Corp 6's 13 employees were
27
28
0
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 10 of 36 Page ID
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1 actually Corp 1 employees that were fraudulently listed on Corp 6's books so that
2
Corp 1 could show less than 300 employees for its second-round PPP application
3
4 and so that the Defendants could receive additional first-round proceeds for these
5 same Corp 1 employees through Corp 6.
6
26. Defendant Farid Pakravan Professional Dental Corporation is a
7
8 California corporation ("Corp 7") with its principal place of business at 12121
9 Wilshire Blvd., Suite 1111, Los Angeles, California 90025.
10
27. During round 1 of the paycheck protection program, Corp 7 requested
11
12 ~ a PPP loan for $182,167.00. They were approved on March 23, 2021 by the SBA
13 for an amount of $182,167.00. The loan was facilitated by A l Ocapital, LLC. Corp 7
14
received 100% of the approved amount. The SBA forgave $183,873.88 of this loan
15
16 on March 3, 2022. On its application for this loan, Corp 7 stated that they had 8
17 employees with an average salary of $109,300.00 per year. This loan hereafter
18
referred to as the "Corp 7 Loan." Plaintiff alleges that Corp 7's 8 employees were
19
20 actually Corp 1 employees that were fraudulently listed on Corp 7's books so that
21
Corp 1 could show less than 300 employees for its second-round PPP application
22
and so that the Defendants could receive additional first-round proceeds for these
23
24 same Corp 1 employees through Corp 7.
25
28. Corp 1, Corp 2, Corp 3, Corp 4, Corp 5, Corp 6 and Corp 7 shall
26
hereinafter be referred to as the Corporate Defendants.
27
29. Defendant Soleyman Cohen-Sedgh ("Cohen-Sedgh) is an individual
28
10
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 11 of 36 Page ID
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and (a)the Chief Executive Officer and Chief Financial Officer of Corp 1,(b)a
Director of Corp 2,(c)the Chief Executive Officer and ChiefFinancial Officer of
Corp 3,(d)the ChiefExecutive Officer and Chief Financial Officer of Corp 4,(e)
4
the Chief Executive Officer and ChiefFinancial Officer of Corp 5,(~ a director of
5
Corp 6 and(g)a director of Corp 7.
6
30. Farid Pakravan ("Pakravan")is an individual and (a)the Secretary of
7
Corp 1,(b)the Secretary of Corp 2,(c)the Secretary of Corp 3,(d)the Secretary of
c~ Corp 4,(e)the Secretary of Corp 5,(~ the Chief Executive Officer and Chief
10 Financial Officer of Corp 6 and (g)the Chief Executive Officer and Chief Financial
11 Officer of Corp 7.
12 31. Farhad Manavi("Manavi")is an individual and(a)a Director of Corp
13 1,(b)the Chief Executive Officer and Chief Financial Officer of Corp 2, and (c) a
14 Director of Corp 5.
15 32. Cohen-Sedgh,Pakravan and Manavi are hereafter referred to as the
16 Individual Defendants.
17 33. Plaintiff is informed and believes that the Individual Defendants are
18
shareholders and owners ofthe Corporate Defendants.
19
34. Plaintiff is informed and believes that the Individual Defendants
20
exercise control over and manage the affairs ofthe Corporate Defendants.
21
35. Plaintiff is informed and believes that the Corporate Defendants are all
22
affiliates and affiliated as these terms are defined in the "Affiliation Rules
23
Applicable to U.S. Small Business Administration Paycheck Protection Program"
24
25 dated Apri13, 2020.
26 36. In total the Corporate Defendants received $11,353,257.00 as follows:
27
~g
11
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 12 of 36 Page ID
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1 Borrower Loan Amount Anuroved Date Employees Lender
2 Corp 1 -Round 1 $7,343,628.00 4/27/2020 477 Idaho First Bank
Corp 1 -Round 2 $1,043,518.00 2/14/2021 131 Al Ocapital, LLC
3 Corp 2 $1,995,000.00 2/24/2021 218 Al Ocapital, LLC
4 Corp 3 $267,612.00 3/27/2021 23 Al Ocapital, LLC
Corp 4 $148,481.00 3/25/2021 18 Al Ocapital, LLC
5
Corp 5 $173,235.00 3/30/2021 15 AlOcapital, LLC
6 Corp 6 $199,616.00 3/30/2021 13 AlOcapital, LLC
Corp 7 $182,167.00 3/23/2021 8 AlOcapital, LLC
7
8 Total $11,353,257.00
9
10 37. City Real Estate Holding, LLC, is a California limited liability
11 company ("Real Estate LLC") with a principal place of business at 9903 Santa
i
12 Monica Blvd., 921 Beverly Hills, California 90212. This business address is a
13 mailbox rental address.
14
38. During round 1 of the paycheck protection program, Real Estate LLC
15
requested a PPP loan for $20,833.00. They were approved on April 8, 2021 by the
16
SBA for an amount of $20,833.00. The loan was facilitated by Harvest Small
17
Business Finance, LLC. Real Estate LLC received 100% ofthe approved amount.
18
The SBA forgave $20,933.21 ofthis loan on October 15, 2021. On its application
19
for this loan, Real Estate LLC stated that they had 1 employee with an average
20
21 salary of $99,994.00 per year.
22 39. Manavi is the Chief Executive Officer, manager and member of Real
23 Estate LLC.
24 40. Plaintiff is informed and believes that the one employee claimed by
25 Real Estate LLC on its PPP loan application is Manavi.
26 III. The CARES Act and Paycheck Protection Program
27 41. On March 27, 2020, the Coronavirus Aid, Relief, and Economic
28
12
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 13 of 36 Page ID
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1 Security Act ("the CARES Act" or "the Act")(Pub. L. 116-136) became law and
provided emergency assistance and health care response for individuals, families,
4 and businesses affected by the coronavirus pandemic. SBA received funding and
authority through the Act to modify existing loan programs and establish a new
6
loan program to assist small businesses nationwide adversely impacted by the
7
8 COVID-19 emergency.
9 42. The CARES Act authorized loans to eligible small businesses
10
struggling to pay employees and other business expenses as a result of the
1]
12 devastating effect of the COVID-19 pandemic.
13 43. Section 1102 of the CARES Act temporarily permitted the SBA to
14
guarantee 100 percent of 7(a) loans under a new program titled the "Paycheck
1>
16 Protection Program"("PPP").
17 44. On April 24, 2020, the Paycheck Protection Program and Health Care
18
Enhancement Act(Pub. L. 116-139) became law and provided additional funding
19
20 and authority for the PPP. On June 5, 2020, the Paycheck Protection Program
21
Flexibility Act of 2020 (Flexibility Act)(Pub. L. 116-142) became law and changed
22
key provisions of the Paycheck Protection Program, including provisions relating to ~
23
24 the maturity of PPP loans, the deferral of PPP loan payments, and the forgiveness
~5 '~
of PPP loans. Case 9:20-cv-81717-DMM Document 52 Entered on FLSD Docket
26
05/20/2022 Page 2 of 28
27
28
13
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 14 of 36 Page ID
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1 45. Under the PPP,in 2020, eligible businesses could obtain one SBA
2
guaranteed PPP loan. Businesses were required to spend loan proceeds for
3
4 employee compensation, rent or mortgage, and other specified expenses and,
5 depending on their use ofthe loan proceeds, could qualify for loan forgiveness, up
6
to the full amount ofthe loan.
7
8 46. The SBA delegated authority to third-party lenders to underwrite and
9 approve the PPP loans. In order to obtain a PPP loan, a qualifying business (through
10
its authorized representative) signed and submitted a PPP loan application(SBA
11
12 Form 2483)online through the lender's application platform. The PPP loan
13 application(SBA Form 2483)required the business (through its authorized
14
representative)to acknowledge the PPP program rules and make certain affirmative
15
16 certifications in order to be eligible to obtain the PPP loan.
17 47. Once the Borrower submitted its PPP loan application(SBA Form
18
2483)to a Lender, the participating lender processed the PPP loan application. If a
19
20 PPP loan application(SBA Form 2483) was approved by the participating lender, it
21
thereafter funded the PPP loan using its own monies, which were 100% guaranteed
22
by the SBA.
23
24 48. After the Lender processed and approved a borrower's PPP loan
25
application(Form 2483), but prior to the closing ofthe PPP loan, the Lender
26
submitted to the SBA,the Lender's Application -Paycheck Protection Program
27
28
14
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 15 of 36 Page ID
#:15
1 Loan Guaranty(SBA Form 2484)to the SBA applying for a guarantee on the loan.
2
For a PPP loan to be approved, the Lender was required to Answer Yes to the
3
4 following questions in the Lender's Application -Paycheck Protection Program
5 Loan Guaranty(SBA Form 2484)as to the Borrower's certification of its General
6
Eligibility to receive a PPP Loan:
7
8 The Applicant has certified to the Lender that (1) 1'eS ❑No
it was in operation on February 15, 2020, has not
9 permanently closed, and was either an eligible
10 self-employed individual, independent contractor,
or sole proprietorship with no employees or had
11 employees for whom it paid salaries and payroll
12 taxes or paid independent contractors, as reported
on Forms) 1099MISC; (2) current economic
13 uncertainty makes this loan request necessary to
14 support the ongoing operations of the Applicant;
(3) the funds will be used to retain workers and
15 maintain payroll, or make payments for mortgage
16 interest, rent, utilities, covered operations
expenditures, covered property damage costs,
17
covered supplier costs, and covered worker
18 protection expenditures; and (4) the Applicant has
not and will not receive another loan under the
19 Paycheck Protection Program, section 7(a)(36) of
20 the Small Business Act (15 U.S.C. 636(a)(36))
(this does not include Paycheck Protection
21
Program second draw loans, section 7(a)(37) of
22 the Small Business Act 15 U.S.C. 636 a 37
23
24 SBA Form 2484 (emphasis added). Therefore, if a PPP borrower lied on its PPP
25
loan application(SBA Form 2483), the PPP borrower's false certification caused
26
the Lender to submit to the SBA with respect to that PPP Loan, a Lender's
27
28
15
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 16 of 36 Page ID
#:16
1 Application -Paycheck Protection Program Loan Guaranty(SBA Form 2484)that
2
contained the PPP borrower's False Statement.
3
4 49. SBA Form 2483 provides the following certification, among others
5 "All SBA loan proceeds will be used only for business-related purposes as specified
6
in the loan application and consistent with the Paycheck Protection Program Rule"
7
8 (hereafter the "Use ofProceeds Certification")
9 50. SBA Form 2483 additionally provides the following certification,
10
among others: "Current economic uncertainty makes this loan request necessary to
11
12 support the ongoing operations ofthe Applicant"(hereafter the "Economic
13 Necessity Certification").
14
51. SBA Form 2483 additionally provides the following certification,
15
16 among others:"The funds will be used to retain workers and maintain payroll or
17 make mortgage interest payments, lease payments, and utility payments, as
18
specified under the Paycheck Protection Program Rule; I understand that if the
19
20 funds are knowingly used for unauthorized purposes, the federal government may
21 hold me legally liable, such as for charges offraud"(hereafter the "Worker
22
Retention and Payroll Certification.")
23
24 '~ 52. SBA Form 2483 additionally provides the following certification,
among others:"The Applicant was in operation on February 15,2020 and had
~~
~~ employees for whom it paid salaries and payroll taxes or paid independent
28
16
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 17 of 36 Page ID
#:17
1 contractors, as reported on Forms) 1099-MISC"(hereafter the "In Operation
2
Certification").
3
4 53. SBA Form 2483 additionally provides the following certification,
5 among others: "During the period beginning on February 15, 2020 and ending on
6
December 31, 2020, the Applicant has not and will not receive another loan under
7
8 the Paycheck Protection Program"(hereafter the "No Other Loan Certification")
9 54. After the borrower submitted the PPP loan application, that application
10
was then processed by a participating lender. If a PPP loan application was
11
12 approved, the participating lender funded the loan using its own monies, which
13 were then guaranteed by the SBA. Generally, in the event that the borrower
14
defaulted on a PPP loan, the SBA would purchase the borrower's debt from the
1J
16 lending financial institution and take on the responsibility for paying back the loan.
17 55. Under the applicable PPP rules and guidance, recipients of PPP loans
18
could apply to have the interest and principal on the PPP loan fully forgiven,
19
20 meaning that the borrower would owe nothing and would have no obligation to
21 repay the PPP loan. To obtain full forgiveness of the PPP loan, borrowers had to
22
attest that they had "not reduced the number of employees or the average paid hours
23
24 of[their] employees" during the loan period, that the loan proceeds had been spent
ZJ
on payroll costs and other permitted expenses and that at least 60% of the loan
~~
proceeds had been spent on payroll costs (hereafter the "Loan Forgiveness
27
28
17
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 18 of 36 Page ID
#:18
1 Certification").
56. Borrowers who qualified for and received a "First Draw" PPP loan
4 were permitted, to apply fora "Second Draw" PPP loan, provided that the borrower
had (a) previously received a First Draw PPP loan and had used the full amount
6
only for authorized uses;(b) had no more than 300 employees (the "300 Employee
7
8 Rule"); and (c)could demonstrate at least a 25%reduction in gross receipts
y between comparable quarters in 2019 and 2020 (hereafter "Second Draw
Certification").
11
l2 57. Like the First Draw PPP loans, Second Draw PPP loans could only be
13 used for certain permitted expenses, such as to fund payroll costs and employee
14
benefits, such as health insurance, to pay for, mortgage interest, rent, utilities or
15
16 worker protection costs related to COVIDI9.
17 IV. Defendants' Fraudulent Scheme of Shuffling Employees to Shell Entities
18
to Collect Duplicate Payroll Sums —False Statements and Misuse of
19
Proceeds
20
a. Corp 1
21
58. Defendants received a PPP loan for all their 477 employees through
22
Corp 1, then shuffled most of them around to shell entities to collect duplicate loans
23
for the same employees and to reduce the number of employees (to below 300)in
24
the original company (Corp 1) such that Corp 1 would qualify for a second loan.
~h Defendants then did not use the loan for payroll, but rather for personal gain.
27 59. In their application for the Corp 1 Round 1 Loan, which was approved
28
18
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 19 of 36 Page ID
#:19
1 on Apri127, 2020, Corp 1 certified that they had 477 employees, with an average
salary of $73,898.00 per year and that 100% of the loan proceeds would be used fo1-
-,
J
payroll. The SBA forgave $7,428,33].00 of this loan on June 25, 2021.
4
60. Less than one year later, Corp 1 applied for a Round 2 Loan, which
was approved on February 14, 2021. In that application Corp 1 certified a business
6
7 related major drop in the number of employees, only 131 employees, with an
8
average salary of $38,236.00 per year. They also promised that 100% of the loan
9
10 proceeds would be used for payroll. The SBA forgave $1,055,182.53 of this loan on
1 1 ~' March 31, 2022.
12
61. In other words, even though Corp 1 certified on its application for the
13
Corp 1 Round 1 Loan that it would retain its workers Corp 1 actually terminated (or
14
for some reason shuffled to other entities) 346, or roughly 73.4% of their
1~
employees in less than one year. It is evident that the funds were not used to retain
16
workers.
17
18 62. Corp 1's failure to use the loan proceeds of the Corp Round 1 Loan for
19 payroll and employee retention constitutes a violation of the Use of Proceeds
20 Certification and the Worker Retention and Payroll Certification.
21 63. Since the Corp 1 Round 1 Loan was forgiven and Corp 1 reduced the
22 average number of it's employees by 73.4%, when Corp 1 made the Loan
23 Forgiveness Certification, that certification was false.
24 64. Corp 1 terminated (or otherwise separated) 73.4% of its employees
25
after it received the Corp 1 Round 1 Loan, when Corp 1 made the Second Draw
26
Certification, so that certification was false.
27
65. Corp 1 also certified it had. less than 300 employees for its Round 2
~~
19
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 20 of 36 Page ID
#:20
1 Loan, but that was also false. That statement was false because prior to submitting
2 the second-round loan application most of Corp 1's employees were fraudulently
3
listed as employees of Corp 2 through Corp 7.
4
66. Plaintiff is informed and believes and herein alleges that the proceeds
5
of the Corp 1 Round 1 Loan and the Corp 1 Round 2 Loan were not used for
6
permitted purposes and therefore when Corp 1 made the Use of Proceeds
7
Certification, the Worker Retention and Payroll Certification and the Loan
8
Forgiveness Certification with respect to each of the loans, the certifications were
9
10 false.
11 b. Corp 2
12 67. Corp 2 is a shell corporation. It was not in operation and was not active
13 until the PPP presented an opportunity for the Defendants to steal.
14 68. Corp 2 was originally formed on November 10, 2010 by filing of
15 Articles of Incorporation with the California Secretary of State. Since July 28, 2011
16 until May 27, 2020 (right after the Corp 1 Round 1 Loan was approved) Corp 2 lay
17 dormant. There were no filings with the California Secretary of State. For more
18
than nine years, Corp 2 filed nothing with the California Secretary of State. There
19
was also no activity which could be detected in any media or other record. As of the
20
date of this Complaint Corp 2 is delinquent with the filing of its Statement of
21
Information with the California Secretary of State.
22
69. Corp 2's first filing after this extended period of dormancy was on
23
May 27, 2020, immediately after Corp 1 had obtained afirst-round loan and the 300 ~
24
25 Employee Rule was known to the Defendants.
26 70. Under the 300 Employee Rule, Corp 1 was ineligible and prohibited
27 from obtaining a second round PPP loan because it had more than 300 employees,
28
20
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 21 of 36 Page ID
#:21
1 in reality.
2 71. Plaintiff is informed and believes that Corp 2 was exploited by the
3
Defendants as a way to evade the 300 Employee Rule enabling it to fraudulently
4
obtain loan proceeds for employees already claimed by Corp 1.
72. Plaintiff is informed and believes that the 218 employees set forth in
6
Corp 2's PPP application were actually employees of Corp 1, for which Corp 1 had
7
already received PPP loan proceeds. They were then shuffled to Corp 2 for two
8
reasons: 1)to allow Corp 1 to evade the 300 Employee Rule for its second-round
q
loan and; 2)to allow Corp 2 to get another loan for the same employees, to
i[~
"double-dip" for payroll costs already received by Corp 1 for the same employees
12 in its first round loan.
13 73. Plaintiff is informed and believes and herein alleges that the proceeds
14 of the Corp 2 Loan were not used for permitted purposes and therefore when Corp 2
1> made the Use ofProceeds Certification, the Worker Retention and Payroll
16 Certification and the Loan Forgiveness Certification with respect to each of the
17 loans, the certifications were false.
18
74. Plaintiff is informed and believes and herein alleges that Corp 2 was
19
not in operation on February 15, 2020 and did not have employees for whom it paid
20
salaries and payroll taxes or paid independent contractors, as reported on Forms)
21
1099-MISC, and therefore when Corp 2 made the In Operation Certification, that
22
certification was false.
23
75. Plaintiff is informed and believes and herein alleges that when the
24
25 authorized representative of Corp 2 made the No Other Loan Certification, such
26 certification was not made in "good-faith" as required because the object of the
27 certification was to evade the 300 Employee Rule restriction on Corp 1 and to
?g
21
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 22 of 36 Page ID
#:22
1 double-dip, and therefore such certification was false.
2 c. Corp 3
3
76. Corp 3 is a shell corporation. It was not in operation and was not active
4
until the PPP presented an opportunity for the Defendants to steal.
5
6 77. Corp 3 was originally formed on October 13, 1994 upon the filing of
7
Articles of Incorporation with the California Secretary of State. From 1997 until
8
2009 the only events with the California Secretary of State were delinquencies and
9
10 failures of Corp 3 to follow corporate formalities.
11
78. Under the 300 Employee Rule, Corp 1 was ineligible and prohibited
12
from obtaining a second round PPP loan because it had more than 300 employees,
13
14 in reality.
15
79. Plaintiff is informed and believes that Corp 3 was exploited by the
16
Defendants as a way to evade the 300 Employee Rule enabling it to fraudulently
17
obtain loan proceeds for employees already claimed by Corp 1.
18
80. Plaintiff is informed and believes that the 23 employees set forth in
19
Corp 3's PPP application were actually employees of Corp 1, for which Corp 1 had
20
21 already received PPP loan proceeds. They were then shuffled to Corp 3 for two
22 reasons: 1)to allow Corp 1 to evade the 300 Employee Rule for its second-round
23 loan and; 2)to allow Corp 3 to "double-dip" for payroll costs already received by
24 Corp 1 for the same employees in its first round loan.
25 81. Plaintiff is informed and believes and herein alleges that the proceeds
26 of the Corp 3 Loan were not used for permitted purposes and therefore when Corp 2
27 made the Use ofProceeds Certification, the Worker Retention and Payroll
28
22
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 23 of 36 Page ID
#:23
1 Certification and the Loan Forgiveness Certification with respect to each ofthe
2 loans, the certifications were false.
3
82. Plaintiff is informed and believes and herein alleges that Corp 3 was
4
not in operation on February 15, 2020 and did not have employees for whom it paid
5
salaries and payroll taxes or paid independent contractors, as reported on Forms)
6
1099-MISC, and therefore when Corp 3 made the In Operation Certification, that
7
certification was false.
8
83. Plaintiff is informed and believes and herein alleges that when the
9
10 authorized representative of Corp 3 made the No Other Loan Certification, such
11 certification was not made in "good-faith" as required because the object of the
12 certification was to evade the 300 Employee Rule restriction on Corp 1 and to
13 double-dip, and therefore such certification was false.
14 d. Corp 4
15 84. Corp 4 is a shell corporation. It was not in operation and was not active ~
16 .until the PPP presented an opportunity for the Defendants to steal.
17 85. Corp 4 was originally formed on Apri12, 2001 upon the filing of
18
Articles ofIncorporation with the California Secretary of State. From 2004 until
19
2019 the only events with the California Secretary of State were delinquencies and
20
failures of Corp 4 to follow corporate formalities.
21
86. Following this extended period of failing to comply with corporate
22
formalities on May 4, 2021 Corp 4 filed a Statement of Information. As of the date
23
of this Complaint, Corp 4 is again delinquent with respect to filing its required
24
25 Statement ofInformation.
26 87. Corp 4's first filing after this extended period of dormancy was on
27 May 4, 2021, after Corp 1 had obtained afirst-round loan and the 300 Employee
28
23
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 24 of 36 Page ID
#:24
1 Rule was known to the Defendants.
2 88. Under the 300 Employee Rule, Corp 1 was ineligible and prohibited
3
from obtaining a second round PPP loan because it had more than 300 employees,
4
in reality.
89. Plaintiff is informed and believes that Corp 4 was exploited by the
6
Defendants as way to evade the 300 Employee Rule and to fraudulently obtain loan
7
proceeds for employees already claimed by Corp 1.
8
c~ 90. Plaintiff is informed and believes that the 18 employees set forth in
lU Corp 4's PPP application were actually employees of Corp 1, for which Corp 1 had
I1 already received PPP loan proceeds. They were then shuffled to Corp 4 for two
12 reasons: 1)to allow Corp 1 to evade the 300 Employee Rule for its second-round
13 loan; and 2)to allow Corp 4 to get another loan for the same employees, to
14 "double-dip" for payroll costs already received by Corp 1 for the same employees
15 in its first round loan.
16 91. Plaintiff is informed and believes and herein alleges that the proceeds
17 of the Corp 4 Loan were not used for permitted purposes and therefore when Corp 4
18
made the Use ofProceeds Certification, the Worker Retention and Payroll
19
Certification and the Loan .Forgiveness Certification with respect to each of the
20 '
loans, the certifications were false.
21
92. Plaintiff is informed and believes and herein alleges that Corp 4 was
22
not in operation on February 15, 2020 and did not have employees for whom it paid
23
salaries and payroll taxes or paid independent contractors, as reported on Forms)
24
~~ 1.099-MISC, and therefore when Corp 4 made the In Operation Certification, that
~~ certification was false.
~~ 93. Plaintiff is informed and believes and herein alleges that when the
?R
24
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 25 of 36 Page ID
#:25
1 authorized representative of Corp 4 made the No Other Loan Certification, such
certification was not made in "good-faith" as required because the object of the
-,
certification was to evade the 300 Employee Rule restriction on Corp 1 and to
4
double-dip, and therefore such certification was false.
e. Corp 5
6
94. Corp 5 is a shell corporation. It was not in operation and was not active
7
8 until the PPP presented an opportunity for the Defendants to steal.
9 95. Corp 5 was originally formed on September 26, 2001 upon the filing
10
of Articles of Incorporation with the California Secretary of State. From 2001 until
11
2018 the only events with the California Secretary of State were delinquencies and
12
failures of Corp 5 to follow corporate formalities. In 2018 Corp 5 followed a
13
statement of information and then failed to file any other required documents unti 1
14
2021. Following this extended period of failing to comply with corporate
IS
formalities on May 4, 2021, Corp 5 filed a Statement of Information.
16
96. Corp 5's first filing after this extended period of dormancy was on
17
18 May 4, 2021, after Corp 1 had obtained afirst-round loan and the 300 Employee
19 Rule was known to the Defendants.
~~ 97. Under the 300 Employee Rule, Corp 1 was ineligible and prohibited
21 from obtaining a second round PPP loan because it had more than 300 employees,
22 i n reality.
23 98. Plaintiff is informed and believes that Corp 5 was exploited by the
24 Defendants as a way to evade the 300 Employee Rule enabling it to fraudulently
25
obtain loan proceeds for employees already claimed by Corp 1.
26
99. Plaintiff is informed and believes that the 18 employees set forth in
27
Corp 5's PPP application were actually employees of Corp 1, for which Corp 1 had
28
25
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 26 of 36 Page ID
#:26
1 already received PPP loan proceeds. They were then shuffled to Corp 5 for two
2 reasons: 1)to allow Corp 1 to evade the 300 Employee Rule for its second-round
3
loan; and 2)to allow Corp 5 to get another loan for the same employees, to
4
"double-dip" for payroll costs already received by Corp 1 for the same employees
5
in its first round loan.
6
100. Plaintiff is informed and believes and herein alleges that the proceeds
7
of the Corp 5 Loan were not used for permitted purposes and therefore when Corp 5
8
made the Use ofProceeds Certification, the Worker Retention and Payroll
9
10 Certification and the Loan Forgiveness Certification with respect to each of the
11 loans, the certifications were false.
12 101. Plaintiff is informed and believes and herein alleges that Corp 5 was
13 not in operation on February 15, 2020 and did not have employees for whom it paid
14 salaries and payroll taxes or paid independent contractors, as reported on Forms)
15 1099-MISC, and therefore when Corp 5 made the In Operation Certification, that
16 certification was false.
17 102. Plaintiff is informed and believes and herein alleges that when the
18
authorized representative of Corp 5 made the No Other Loan Certification, such
19
certification was not made in "good-faith" as required because the object of the
20
certification was to evade the 300 Employee Rule restriction on Corp 1 and to
21
double-dip, and therefore such certification was false.
22
f. Corp 6
23
103. Corp 6 is a shell corporation. It was not in operation and was not active
24
25 until the PPP presented an opportunity for the Defendants to steal.
26
104. Corp 6 was originally formed on August 19, 2002 upon the filing of
27
Articles of Incorporation with the California Secretary of State. From 2002 until
28
"~
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 27 of 36 Page ID
#:27
1 2018 the only events with the California Secretary of State were delinquencies and
2 failures of Corp 6 to follow corporate formalities. In 2018 Corp 6 filed a statement
3
of information and then failed to file any other required documents until 2021.
4
Following this extended period of failing to comply with corporate formalities on
5
May 4, 2021, Corp 6 filed a Statement of Information.
6
105. Corp 6's first filing after this extended period of dormancy was on
7
May 4, 2021, after Corp 1 had obtained afirst-round loan and the 300 Employee
8
Rule was known to the Defendants.
9
10 106. Under the 300 Employee Rule, Corp 1 was ineligible and prohibited
11 from obtaining a second round PPP loan because it had more than 300 employees,
12 in reality.
13 107. Plaintiff is informed and believes that Corp 6 was exploited by the
14 Defendants as a way to evade the 300 Employee Rule enabling it to fraudulently
15 obtain loan proceeds for employees already claimed by Corp 1.
16 108. Plaintiff is informed and believes that the 13 employees set forth in
17 Corp 6's PPP application were actually employees of Corp 1, for which Corp 1 had
18
already received PPP loan proceeds. They were then shuffled to Corp 6 for two
19
reasons: 1)to allow Corp 1 to evade the 300 Employee Rule for its second-round
20
loan; and 2)to allow Corp 6 to get another loan for the same employees, to
21
"double-dip" for proceeds already received by Corp 1 for the same employees in its
22
first-round loan.
23
109. Plaintiff is informed and believes and herein alleges that the proceeds
24
25 ofthe Corp 6 Loan were not used for permitted purposes and therefore when Corp 6~
26 made the Use ofProceeds Certification, the Worker Retention and Payroll
27 Certification and the Loan Forgiveness Certification with respect to each of the
28
27
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 28 of 36 Page ID
#:28
1 loans, the certifications were false.
2 1 10. Plaintiff is informed and believes and herein alleges that Corp 6 was
3
not in operation on February 15, 2020 and did not have employees for whom it paid
4
salaries and payroll taxes or paid independent contractors, as reported on Forms)
5
1099-MISC, and therefore when Corp 6 made the In Operation Certification, that
6
certification was false.
7
1 11. Plaintiff is informed and believes and herein alleges that when the
8
authorized representative of Corp 6 made the No Other Loan Certification, such
9
10 certification was not made in "good-faith" as required because the object of the
11 certification was to evade the 300 Employee Rule restriction on Corp 1 and to
12 double-dip, and therefore such certification was false.
13 g. Corp 7
14 1 12. Corp 7 is a shell corporation. It was not in operation and was not active
15
until the PPP presented an opportunity for the Defendants to steal.
16
1 13. Corp 7 was originally formed on July 24, 2002 upon the filing of
17
18 Articles of Incorporation with the California Secretary of State. From 2002 until
19 2008 the only events with the California Secretary of State were delinquencies and
20 failures of Corp 7 to follow corporate formalities, including its suspension in 2005
21 and revivor in 2008. From its revivor in 2008 to the filing of a statement of
22 information 2018, none ofthe other many required filings were made with the
23 Secretary of State. In 2018 Corp 7 filed a statement of information and then failed
24 to file any other required documents unti12021. Following this extended period of
25
failing to comply with corporate formalities on March 1, 2021, Corp 7 filed a
26
Statement ofInformation.
27
1 14. Corp 7's first filing after this extended period of dormancy was on
28
28
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 29 of 36 Page ID
#:29
1 March 1, 2021, after Corp 1 had obtained afirst-round loan and the 300 Employee
2 Rule was known to the Defendants.
3
1 15. Under the 300 Employee Rule, Corp 1 was ineligible and prohibited
4
from obtaining a second round PPP loan because it had more than 300 employees,
in reality.
6
1 16. Plaintiff is informed and believes that Corp 7 was exploited by the
7
Defendants as a way to evade the 300 Employee Rule enabling it to fraudulently
8
obtain loan proceeds for employees already claimed by Corp l .
9
1 17. Plaintiff is informed and believes that the 8 employees set forth in
10
11 Corp 7's PPP application were actually employees of Corp 1, for which Corp 1 had
12 already received PPP loan proceeds. They were then shuffled to Corp 7 for two
13 reasons: 1)to allow Corp 1 to evade the 300 Employee Rule for its second-round
14 loan; and 2)to allow Corp 7 to get another loan for the same employees, to
l~ "double-dip" for payroll costs already received by Corp 1 for the same employees
16 in its first-round loan.
17 1 18. Plaintiff is informed and. believes and herein alleges that the proceeds
18
of the Corp 7 Loan were not used for permitted purposes and therefore when Corp 7
19
made the Use ofProceeds Certification, the Worker Retention and Payroll
20
Certification and the Loan Forgiveness Certification with respect to each of the
21
loans, the certifications were false.
22
1 19. Plaintiff is informed and believes and herein alleges that Corp 7 was
23
not in operation on February 15, 2020 and did not have employees for whom it paid
24
25 salaries and payroll taxes or paid independent contractors, as reported on Forms)
~h 1099-MISC, and therefore when Corp 6 made the In Operation Certification, that
~~ certification was false.
~K
29
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 30 of 36 Page ID
#:30
1 120. Plaintiff is informed and believes and herein alleges that when the
2 authorized representative of Corp 7 made the No Other Loan Certification, such
3
certification was not made in "good-faith" as required because the object of the
4
certification was to evade the 300 Employee Rule restriction on Corp 1 and to
5
double-dip, and therefore such certification was false.
6
h. The Defendants' Embezzlement of the Loan Funds -Pandemic Real Estate
7
Buying Spree
8
121. Real Estate LLC is an entity that is owned and controlled by Manavi.
9
10 122. On July 2, 2020, through Real Estate LLC, Manavi purchased that
11 certain real property located at 1131 N Westmoreland Ave., Los Angeles California
12 90029 in an all-cash offer for $900,000. i
13 123. On August 24, 2020, Manavi purchased the property located at 2187
14 Summitridge Drive, Beverly Hills, California 90210 for $4,375,000.
15 124. On March 26, 2021, through Real Estate LLC, Manavi purchased that
16 certain property located at 216 N Park View St, Los Angeles, California 90026 in
17 an all-cash offer for $847,000. Manavi then transferred the property to 216 N Park
18
View LLC,a California limited liability company, owned and managed by his
19
brother Farshad Manavi.
20
125. On June 7, 2021, Pakravan purchased the property located at 24314
21
Malibu Rd., Malibu, California 90265 for $9,700,000. Pakravan thereafter
22
quitclaimed the property to Fun and Malibu Road LLC, a California limited
23
liability company in which he and Cohen-Sedgh are both members.
24
25 126. On June 29, 2021, through Real Estate LLC, Manavi purchased that
26 certain property located at 7951 Capistrano Avenue, Canoga Park, California 91304
27 in an all-cash offer for $640,000.
28
30
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 31 of 36 Page ID
#:31
1 127. On August 9, 2021, the Individual Defendants, through Washington
2 and Norwalk LLC, purchased that property located at 7910 Norwalk Blvd.,
3
Whittier, California 90606. Washington and Norwalk,LLC is a California limited
4
liability company that is owned and controlled by the Individual Defendants.
5
128. On August 30, 2021, through Real Estate LLC, Manavi purchased that
6
certain property located at 1546 W Avenue L12, Lancaster, California 93534 in an
7
all-cash offer for $373,000.
8
129. On November 4, 2021,through Real Estate LLC, Manavi purchased
9
10 that certain property located at 17159 Lassen St., Northridge, California 91325 in
11 an all-cash offer for $652,500.
12 V. THE FALSE CLAIMS ACT
13 130. Plaintiff alleges that, from at least Apri127, 2020 through the time of
14 the filing of this Complaint, Defendants violated the FCA by "knowingly"
15 submitting and/or causing the submission of false claims for payment to lenders
16 authorized by the SBA to process PPP loan applications in the form ofPPP
17 Applications and the resulting receipt and failure to return PPP loans. These claims
18
for payment were false because Defendants:(1) made knowingly false statements
19
and certifications in their PPP applications, and in certifications accompanying its
20
receipt of federal PPP funds, that it was complying with, and would continue to
21
comply with, applicable laws and regulations governing the award ofPPP loans;
22
and/or(2) made, or caused to be made, false representations in loan applications
23
that the Corporate Defendants were eligible to receive such PPP loans. Moreover,
24
25 Defendants' false claims caused on numerous occasions Idaho First Bank and
26 A l OCapital, LLC to submit to the SBA,a Lender's Application -Paycheck
27 Protection Program Loan Guaranty(SBA Form 2484)that contained Defendants'
28
31
COMPLAINT
Case 2:22-cv-03816-MRA-MAR Document 1 Filed 06/03/22 Page 32 of 36 Page ID
#:32
1 false statement concerning Corporate Defendants' general eligibility for the PPP
2 loans, on which the SBA relied and paid to the lenders.
3
131. The False Claims Act prohibits fraudulent conduct in connection with
4
federal programs, including the knowing submission of false claims for payment to
5
the government.
6
See 31 U.S.C. § 3729(a)(1)(A). In these circumstances, liability may attach if the
7
omission renders those representations misleading. 41.31 U.S.C. § 3729(a)(1)(A)
K
and(B)ofthe FCA provide that:
9
lU (1)...any person who—
11 (A)knowingly presents, or causes to be presented, a false or fraudulent
12 ~ claim for payment or approval; [or]
13 (B)knowingly snakes, uses, or causes to be made or used, a false
14 record or statement material to a false or fraudulent claim,
1J
16 (G)knowingly makes, uses, or causes to be made or used, a false
17 record or statement material to an obligation to pay or transmit money or property
18
to the Government, or knowingly conceals or knowingly and improperly avoids or
19
decreases an obligation to pay or transmit money or property to the Government,
20
is liable to the United States Government .. .
21
31 U.S.C. § 3729(a)(1)(A),(B), and(G)(2020).
22
42. The scope of a false or fraudulent claim is to be broadly construed.
23
As used in the FCA, a "claim"
24 I
2 (A)means any request or demand, whether under a contract or
~h otherwise, for money or property and whether or not the United States has title to
27 the money or property, that-
?g
32
COMPLAINT
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1 (i) is presented to an officer, employee, or agent of the United States;
2 or
3
(ii) is made to a contractor, grantee, or other recipient, if the money or
4
property is to be spent or used on the Government's behalf or to advance a
5
Government program or interest, and if the United States Government—
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(I) provides or has provided any portion ofthe money or property requested or
7
demanded; or
8
(II) will reimburse such contractor, grantee, or other recipient for any
9
[Dl portion ofthe money or property which is requested or demanded;...
11 31 U.S.C. § 3729(b)(2)(2020).
12 132. A person who violates the False Claims Act during the time period at
13 issue "is liable for a civil penalty as adjusted, plus 3 times the amount of damages
14 which the United States Government sustains because ofthe act ofthat person." 31
1 U.S.C. § 3729(a). See 28 C.F.R. § 85.3(a)(9); Department of Justice, 28 CFR Part
16 85, Civil Monetary Penalties Inflation Adjustments for 2022 published at:
17 https://www.govinfo.gov/content/pkg/FR-2022-05-09/pdf/2022-09928.pdf.
18
VI. JURISDICTION &VENUE
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133. This Court has subject matter jurisdiction over the Plaintiff's claims
20
21 brought under the FCA,31 U.S.C. §§ 3279, et seq., pursuant to 31 U.S.C. §§ 3730
22 and 3732. This Court has supplemental jurisdiction to entertain the common law
23
and equitable causes of action under 28 U.S.C. § 1367(a).
24
~S 1 34. This Court has personal jurisdiction over Defendants pursuant to 31
26 U.S.C. § 3732(a) because at all times material hereto, Defendants transacted
27
business and are found in the Central District of California, and acts proscribed by
28
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COMPLAINT
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1 31 U.S.C. § 3729 occurred in this district.
135. Venue is proper in this district pursuant to 31 U.S.C. § 3732(a), and
4 under 28 U.S.C. §§ 1391(b) and 1395(a), because the Corporate Defendants are all
California entities headquartered at the same office in Los Angeles County, all
h
within the Central District of California. Moreover, the Individual Defendants
7
8 reside and do business in Los Angeles County within the Central District of
9 California. Furthermore, acts that form the basis of this Complaint occurred in the
10
Central District of California.
I1
12 1 36. Relator's claims and this Complaint are not based upon prior public
13 disclosures of allegations or transactions in a federal criminal, civil, or
14
administrative hearing in which the Government or its agent is a party; in a
15
16 congressional, Government Accountability Office, or other federal report, hearing,
]7 audit, or investigation; or from the news media. To the extent that there has been a
18
public disclosure unknown to Relator, it is the "original source" within the meaning
19
20 of 31 U.S.C. § 3730(e)(4)(B) and/or the public disclosure is a result of Relator
21
voluntarily providing this information to the United States Government prior to
22
filing this qui tam action.
23
24 VII. FIRST CAUSE OF ACTION
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FALSE OR FRAUDULENT CLAIMS(31 U.S.C.§ 3729.(a)(1)(A-B))
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1 37. Plaintiff alleges and incorporates by reference each and every
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1 allegation contained in all prior paragraphs of this complaint.
138. This is a claim for treble damages and penalties under the False Claims
3
4 Act, 31 U.S.C. § 3729, et seq., as amended.
139. By virtue of the acts described above, Defendants knowingly
6
presented, or caused to be presented, to an officer or employee of the United States
7
8 government, false or fraudulent claims for payment or approval, in violation of the
9 Fca,31 u.s.c. § 3~29(a)(1)(A).
to
1.40. By virtue of the acts described above, Defendants knowingly made or
11
12 used, or caused to be made or used, false or fraudulent records or statements
13 material to false or fraudulent claims for payment by the Government.
14
141. Because of the Defendants' acts, the United States sustained damages
15
16 in an amount to be determined at trial and, therefore, is entitled to treble damages
]7
under the FCA, plus civil penalties of not less than $12,537.00 and not more than
18
$25,076.00 for each and every violation arising from Defendants' unlawful conduct
19
20 alleged herein.
21
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PRAYER FOR RELIEF
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~~ WHEREFORE,qui tam Plaintiff/Relator prays for judgment against
~~
Defendants, as follows:
~~
~~ 1. That this Court enter judgment against each Defendant in an amount equal ~
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COMPLAINT
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1 to three times the damages that the United States has sustained because of
Defendants' action, plus a civil penalty of not less than $12,537.00 and
3
4 not more than $25,076.00 for each and every false claim as are required.
i
by law, together with all such further relief as may be just and proper.
6
2. Such other relief as this Court may deem just and proper, together with
7
8 interest and costs ofthis action.
9 3. Reasonable attorney fees, litigation expenses, and costs of suit
10
JURY DEMAND
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12 Plaintiff demands a trial by jury on all issues so triable.
13
14 Dated: June 1, 2022 THE LAW OFFICE OF HAKIMI & SHAHRIARI
IS
1C By: /s/ Anoush Hakimi
17 ANOUSH HAKIMI,ESQ.
Attorney for Plaintiff RELATOR LLC
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COMPLAINT
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