Officials with the Tennessee Department of Economic and Community Development (ECD) awarded a $3 million grant to a company that two men started by lying and committing fraud.
This, according to an investigative report that Tennessee Comptrollers released this week.
Tennessee officials awarded the money to the Textile Corporation of America (TCA).
“Investigators determined that TCA owners Karim and Rahim Sadruddin engaged in a scheme to receive these grant funds by submitting fictitious and fraudulent information to ECD. The investigation has resulted in guilty pleas in both state and federal court,” Tennessee Comptroller Jason Mumpower said in an emailed press release.
“In 2017, ECD awarded the grant to TCA to purchase and renovate a building in Pikeville, Tennessee. Under the terms of the grant, ECD agreed to reimburse TCA for the building expenses incurred. In return, TCA owners pledged to manufacture textiles and create 995 jobs. Within the first year, TCA requested and received the entire $3 million, including the $850,000 cost of the building.”
Investigators said the Sadruddins lied on several statements and submitted fictitious documents to obtain the grant. These lies included:
• Stating an established textile manufacturer in Pakistan was the parent corporation of TCA when, in reality, the manufacturer had no business relationship with TCA.
• Stating that TCA and the Pakistani manufacturer had 3,480 employees worldwide when, in reality, TCA had no employees.
• Submitting a copy of the 2016 audit report for the Pakistani company as evidence that TCA had adequate funds to invest in the $27.1 million dollar project in Pikeville. Again, TCA had no business relationship with this company.
• Stating that TCA would hire 995 people. Karim Sadruddin admitted he knew TCA would never hire that many people, and he inflated the number of jobs in hopes of receiving more grant money.
“Once the grant was awarded, TCA created and submitted fake invoices, wire transfer documents, and other information indicating that work was being done and contractors were being paid in order to receive grant reimbursement payments from the state. ECD relied on these fraudulent documents when it disbursed the grant money,” Mumpower said.
“As of January 2019, TCA had completed a minor portion of the building retrofit and only 10 sewing machines had been temporarily installed. No manufacturing jobs had been created. Investigators determined the Sadruddins used some of the grant money they received to invest in an unrelated business venture, make a campaign contribution, purchase a $54,500 Ford pickup, make payments on a residential building lot, and buy groceries.”
Karim and Rahim Sadruddin have both pleaded guilty to multiple charges in state and federal court. Additionally, they must pay more than $7 million in restitution, according to the press release.
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Chris Butler is an investigative journalist at The Tennessee Star. Follow Chris on Facebook. Email tips to [email protected].
About 5-6 years ago I needed to replace my AC unit. I got 4 quotes- one including Lee company, Donelson Air, Derryberry, and Hiller. 1 quote was outrageously higher than the other 3. Can you guess which company? mr lee needs to go.
How about who was running ECD at this time? From my search this was Bob Rolfe who was reappointed by Bill Lee in 2018. It’s just taxpayer dollars so it’s like monopoly money to these people. Giving away Tennessee taxpayer money with no accountability and picking winners and losers in business. Crony capitalism at it’s best. Thanks Bill Lee for continuing in the grand Haslam tradition.
Aries – You are 100% correct. I would have to jump through hoops to get a $300,000 mortgage but Tennessee ECD apparently does not vetting before handing over $3,000,000 of taxpayer money. Mr. Lee is an abysmal failure. Got to get rid ASAP.