Textile company sews web of lies to collect $3 million grant from Tennessee

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KNOXVILLE, Tenn. (WATE) — Two men have pleaded guilty to multiple charges in state and federal court and been ordered to pay more than $7 million in restitution stemming from a scheme where they received a $3 million grant from the Tennessee Department of Economic and Community Development to develop a textile plant in Bledsoe County.

According to the state’s Comptroller Office, Textile Corporation of America was given the grant in 2017 to purchase and renovate a building in Pikeville. Company owners Karim and Rahim Sadruddin pledged to create 995 jobs and invest $27.1 million, but an investigation found the two made numerous false statements and provided false documents.

The two said TCA was under a parent corporation of a textile manufacturer in Pakistan but no relationship was found. They also said TCA had more than 3,400 employees worldwide but had none.

Once the grant was awarded, Textile Corporation of America submitted fake invoices, wire transfer documents, and other information to appear that work was being done and contractors were being paid. The state Department of Economic and Community Development relied on these fraudulent documents when it disbursed the grant money.

The building that was purchased by Textile Corporation of America sits empty in Pikeville, Tennessee.

“While this investigation describes a disappointing scheme, it also highlights the need for improved accountability over state grant money,” Tennessee Comptroller Jason Mumpower said. “I’m encouraged to note that ECD is taking more steps to verify the validity of the information on grant applications, review supporting documentation more carefully, and ensure it is following its own policies and procedures surrounding grant awards.”

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 found 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.

The two have been ordered to pay $7,005,895.76 in restitution.

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