Pikeville, Tennessee, textile mill mired in delays, lawsuits

Pikeville, Tennessee, textile mill mired in delays, lawsuits

State probes $3 million grant to aid project

January 16th, 2019 by Ben Benton and Dave Flessner in Business Around the Region

The gates at Textile Corporation of America's facility in Pikeville, Tennessee, are locked amid an apparent review by the state Comptroller's Office of the Treasury and possibly other agencies.

Photo by Ben Benton /Times Free Press.

Updated at 8:51 p.m. on Thursday, Jan. 17, 2019, to correct the year Dura Automotive plant shut down to 2005.

PIKEVILLE — More than 18 months after a Pakistani textile group promised to build a major sewing mill here that would be the biggest employer in Bledsoe County, the mill has yet to produce any product and the plant is now padlocked.

Textile Corporation of America (TCA), a startup company formed in 2017 by textile industry veterans Karim and Rahim Sadruddin along with Chattanooga builder Ed Cagle and former Alabama Attorney General Troy King, received a $3 million grant from the state and unspecified assistance from the Tennessee Valley Authority to build the textile mill. The sewing facility was to make a variety of apparel, bedding and linen products in the former Dura Automotive plant, which shut down in 2005.

Bledsoe County Mayor Gregg Ridley

Bledsoe County Mayor Gregg Ridley

Photo by Contributed Photo /Times Free Press.

But those dreams appear to have unraveled. Investigators are now probing what happened to the money and whether the owners may have fraudulently sold Chinese-made tarps from an affiliated business to the federal government as part of its hurricane relief program in Puerto Rico.

"The sad thing is we've been waiting for two years to have jobs and we have none," Pikeville Mayor Phil Cagle said Wednesday. "The future of our jobs, the way it stands right now, it is very disturbing. We have only one goal and that's to get jobs for our people."

Bledsoe County Mayor Gregg Ridley said the county's Industrial Development Board supported the project to help bring needed jobs to Pikeville and to reactivate the abandoned plant. But the project developers, who had pledged to match the state aid with $27.1 million of their own investment, turned to outside lenders for money and were soon engaged in a legal fight among themselves. One lender to an affiliate company is trying to foreclose on the Pikeville plant to recover more than $1.4 million in unpaid debt from another Sadruddin-affiliated company, Master Group USA LLC.

Ridley said Wednesday he was "disappointed but not surprised" by the apparent shutdown of the plant after dealing with the company over the past couple of years. Ridley said he didn't know why the plant had been padlocked.

Last week, federal and state investigators came to the plant and talked with Karim and Rahim Sadruddin.

The Sadruddins said they are fourth generation textile industry veterans with ties to major Pakistani textile producers and had promised in November to hire production workers and begin manufacturing by the end of last year. But those plans never materialized.

The Tennessee Comptroller has been investigating TCA since early last year at the request of the Tennessee Department of Economic and Community Development, which awarded the company $3 million in fast track grants to aid the project, according to agency spokesman Scott Harrison. Under the agreement, TCA was to spend the money to renovate the plant and the company had five years to reach the target of having 1,000 jobs.

The Pikeville plant was chosen, in part, because Bledsoe is an economically distressed county and qualifies for extra state and federal aid. In November, Bledsoe County had the second highest jobless rate of all 95 counties at 5.2 percent, nearly double the statewide rate.

Cagle, a Chattanooga developer and builder not related to the Pikeville mayor, said he was paid $850,000 and completed the plant renovation in Pikeville. But Rahim Sadruddin testified in a civil dispute last year that his company prepared a wire transfer document indicating more than $2 million was paid to Cagle for the work. Jerry Farinash, an attorney for Cagle, suggested in a court hearing that the wire transfer was falsified.

In court filings, the business owners acknowledge that they had trouble coming up with the money to buy the factory or other capital to acquire inventory and machinery. To both finance the building purchase and later to raise funds for another textile venture, the owners turned to private individuals to secure short-term loans and paid premium interest and fee payments to get their money.

Cagle helped arrange some of those loans, but he said he said he has had nothing to do with the operation of the business in recent months and never made any money from the business.

"My interest was and is to bring needed jobs to this county," Cagle said, claiming he was misled by the Sadruddins.

Company officials were not available Wednesday and officials with the U.S. Department of Justice and the state Department of Economic and Community Development did not return calls.

The Pikeville mill has been used to store tarps which an affiliate company of the owners of Textile Corp. of America — Master Group USA LLC — sold last year to the Federal Emergency Management Agency to aid victims of the Hurricane Maria in Puerto Rico.

But last July FEMA suspended the contract and disbarred Master Group and its affiliates from supplying more tarps or doing any business with FEMA for three years, claiming the company illegally procured the tarps from the People's Republic of China in violation of the Trade Adjustment Act (TAA).

Sadruddin tried to reassure FEMA last year that the tarps were made in Taiwan and then later claimed some were made in Korea, Japan and Vietnam and were simply shipped through Shanghai, China to Puerto Rico. But a FEMA investigation disputed those claims, noting that shipping records and identification of the country of origin filings are "replete with evidence that [Master Group] failed to comply with the TAA requirements of their contract."

Joel Doolin, a FEMA suspension and debarment official, said Master Group "knowingly procured the tarps in violation of TAA (Trade Adjustment Act), made "material misrepresentations" to FEMA and "submitted a fraudulent letter of commitment to FEMA" by shipping tarps made in China in violation of federal procurement rules.

"Finally, the tarps delivered to FEMA by Master Group and its affiliates did not meet contract specifications for thickness," he said.

Contact staff writer Ben Benton at bbenton@timesfreepress.com or 423-757-6569. Follow him on Twitter @BenBenton or at www.facebook.com/benbenton1.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.

 


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