Kyko Global, Inc. v. Prithvi Info. Solutions, Ltd., Case No. 2:13-CV-1034 MJP

KYKO GLOBAL, INC., a Canadian corporation, and KYKO GLOBAL GMBH,a Bahamian corporation, Plaintiffs, v. PRITHVI INFORMATION SOLUTIONS, LTD., an Indian corporation, et al., Defendants.

Case No. 2:13-CV-1034 MJP

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE

June 13, 2016

The Honorable Marsha J. Pechman

FINDINGS OF FACT AND CONCLUSIONS OF LAW

This matter came before the Court for a bench trial from May 31-June 1, 2016. Plaintiffs Kyko Global Inc. and Kyko Global GmbH (collectively "Kyko") were represented by Darian Stanford and Keith Pitt of Slinde Nelson Stanford. Defendants were unrepresented and failed to appear at the time of trial.¹ The Court received various exhibits and heard testimony from Kyko CEO Kiran Kulkarni, from Guru Pandyar, and (via deposition designation) Srinivas Sista.

Being fully advised, the Court makes its Findings of Fact and Conclusions of Law:

I. FINDINGS OF FACT

A. Introduction.

1. This matter traces its roots to the prior action entitled Kyko Global, Inc. et al v. Prithvi Information Solutions, Ltd. et al., Case No. 2:13-CV-01034 MJP (the "Prior Lawsuit"), within the United States Court for the Western District of Washington (the "District Court").

2. On June 30, 2013, Kyko and a majority of the defendants named in the Prior Lawsuit entered into a Final Settlement Agreement (the "Settlement Agreement") in an effort to resolve the matters raised therein (the "Settling Defendants"). (Exh. 103.) The only current Defendants who did not execute the Settlement Agreement were Srinivas Sista and Lalita Sista (collectively the "Sistas") and International Business Solutions, Inc. ("IBS").

3. Guru and Arundathi Pandyar (collectively the "Pandyars") were previously defendants and did not execute the Settlement Agreement. However, the Pandyars are no longer defendants in this litigation. Kyko subsequently entered into a settlement agreement with the Pandyars, whereby Guru Pandyar would agree to testify truthfully under oath and Kyko agreed to dismiss the Pandyars from the lawsuit. (Exh. 121.)

4. As of July 31, 2013, the Settling Defendants immediately breached the Settlement Agreement, resulting in series of $18 million (plus costs, attorney fees and interest at 2.45% per month) Confessions of Judgment against these parties. (Exh. 105-A is the Confession of Prithvi Information Solutions, Ltd.; Exh. 105-B is the Confession of Satish Vuppalapati; Exh. 105-C is the Confession of Prithvi Solutions, Inc.; Exh. 105-D is the Confession of Prithvi Information Solutions International, LLC; Exh. 105-E is the Confession of Prithvi Catalytic; Exh. 105-F is the Confession of Madhavi Vuppalapati; Exh. 105-G is the Confession of L3C, Inc.; Exh. 105-H is the Confession of Inalytix, Inc.; Exh. 105-I is the Confession of Huawei Latin American Solutions; Exh. 105-J is the Confession of Financial Oxygen; Exh. 105-K is the Confession ofEPP, Inc.; Exh. 105-L is the Confession of DCGS, Inc.; Exh. 105-M is the Confession of Avani Investments and Exh. 105-N is the Confession of Ananya Capital.)

5. The Prior Lawsuit was scheduled for trial, on its merits, on July 7, 2014.

6. Twenty days before trial, on June 17, 2014, the Sistas and the Pandyars filed respective petitions for bankruptcy. (Exhs. 133-134.) The bankruptcy filings were encouraged by Satish Vuppalapati to delay the trial of the Prior Lawsuit. (Exh. 119.) On June 19, 2014, the District Court entered the Order Staying Case [Prior Lawsuit Dkt. # 226] with respect to the Prior Lawsuit "pending resolution of the bankruptcy proceedings."

B. Parties and Jurisdiction.

7. Plaintiff Kyko Global, Inc. is a Canadian corporation with its principal place of business in Ontario, Canada. Plaintiff Kyko Global GmbH is a wholly-owned subsidiary of Plaintiff Kyko Global, Inc. with its principal place of business in the Bahamas. Together, Kyko offers accounts receivable factoring services. Kiran Kulkarni is the CEO for Kyko.

8. Defendant Prithvi Information Solutions, Ltd. ("PISL") is an Indian corporation and conducts business in the State of Washington. (Exhs. 128-129.) At all material times, Defendant Madhavi Vuppalapati was one of PISL's directors and its chairperson.

9. Defendant Prithvi Solutions, Inc. ("PSI") is a Delaware corporation and conducts business in the State of Washington. (Exhs. 128-129.)

10. Defendant Prithvi Information Solutions International, LLC ("PISI") is a Pennsylvania limited liability company registered to do business with the State of Washington Secretary of State. (Exhs. 128-129.) At all material times, PISI's sole member was Madhavi Vuppalapati.

11. Defendant Inalytix, Inc. ("Inalytix") is a Nevada corporation and its principal place of business is located in Bellevue, Washington. (Exhs. 128-129.) At all material times, Inalytix's president and director was Madhavi Vuppalapati.

12. Defendant International Business Solutions, Inc. ("IBS") is a North Carolina, corporation. (Exh. 129.)

13. Defendant Avani Investments, Inc. ("Avani") is a Delaware corporation. (Exh. 129.)

14. Defendant Ananya Capital Inc. ("Ananya") is a Delaware corporation and registered to do business with the Washington Secretary of State and with its principal place of business in Redmond, Washington. (Exhs. 31-32 and 129.) At all material times, Ananya's agent, president and director was Mr. Sista. (Exhs. 31-32.)

15. Defendant Madhavi Vuppalapati and Anandhan Jagaraman, husband and wife and the marital community composed thereof, are individuals who at all relevant times resided in Bellevue, Washington. Madhavi Vuppalapati, at all material times herein, was also a member/director of Defendant PISI; the President/Secretary/Treasurer and Director of Inalytix, Inc.; and a director of and Prithvi Solutions, Inc. and an officer or director of certain other affiliated entities identified herein as Defendants.

16. Satish Vuppalapati is the brother of Madhavi Vuppalapati. He actively orchestrated this massive fraud (from 2011 to the present) along with his sister through various companies and sham entities (many of which are either incorporated within this State or expressly authorized to transact business within this State). Satish Vuppalapati and Madhavi Vuppalapati are collectively referred to as the "Vuppalapatis."

17. Defendant Srinivas Sista and Lalita Sista, husband and wife, and the marital community composed thereof, are individuals who at all relevant times reside in Redmond, Washington. Mr. Sista is also the Director/President of Ananya and an officer of certain other related affiliates and is a full-time employee of various affiliated companies associated with Defendants PISL and the Vuppalapatis.

18. Defendant DCGS, Inc. ("DCGS") was created as a sham Pennsylvania corporation by Madhavi Vuppalapati on June 1, 2012. (Exh. 42.) The office address for DCGS, Inc. is a condominium in Pittsburgh owned by Madhavi Vuppalapati. (Exhs. 42 and 127.)

19. Defendant EPP, Inc. ("EPP") was created as a sham Washington corporation by Madhavi Vuppalapati on July 12, 2012. (Exh. 48.) Its "principal location" is a Bellevue address owned by a cousin of Madhavi Vuppalapati, and its registered agent is Madhavi Vuppalapati. (Exhs. 48 and 127.)

20. Defendant Financial Oxygen, Inc. ("Financial Oxygen") was created as a sham Washington corporation by Srinivas Sista on May 1, 2012. (Exh. 37.) Its principal place of business is Mr. Sista's home address in Redmond, and Mr. Sista is Financial Oxygen's President and Registered Agent is Mr. Sista. (Exhs. 37 and 127.)

21. Defendant Huawei Latin American Solutions, Inc. ("Huawei") was created as a sham Florida corporation registered to do business with the Washington Secretary of State by Madhavi Vuppalapati on December 22, 2011. (Exh. 15.) While the name on the Articles of Incorporation is Mr. Sista's, Mr. Pandyar testified that the Vuppalapatis used Mr. Sista's name initially without his knowledge, but that Mr. Sista ultimately consented. (Exh. 15.) The principal place of business is PISL's Bellevue, Washington office. (Exh. 127.) Huawei Latin American Solutions, Inc.'s President is Defendant Mr. Sista.

22. Defendant L3C, Inc. ("L3C") was created as a sham Washington corporation by Guru Pandyar on July 13, 2012. (Exhs. 49-50.) Mr. Pandyar created L3C at the instruction of the Vuppalapatis. L3C's principal place of business is Mr. Pandyar's former home address, and Mr. Pandyar is also the registered agent. (Exhs. 49-50, 127.)

23. Jurisdiction to consider this Complaint arises under 28 U.S.C. §§ 1332, 1334, and 157, 11 U.S.C. § 523, and Fed. R. Bankr. P. 7001. The Court also has jurisdiction over this civil action pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1964 for the Kyko's civil RICO claims. Plaintiff Kyko Global, Inc. is a citizen of Canada. Plaintiff Kyko Global GmbH is a citizen ofthe Bahamas. Plaintiffs are each citizens of a foreign state. Defendants are each citizens of different states other than Canada and Bahamas. None of the Plaintiffs are from the same state as any of the Defendants and, therefore, there is complete diversity among the parties. The matter in controversy exceeds the sum or value of $75,000. This Court has personal jurisdiction over Defendants. Defendants have engaged in substantial business and related communications with the Plaintiffs and the claims arise from the Defendants' transaction of business within this district and that relate to the Debtors' case under Title 11. This matter involves a core proceeding under 28 U.S.C. § 157(b)(2)(B), (I), & (J). Venue is proper in this court under 28 U.S.C. §§ 1391, 1408 & 1409 and 18 U.S.C. § 1965(a). A substantial portion of the activities giving rise to the Plaintiffs' claims have taken place in this district.

C. Background to the fraudulent scheme.

24. In mid-2011, a third party individual reached out to Kyko and Kiran Kulkarni about the possibility of Kyko providing accounts receivable factoring services to PISL. The specific factoring arrangement is...