Authorities reported that three New Jersey residents have pleaded guilty in a scheme to fraudulently obtain more than $35 million in Small Business Administration (SBA) loans. The individuals involved, Mehul Ramesh Khatiwala, 43, Rajendra G. Parikh, 64, and Jennifer H. Watkins, 48, admitted to the charges in a federal court. The loans were used for the purchase of hotels.
U.S. Attorney for the District of Maryland, Kelly O. Hayes, announced the guilty pleas, with Special Agent in Charge Robert Manchak of the Federal Housing Finance Agency Office of Inspector General and Special Agent in Charge Jeffrey D. Pittano of the Federal Deposit Insurance Corporation Office of Inspector General, Mid-Atlantic Region.
Each of the co-conspirators pleaded guilty to conspiracy to commit bank fraud. The plea agreements describe how the defendants, alongside their co-conspirators, engaged in a scheme from August 2018 to February 2020 to obtain loans for buying and selling hotels through a real estate investment strategy known as "flipping." This involved purchasing properties to sell them quickly for profit.
"Flipping" in this context refers to a real estate investment strategy that entails buying property to hold briefly before selling it for a profit. During the loan application process, the conspirators made false statements and omitted material facts to financial institutions about sellers' identities and borrowers' equity injections. The defendants used the SBA’s Section 7(a) Program, which insures a significant portion of the loan while requiring borrowers to invest their own funds.
Khatiwala and Parikh, as managers, along with Watkins, admitted in their pleas to creating shell companies with straw owners, who signed documents for the purchase of hotel properties on behalf of these entities. The straw owners were not the real owners, as ownership rested with Khatiwala and Parikh.
The conspirators then formed a second company to buy the hotels at inflated prices. They approached banks for loans by misleading them on investment equity, among other false representations.
All three could face up to 30 years in federal prison for conspiracy to commit bank fraud. Sentences are determined by a federal district court judge based on U.S. Sentencing Guidelines and other legal factors.
"U.S. Attorney Hayes commended the FHFA-OIG and FDIC-OIG for their work in the investigation. Ms. Hayes also thanked Assistant U.S. Attorneys Harry M. Gruber, Evelyn L. Cusson, and Ari D. Evans, who are prosecuting the federal case, and recognized Paralegal Specialists Joanna B.N. Huber and Zharde Todman."
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