Five persons, including three Indian Americans have been charged in a fraudulent scheme to obtain over $35 million by providing false documentation in support of Small Business Administration (SBA) loan applications for purchasing hotels.
Mehul Ramesh Khatiwala, aka “Mike Khatiwala,” 41, of Voorhees, New Jersey, also faces a continuing financial crimes enterprise charge, also known as the financial crime kingpin statute—the first time this statute has been charged in Maryland.
Khatiwala, Rajendra G Parikh, 63, Rajnikant I Patel, 59, from New Jersey and two others were charged with bank fraud, making false statements to financial institutions and money laundering, according to US Attorney for the District of Maryland.
While Khatiwala and Parikh had initial appearances in the US District Court in New Jersey on Nov 3, 2023, and were ordered to be detained, Patel is set to have an initial appearance before a judge in Baltimore on June 9.
According to the 31-count indictment, Khatiwala was the owner and managing member of Delaware Hotel Group LLC, and an operator of GMK Consulting LLC and KPG Hotel Mgmt LLC which were hotel management and loan brokerage companies located in Mount Laurel, New Jersey.
Rajendra Parkih was an owner of KPG and Rajnikant Patel worked as the manager of a convenience store owned by Parikh and Parikh’s brother.
The indictment alleges that from August 2018 until February 2020 the defendants conspired to obtain loan proceeds for the defendants and others to buy and sell hotels in a hotel flipping scheme by making material misrepresentations and omissions to financial institutions during the loan application process regarding the identity of the sellers, the familial relationships between the parties, and the nature and amount of the equity injected by the borrowers, under the SBA’s Section 7(a) Program.
The indictment also alleges that the defendants engaged in roundtrip transactions, whereby they falsely represented to financial institutions that over $1.5 million on deposit in a Residential Title escrow account would be used to satisfy the Buyer’s equity injection obligations, when, the indictment alleges, the funds were temporarily withdrawn from that account prior to the loan closings and redeposited back into the same escrow account subsequent to the loan closings.
If convicted, Khatiwala faces a mandatory minimum sentence of 10 years and up to life in prison for a continuing financial crime enterprise.
All of the defendants face a maximum of 30 years in federal prison for the conspiracy to commit bank fraud and for each count of bank fraud; a maximum of 5 years in federal prison for a conspiracy to make a false statement to a financial institution.
Khatiwala, Parikh, and two others also face a maximum of 30 years in federal prison for each count of making a false statement a financial institution and a maximum of 10 years in federal prison for conspiracy to launder money and for each count of money laundering.