Three Indian-Americans charged in loan fraud scheme worth over $35 million
New York: Three Indian-Americans have been charged in a scheme to defraud financial institutions with the intent to obtain more than $35 million by providing false documents in support of Small Business Administration (SBA) loan applications for the purchase of a hotel. Rajendra G, 63, of New Jersey. Parikh and Rajnikant I. Patel, 59, were charged with bank fraud, making false statements to financial institutions and money laundering.
In addition to the above charges, the ringleader of the fraud scheme, Mehul Ramesh Khatiwala (alias Mike Khatiwala), 41, was also charged with Continuing Financial Crimes Enterprise.
Also known as the Financial Crimes Kingpin statute, the additional charges on Khatiwala have been used for the first time in Maryland, the U.S. Attorney’s Office, District of Maryland announced Wednesday.
While Khatiwala and Parikh made their initial appearance in the US District Court in New Jersey on November 3, where they were ordered taken into custody, Patel’s initial appearance will be held on Thursday.
According to the 31-count indictment, Khatiwala was the owner and managing member of Delaware Hotel Group and operator of GMK Consulting and KPG Hotels MGMT, hotel management and loan brokerage companies based in Mount Laurel, New Jersey.
Rajendra Parikh was the owner of KPG and worked as a manager of a convenience store owned by Patel Parikh and Parikh’s brother.
The indictment alleges that from August 2018 to February 2020, the defendants conspired to obtain loan proceeds for the defendants and others to buy and sell hotels in a hotel flipping scheme.
They did this by making misrepresentations and omissions to financial institutions during the loan application process under SBA Section 7 regarding the identity of the sellers, the family relationships between the parties, and the nature and amount of equity injected by the borrowers. Program.
This program guaranteed and insured 75 percent to 90 percent of eligible loans made and administered by participating lending institutions and required that the small business owner/borrower provide a portion of his or her own funds to qualify for the loan. Invest a certain amount in the business.
Specifically, the indictment alleged that Khatiwala and Parikh created shell companies using Patel and a co-conspirator as straw owners of the companies.
He then signed purchase contracts, operating agreements and related documents from the straw owners to purchase the hotel property in the names of shell companies created by Khatiwala and Parikh.
At the same time they were soliciting investors, including family members, and creating other companies to serve as purchasing entities (“buyers”) so that they could quickly resell the hotels at much higher prices.
As detailed in the indictment, Khatiwala, Parikh and two other co-conspirators collected, compiled, and submitted documents required by financial institutions to determine whether buyers qualified for SBA loans.
The indictment further alleges that Khatiwala and Parikh fraudulently diverted some of the buyers’ equity injections to make down payments on hotels under contracts with shell companies controlled by Khatiwala and Parikh.
They presented as support for the equity injection the same wire transfer records and gift letters that had already been used to satisfy the buyer’s equity injection obligations for other SBA loan applications.
Additionally, he fraudulently submitted false bank statements and wire transfers to complete the equity injections.
The defendants engaged in roundtrip transactions whereby they falsely represented to financial institutions that more than $1.5 million on deposit in a residential title escrow account would be used to satisfy the purchaser’s equity injection obligations, when indicted. It was alleged that the funds had been temporarily withdrawn. account before loan closing and deposited back into the same escrow account after loan closing.
Additionally, the indictment claimed that Khatiwala and Parikh falsely represented to financial institutions that the purchasing entities had purchased hotels from shell companies, when in fact, the shell companies did not yet own the properties.
Khatiwala and Parikh used loan funds given to buyers to purchase hotels from shell companies, so that the shell companies could first purchase the property and then sell it to the buyer.
If convicted, Khatiwala faces a mandatory minimum sentence of 10 years and up to life in prison for a persistent financial crime enterprise.
All defendants face a maximum sentence of 30 years in federal prison for each count of conspiracy to commit bank fraud and conspiracy to commit bank fraud; A maximum sentence of 5 years in federal prison for conspiracy to make false statements to a financial institution.
