New Jersey Trio Pleads Guilty in $35 Million SBA Loan Fraud Scheme

Three New Jersey residents have admitted to their roles in a complex scheme that defrauded banks of more than $35 million in federally backed loans intended for small businesses. The loans, secured under the Small Business Administration’s Section 7(a) Program, were used to finance fraudulent hotel purchases orchestrated by a network of shell companies and misrepresented ownership.

Mehul Ramesh Khatiwala, 43, of Voorhees; Rajendra G. Parikh, 64, of Monroe; and Jennifer H. Watkins, 48, of Marlton, each pleaded guilty to conspiracy to commit bank fraud in federal court in Maryland. According to plea documents, Khatiwala, Parikh, and Watkins operated various hotel management and consulting firms out of New Jersey. Between August 2018 and February 2020, they collaborated to obtain SBA loans by submitting falsified information, including misstatements about borrower equity and concealed relationships between buyers and sellers.

The group used straw owners and shell companies to create the appearance of legitimate business transactions. They arranged for one entity to purchase a hotel and then used another controlled entity to buy it at an inflated price. This “flipping” method, typically used for short-term investment profits, allowed them to solicit bank loans under false pretenses while portraying these transactions as arms-length sales between independent parties.

To meet SBA loan criteria, the conspirators falsely claimed borrowers were investing their own funds into the businesses, a key requirement for federal backing. In reality, the equity injections were fabricated, and the true owners—Khatiwala and Parikh—remained hidden behind the straw owners. The banks, relying on these misrepresentations, unknowingly issued loans that were ultimately guaranteed by the SBA, exposing federal funds to significant risk.

Sentencing for Khatiwala, Parikh, and Watkins is pending, with each facing up to 30 years in federal prison. However, actual penalties will be determined by a judge after reviewing the federal sentencing guidelines and other factors. The case was investigated by the Offices of Inspector General for both the Federal Housing Finance Agency and the Federal Deposit Insurance Corporation.

Article by multiple RFHC contributors, based upon information from the U.S. Attorney’s Office for the District of Maryland

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