New Jersey Woman Sentenced to Federal Prison for $35M SBA Loan Fraud Scheme Involving Hotel Flipping

A New Jersey woman was sentenced to three years in federal prison for her role in a scheme that defrauded banks and the Small Business Administration (SBA) of over $35 million in loan funds. According to a release from the U.S. Attorney’s Office for the District of Maryland, Jennifer Watkins, 48, of Marlton, also received three years of supervised release and was ordered to pay more than $6 million in restitution for her part in a conspiracy involving the fraudulent acquisition of SBA-backed loans used to finance hotel purchases.

Between August 2018 and February 2020, Watkins and her co-conspirators—Mehul Ramesh Khatiwala of Voorhees and Rajendra G. Parikh of Monroe—created a network of shell companies and straw buyers to carry out a hotel “flipping” operation. They purchased hotel properties using one set of entities, then resold them to other controlled entities at inflated prices to obtain larger SBA Section 7(a) loans. These loans, typically intended to help small businesses by covering up to 85% of loan amounts, require genuine equity investment from the borrowers. Investigators found the conspirators made false claims about equity injections, relationships among involved parties, and the identities of hotel sellers.

The group orchestrated the transactions so they could control both sides of the purchase and sale process. By misrepresenting key financial and ownership information, they deceived banks into approving loans that otherwise wouldn’t qualify. The SBA ultimately insured the majority of these fraudulent loans, leaving taxpayers potentially liable for losses. Watkins served as a project coordinator and loan broker for the group, managing loan documentation and company operations used to facilitate the fraud.

U.S. District Judge Deborah K. Chasanow handed down the sentence in Baltimore, Maryland, and noted Watkins’ direct involvement in the execution of the scheme. The case was prosecuted by Assistant U.S. Attorneys Harry M. Gruber, Evelyn L. Cusson, and Ari D. Evans, with assistance from federal inspectors with the FHFA and FDIC.

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

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