A fraud scheme that was allegedly intended to obtain more than $35 million in federally backed business loans from financial institutions through false documents was charged last week against five by a federal grand jury sitting in Baltimore, Md.
The charges include a “continuing financial crimes enterprise charge,” also known as the financial crime kingpin statute, and represent the first time that specific charge had been leveled in Maryland, according to federal prosecutors.
According to the Maryland U.S. Attorney’s office, and the office of inspector general (OIG) of the Federal Deposit Insurance Corp. (FDIC), the charges were issued against Rajendra G. Parikh, 63, of Monroe, N.J.; Jennifer H. Watkins, 47, of Marlton N.J.; Rebecca Marie Cohn, a/k/a Rebecca Marie Stanton, 36, of Fallston, Md; Rajnikant I. Patel, 59, of North Brunswick, N.J.; and Mehul Ramesh Khatiwala, a/k/a “Mike Khatiwala,” 41, of Voorhees, N.J.
Khatiwala faces the “kingpin statute” charge, which targets individuals and organizations that traffic controlled substances on a large scale. The law was enacted in 1970.
According to the indictment, from August 2018 until February 2020 the defendants conspired to obtain loan proceeds for themselves 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 Small Business Administration’s (SBA) Section 7(a) Program.
According to the agencies, the SBA program guaranteed and insured 75% to 90% of qualified loans made and administered by participating lending institutions and required that the small business owner/borrower invest a certain amount of their own money into the business to qualify for the loan.
“Specifically, the indictment alleges that Khatiwala, Parikh, and Watkins created shell companies using Patel and a co-conspirator as the straw owners of the companies, then had the straw owners sign purchase contracts, operating agreements, and related documents to buy hotel properties in the names of the shell companies created by Khatiwala, Parikh, and Watkins, while at the same time soliciting investors, including family members, and creating other companies to serve as buying entities (the ‘Buyers’) so they could quickly resell the hotels at a much higher price,” the indictment alleges.
The agencies said Khatiwala faces a mandatory minimum sentence of 10 years and up to life in prison for a continuing financial crime enterprise. All 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.
Further, Khatiwala, Parikh, Watkins, and Cohn 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.
However, the agencies noted that actual sentences for federal crimes are typically less than the maximum penalties.