NRI PULSE STAFF REPORT
Philadelphia, PA, September 4, 2026: The U.S. Department of Justice has accused an Indian-American father and son and several members of their family of operating a sprawling loan fraud scheme involving more than $100 million in financing for hotels in Pennsylvania and New Jersey.
In a 332-page civil complaint filed Aug. 14 in the U.S. District Court for the Eastern District of Pennsylvania, the federal government alleges that New Jersey-based hotel operators Pankaj Sheth and his son Rajan Sheth, along with five other family members, 21 business entities and eight associates, used a network of companies and purported “straw owners” to obtain government-backed and other loans despite a history of defaults, bankruptcies and substantial debt.
The 133-count lawsuit includes claims under the federal False Claims Act and alleges that the defendants made misrepresentations about ownership, finances and other information to secure loans for more than a dozen hotels in the Mid-Atlantic region.
According to the complaint, the Sheths repeatedly transferred hotel ownership among different limited liability companies, allowing newly created entities to apply for financing without disclosing their connections to businesses that had previously defaulted.
The Justice Department alleges that proceeds from new loans were then used in part to pay off earlier troubled loans or debts and that the process was repeated with other entities and properties. The government characterizes the alleged operation as a cyclical, “Ponzi”-like scheme involving more than $100 million in financing.
Unlike a traditional Ponzi scheme, however, the allegations do not involve investors being promised fictitious investment returns. Instead, the government’s comparison refers to what it says was a recurring pattern of obtaining new financing to address obligations associated with previous loans.
One of the properties at the center of the lawsuit is a hotel on Penrose Avenue in South Philadelphia, currently operating as the Holiday Inn Philadelphia Airport-Stadium Area.
The Sheth family has controlled the property since 1999, according to the complaint. Over the years, the hotel operated under several names, including Skyview Plaza, Penrose Hotel and Radisson.
Federal prosecutors allege that the property was used as collateral to obtain more than $45 million in loans over the years, with newer financing repeatedly used to address earlier debts and defaults.
In one instance, the government says Penn Hospitality Management LLC obtained a $5 million Small Business Administration-backed loan and a $3.1 million commercial loan in 2018. The lawsuit alleges that $1.8 million intended for renovations was instead diverted to the Sheths.
After the 2018 loan went into default, another company allegedly obtained $12 million in new financing, allowing the family to retain control of the property, according to the complaint.
The lawsuit also accuses businesses connected to the family of taking advantage of federal COVID-19 relief programs. According to reports on the complaint, Sheth-related businesses obtained at least 18 pandemic-era loans totaling about $2.5 million, with the government alleging that some applications involved hotels that were closed or had no payroll.
Another allegation involves a hotel in Browns Mills, New Jersey, where the government says a property facing foreclosure was effectively transferred to an entity secretly controlled by the same family while the purchaser was represented as independent.
The broader allegation running through the lawsuit is that individuals presented as owners of some businesses were, in reality, “straw owners,” while the Sheths retained control behind the scenes.
Rajan Sheth has strongly denied the government’s allegations.
“The business we’re in is buying distressed properties and we turn them around,” he told The Philadelphia Inquirer, adding, “There is no scheme here.”
Sheth said the family cooperated with a federal investigation that had been underway for more than two years and maintained that “every penny” borrowed had been repaid. He said the family plans to fight the government’s allegations.
The Justice Department’s action is a civil lawsuit, not a criminal indictment, and the allegations have not been proven in court. The government is seeking recovery of funds it says the defendants improperly received, along with damages and other relief.
The case, United States of America v. Sheth et al., names Pankaj and Rajan Sheth as well as Renuka Sheth, Rohit Sheth, Khushali Sheth, Lisa Sheth and Rishi Sheth among the individual defendants.
The lawsuit was filed Aug. 14, although the case drew renewed attention this week following reports in Indian media about the Sheth family’s Indian origins and hotel holdings.
The defendants will have an opportunity to respond to the government’s allegations as the civil case proceeds.
