Elkhart business owner ordered to pay $150M to bank fraud victims
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A Michigan man has been sentenced to 97 months imprisonment after pleading guilty to bank fraud and attempted tax evasion charges related to his time leading an Elkhart-based payroll company.
U.S. District Court Judge Pamela Barker sentenced Najeeb Khan, 70, of Edwardsburg, Michigan, on Thursday. The judge also ordered Khan to pay more than $150 million in restitution to his victims and the IRS, and ordered him to serve three years of supervised release after leaving prison.
Kahn’s company, Interlogic Outsourcing Inc., at one point serviced as many as 6,000 clients.
Officials say Khan’s actions began in 2014 when he used company accounts to fraudulently obtain money from multiple financial institutions, including KeyBank, through a check-kiting scheme and used the money to buy cars, planes and vacation homes.
Check-kiting, federal officials say, involves writing checks back and forth between account to fraudulently inflate balances so that banks continue honoring checks written with insufficient funds.
“Financial crimes can have serious and long-term consequences,” FBI Cleveland Special Agent in Charge Gregory Nelsen said in a news release from the U.S. Attorney’s Office in the Northern District of Ohio. “The defendant orchestrated an elaborate business fraud scheme that caused extensive monetary harm to financial institutions nationwide.
In Khan’s case, officials say, the Elkhart businessman wrote checks from company accounts at Lake City Bank to deposit in company accounts at KeyBank. He then wrote checks from company accounts at Berkshire Bank, officials say, to deposit into company accounts at Lake City Bank. To cover the funds issued from Berkshire Bank, Khan then wired money from company accounts at KeyBank to other company accounts back at Berkshire Bank.
All told, officials say Khan’s actions led to $150 million in losses to businesses across the country and to KeyBank in the Northern District of Ohio where he was sentenced. Officials also say Khan failed to report earnings from his check kiting in his annual taxes from 2014 to 2017.
“This defendant essentially gave himself a $150,000,000 loan, spent money however he wanted on himself and his business, then defaulted, all without ever getting the banks’ approval to give him that loan,” said U.S. Attorney Rebecca C. Lutzko said in the Northern District of Ohio’s news release. “These types of financial crimes undermine the well-being of our financial institutions and harm our entire community.”