Judge Pamela A. Barker of the U.S. District Court sentenced 70-year-old Najeeb Khan of Edwardsburg, Michigan, to 97 months in prison after Khan had earlier entered a guilty plea to bank fraud and attempted tax evasion. Judge Barker also mandated that Khan serve three years of supervised release following his release from jail and reimburse the victims of his bank fraud and the IRS for more than $150,000,000.
Khan wrote checks and completed wire transfers across several accounts he controlled at several institutions as part of his plan. This kind of fraud is called “check-kiting,” and it entails the criminal repeatedly writing checks between accounts that are under their control in order to falsely inflate account balances and trick banks into honoring checks that are written with inadequate funds.
After that, Khan sent checks from IOI accounts at Berkshire Bank to IOI accounts at Lake City Bank, then from IOI accounts at KeyBank to IOI accounts at Lake City Bank. Khan sent money from IOI accounts at KeyBank to IOI accounts at Berkshire Bank in order to pay the check that Berkshire Bank had issued.
Court records state that Khan was the owner and operator of Interlogic Outsourcing Inc. (“IOI”), a payroll processing business that had about 6,000 customers at one point.
But starting in 2014, Khan ran a check-kitting operation in which he stole money from several banks, including KeyBank, using the commercial bank accounts owned by his company. Khan utilized this money to finance his lifestyle, which included buying cars, planes, and vacation houses, as well as the expansion of his payroll processing company.
“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. “These types of financial crimes undermine the well-being of our financial institutions and harm our entire community. This office will vigilantly investigate and prosecute persons who engage in such conduct to protect and prevent harm to financial institutions locally and nationwide.”
“Financial crimes can have serious and long-term consequences. Complex financial crimes that impact the economic well-being of institutions are reprehensible,” said FBI Cleveland Special Agent in Charge Gregory Nelsen. “The defendant orchestrated an elaborate business fraud scheme that caused extensive monetary harm to financial institutions nationwide. The FBI will work diligently and seek justice for individuals and entities who fall victim to conniving criminals who cheat and lie for the sole purpose of personal gain.”
Khan entered a guilty plea to charges of bank fraud and tax evasion. According to his lawyers, he sold his collection of cars, which brought in around $40 million at auction, in order to assist his victims in getting some money back.
Approximately 1,700 of Khan’s clients lost out on money that Khan’s company had withheld for payroll taxes when his scam failed, according to the prosecution. The Boy Scouts of America and four Catholic dioceses were among the NGOs and charities that comprised Theos firms
Credit is due to the agents who investigated the case, the Cleveland FBI, and IRS Criminal Investigations (“CI”). This case was prosecuted by Assistant U.S. Attorneys Chelsea S. Rice and Alejandro A. Abreu.
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