CLEVELAND – Najeeb Khan, 69, of Edwardsburg, Michigan, was charged in a Bill of Information today with operating a long-running check-kiting scheme that caused a financial loss of nearly $150 million to businesses around the country and KeyBank in the Northern District of Ohio.
The Bill of Information charges Khan with one count of bank fraud and one count of attempted tax evasion.
According to court documents, Khan owned and operated Interlogic Outsourcing Inc. (IOI), a payroll processing company that, at one point, provided services to approximately 6,000 clients.
Beginning in 2014, Khan operated a check-kiting scheme using his company’s business bank accounts to fraudulently obtain funds from various financial institutions, including KeyBank. Khan is accused of using these funds to support the growth of his payroll processing business and fund his lifestyle, which included the purchase of automobiles, aircraft, and vacation homes.
As part of his scheme, Khan wrote checks and made wire transfers between accounts under his control at various banks, a type of fraud commonly known as check-kiting. In a check-kiting scheme, checks are continually written back and forth to fraudulently inflate account balances deceiving banks into honoring checks written with insufficient funds.
According to the Bill of Information, Khan wrote checks from IOI accounts at Lake City Bank for deposit into IOI accounts at KeyBank and then wrote checks from IOI accounts at Berkshire Bank for deposit into IOI accounts at Lake City Bank. To cover the check funds issued from Berkshire Bank, Khan is accused of wiring funds from IOI accounts at KeyBank to IOI accounts at Berkshire Bank.
As part of the scheme, Khan is accused of diverting money from the check-kite to personal and other business accounts.
As a result, Khan caused a total financial loss of nearly $150 million.
Khan was also charged with failure to report income gained from the check-kiting scheme on his annual tax return for the tax years 2014-2017.
This case was investigated by the Cleveland FBI and IRS Criminal Investigations (CI). This case is being prosecuted by Assistant U.S. Attorneys Alejandro A. Abreu and Chelsea S. Rice.