CLEVELAND, Ohio— The owner of a payroll processing company has admitted to orchestrating a years-long check fraud scheme that cost several companies, including Cleveland-based KeyBank, about $150 million.
Najeeb Khan, owner of Interlogic Outsourcing Inc., pleaded guilty Thursday in federal court in Cleveland to bank fraud and attempted tax evasion.
The plea agreement allows lawyers for both sides to discuss what sentence is appropriate when he is sentenced by U.S. District Judge Pamela Barker. He will start at a level between 14 and 18 years in prison, according to the plea agreement. The date of sentencing has not yet been set.
Khan also agreed to pay back the money he stole, including $121.4 million from KeyBank and $27.2 million from Interlogic Outsourcing clients.
The confession was expected after Khan agreed to be charged in a memo, which usually means a person cooperated with investigators rather than a grand jury proceeding.
Interlogic Outsourcing Inc., based in Elkhart, Indiana, handled payroll processing for about 6,000 companies nationwide.
Khan, of Edwardsburg, Michigan, ran what is known as a check scheme from 2014 to 2019, when he filed for bankruptcy and self-reported the scheme to federal authorities.
A check payment scheme involves writing checks from one account to another without sufficient funds. A bad check or wire transfer is used to cover the money for the first check. Checks are constantly written back and forth between accounts to inflate balances and defraud banks.
Khan orchestrated the transactions between three financial institutions — Lake City Bank, Berkshire Bank and KeyBank, according to prosecutors. KeyBank lost most of the money, according to prosecutors.
Khan also failed to report the money he earned in income taxes and owes the IRS more than $7 million. Barker will determine the exact amount he must repay at sentencing.
Khan used the money to buy some expensive cars, planes and vacation homes, according to court records.
After Khan filed for bankruptcy, he sold his collection of rare and exotic cars for about $40 million at auction as part of the process.
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