Who is Najeeb Khan? Indiana businessman who ran a $180 million scam sentenced to 8 years in prison
ELKHART, INDIANA: Najeeb Khan, 70, of Edwardsburg, Michigan, orchestrated a $180 million check-kiting scheme, and used the proceeds to build one of the world’s most revered classic car collections as well as lead a lavish lifestyle.
Admitting that he was "blinded by greed" as he defrauded customers, Khan has been sentenced to eight years in prison, reported the Daily Mail.
According to Cleveland.com, Khan bought more than 250 cars, as well as airplanes, boats, and a helicopter. He made the purchases while growing his payroll processing business Interlogic Outsourcing Inc.
Khan also reportedly purchased mansions in Arizona and Michigan, and homes in Florida and Montana by ripping off more than 1,700 clients for nearly a decade.
"I’m humbled with deep regret and remorse to all the victims whose lives were negatively impacted by my actions and greed,” he said during the hearing.
Khan's wife Nancy was transferred the couple's homes and bank accounts worth up to $3 million before his 2020 bankruptcy, and she will be allowed to keep them under a deal struck with creditors.
How did Najeeb Khan conduct the multi-million dollar scam?
A first-generation immigrant from Pakistan, Khan joined an Indiana Bank after college, rose to the position of vice president, and then started his payroll processing company in 1988.
Between 2011 to 2019, he began embezzling money by writing checks back and forth between accounts he controlled to fraudulently inflate account balances, all the while growing his business. He then siphoned off about $73 million for himself.
Prosecutors state that when the scheme collapsed, about 1,700 of Khan's clients lost out on money his company had withdrawn for payroll taxes.
Those companies included KeyBank in Cleveland which lost $122 million, as well as small and mid-sized businesses, nonprofits, and charities, including the Boy Scouts of America and four Catholic dioceses.
Some of the victims had to pay the IRS, as well as their employees out of their own pockets or take out-of-line credit. Others had to lay off employees.
How did Najeeb Khan's scam get caught?
In 2019, KeyBank discovered the $122 million hole in its accounts and deployed more than 100 staff members to trace the missing cash.
Peter Szafran, Senior Vice President of Keybank, described the scale of the theft as "breathtaking" and said that several bank staff members were fired for allowing Khan to get away with it.
"It was a crime of pure avarice. It was not a crime of need but of excessive greed on an epic scale," he added.
How was Najeeb Khan sentenced?
US District Judge Pamela Barker handed the eight-year prison sentence to Khan. She also ordered him to pay $121 million in restitution to KeyBank and $27 million to the clients he looted.
Khan must also pay $9.8 million to the IRS for taxes he didn’t pay for five years, though Barker noted the money owed to the IRS will likely never be paid back.
However, Khan was credited by the judge for his lack of criminal history and the $65 million he has so far paid back to victims. He raised $40 million for restitution by selling 240 cars.
Announcing the sentence, US Attorney Rebecca C Lutzko stated, "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."
"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," the attorney added.