Interlogic Outsourcing, an Indiana payroll processor that serves thousands of small businesses, filed for Chapter 11 bankruptcy on Aug. 12, 2019 and pointed the blame at its own founder.
The company, known as IOI Payroll, accused Najeeb Khan of a “sophisticated scheme” to mismanage its money. Khan had resigned as chief executive, and consultants now run the firm while it tries to find a buyer.
KeyBank sued Khan last month, charging that he fraudulently initiated $122 million in wire transfers without enough money on hand to cover them. The bank said the transfers went through before Lake City Bank returned the underlying checks for insufficient funds. KeyBank covered the shortfall and said it stood to lose $90 million after tax.
The overdraft rippled out across the country. Some businesses saw payroll delayed, and others discovered that federal and state taxes had never been paid even though the money was pulled from their accounts.
In its filing, the company said the overdraft had been accumulating for years and had been hidden by carefully timed transfers Khan orchestrated daily. About 200 of IOI’s 6,000 clients have ended their contracts since the news broke. Seven former clients filed their own lawsuits to recover money that was never forwarded to tax agencies.
Dan Wikel, a consultant leading the restructuring, said Khan ran “a significant and ongoing scheme of intentional financial mismanagement”. The bankruptcy papers put the number of creditors between 5,000 and 10,000, with assets of $1 million to $10 million and liabilities of $10 million to $50 million. Five prospective buyers were in talks to acquire the company.
Sources
- Interlogic Outsourcing Blames Ex-CEO for Bankruptcy – WSJ
- Elkhart payroll firm declares bankruptcy, accuses its founder of a 'sophisticated scheme'
Sources
- FinCEN Notice Highlights Concerning Increase in Payroll Tax …
- New Advisory Targets Payroll Tax Fraud Schemes – Thomson Reuters
