Bank sues Elkhart business over $122M in wire transfers

CLEVELAND — An Ohio bank is suing an Elkhart business, claiming the company overdrafted its account by $122 million and hasn’t repaid the money.

Cleveland-based KeyBank says that Interlogic Outsourcing Inc., a payroll company in Elkhart, made a series of wire transfers earlier this month totaling $220 million but knew there wasn’t enough in its account to cover all the transfers. KeyBank filed the lawsuit July 9 in federal district court in northern Ohio.

The bank says it’s in danger of losing at least $122 million as a result of company owner Najeeb Khan’s actions. In addition to suing for repayment, the bank wants the court to issue a temporary restraining order against all recipients of the transferred funds, to keep the money from being disbursed.

KeyBank also names Berkshire Bank, Wells Fargo and JPMorgan Chase as defendants in the lawsuit, since it says the transfers were made through them.

The court ordered that Khan’s assets be frozen and issued a preliminary injunction ordering the fund recipients to hold on to the money. A hearing is set for today on the judge’s preliminary orders.

According to KeyBank’s lawsuit:

The bank says Khan had TimePlus and IOI Payroll, two companies related to Interlogic, issue a series of checks to Interlogic totaling about $250 million on July 3 and 5. The money was drawn from the companies’ bank accounts with Lake City Bank in Warsaw.

Khan then deposited $123 million in Interlogic’s KeyBank account on July 3 and $127 million on July 5. 

The bank activity was consisted with earlier deposits made by Interlogic this year. KeyBank understood Interlogic to be making the deposits as part of its payroll services to customers.

On July 5, Interlogic issued numerous separate wire transfers of between $1 and $3 million to various entities through Berkshire, Wells Fargo and JPMorgan, totaling $90 million in all. Interlogic issued another 41 wire transfers totaling $122.5 million on July 8.

Interlogic had enough money in its KeyBank account to process all of the wire transfers. But the bank says it didn’t know that TimePlus and IOI Payroll didn’t have enough money in their Lake City Bank accounts, and received notice that the checks were being returned for insufficient funds.

As a result, sufficient funds weren’t transferred from Lake City Bank to cover the $212.5 million in wire transfers. KeyBank claims that Khan knew there wasn’t enough money in the accounts.

KeyBank notes that under a 2008 agreement with Interlogic, the company is responsible for immediately repaying any overdraft, with interest.

KeyBank also contacted Berkshire, Wells Fargo and JPMorgan about the transferred funds on July 9 and 10. The three banks declined to voluntarily set aside the funds without an agreement by KeyBank to idemnify each of them in case a third party made a claim on the funds. 

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