Khan answers bank's lawsuit with silence

Elkhart Truth file photoIn a separate bankruptcy issue, the company has provided the court with a list of more than 7,000 customers who are owed money. And Khan has asked for more time to respond to a lawsuit in an Elkhart County court filed jointly by about 20 local clients.

CLEVELAND — The owner of an Elkhart payroll company refuses to answer the allegations in the first of several lawsuits from banks and former clients, citing an investigation being conducted by a U.S. district attorney.

Owner and former CEO Najeeb Khan and Interlogic Outsourcing Inc. have been the subject of multiple lawsuits since July, when an Ohio bank claimed it could lose hundreds of millions of dollars after Interlogic overdrafted its account and didn’t repay the money. Cleveland-based KeyBank alleges that it could lose $122 million to $220 million after Khan had Interlogic make a series of wire transfers in early July.

The bank alleges that Khan knew there wasn’t enough money to cover the transfers.

In a separate bankruptcy issue, the company has provided the court with a list of more than 7,000 customers who are owed money. And Khan has asked for more time to respond to a lawsuit in an Elkhart County court filed jointly by about 20 local clients.

‘Unclean hands’

Khan filed a response to the bank’s lawsuit on Aug. 27. In answer to most of the allegations in the complaint, he chooses to excercise his right not to self-incriminate.

“The subject matter of the complaint is the basis for at least one investigation currently being conducted by the United States Attorney for the Northern District of Ohio,” he says repeatedly. “Exercising his rights under the Fifth Amendment to the Constitution of the United States, Defendant respectfully declines to answer these allegations on the ground that his answers might tend to incriminate him.”

He also asks that his refusal to answer be treated by the court as a denial of the allegations.

The only things Khan confirms in the filing are a statement that Interlogic is a payroll processing company that is based in Elkhart and does business in Ohio, and a statement that he lives in Michigan and is the owner and former president of the company.

Khan goes on to offer four claims in his defense. He says he shouldn’t be responsible “for any damages caused by KeyBank’s failure to mitigate its own damages” or for “any damages to the extent that KeyBank has unclean hands or consented to” his alleged actions.

He also says the bank’s claims are barred by the statute of limitations and that the U.S. District Court in Northern Ohio has no personal jurisdiction over him.

A request for comment was sent Tuesday to a spokesman for the U.S. Attorney’s Office in the Northern District of Ohio.

‘Customer 7251’

In August, Interlogic Outsourcing filed for Chapter 11  bankruptcy protection while negotiations for the sale of the company are under way. The company says it owes between $10 million and $50 million to between 5,000 and 10,000 creditors, but has assets worth only $1 million to $10 million.

The company says it was the victim of a “significant and ongoing scheme of intentional financial mismanagement” by Khan.

On Friday, the company sent the court a 178-page list of creditors. A few have names and addresses given, but most are simply identified as “Customer 1” through “Customer 7251.”

The list also includes the treasurer’s office for several states, including Ohio and Maine, as well as the Ohio Department of Taxation, the Tennessee Department of Labor and the Allen County, Indiana Treasurer.

2nd restraining order requested

Also in August, South Bend firm Jones Law Office filed a lawsuit in Elkhart County court on behalf of a growing list of IOI clients. It accuses Khan of fraud, conversion and constructive fraud.

They claim IOI withdrew funds from the clients’ bank accounts to pay wages and make payroll-related state and federal tax payments, but failed to actually make any of those payments. They say the company made false statements to gain access to clients’ funds, that it knew those payments wouldn’t be made and that it continued to lie in emails later sent to clients.

The court issued a temporary restraining order against Khan after hearing that the plaintiffs risked losing any chance of recovering their losses if he were allowed to sell his assets to satisfy KeyBank’s claims. The order expires Thursday.

On Tuesday, Jones Law Office asked the court to issue another temporary restraining order against Khan, either until an Oct. 1 court hearing can be held or they are given the chance to question Khan and his wife under oath.

The law office says in the filing that Khan has refused to produce his personal budget, as the court ordered, and has failed to completely disclose a list of property and funds. Attorneys say they learned of an airplane that was sold for $290,000 and about the impending sale of a helicopter.

They say they asked KeyBank if the funds from the sale of the airplane are being held in escrow, but the bank failed to respond. They say if KeyBank is accepting property from Khan, then the plaintiffs’ interests are in direct conflict with those of KeyBank.

“Khan and Counterclaim Defendant KeyBank have been united and acting in concert since the filing of this lawsuit,” the request states,” and the Plaintiffs’ interests are in no way protected by KeyBank.”

Also on Tuesday, attorneys for Khan asked the court for an extension to the time he has to file an answer to the lawsuit. They asked that the Sept. 5 deadline be reset to Oct. 8, saying they need more time to investigate the claims.

(11) comments

DHenke

Joe you have a rich person aversion like a wanna be. This has nothing to do with rich or poor but law. Therefore a court matter not public opinion. The system will be upheld and justice served. Thought you would know that part.


Joe King

Hello Mr. Henke, You don't know my economic statuts, but I was just stating the obvious.....in the comment section...Glad you are observant....Thanks, you can now go back to taking parks and recs from minorities....


fasterontheright

He's not in jail because they're just allegations. The guy who robbed the store for $100 was caught and that's why he went to jail.



Anybody can make up a story about you that you stole millions. I'm sure you would like to stay free and innocent till proven guilty by the court.


Joe King

the bankruptcy papers filed saying over 7000 clients are owed money are admissions....not allegations... money stolen and used for other gains....I love how "nice" rich people get to hang out like nothing has happened because they can afford attorneys to guide them thru this difficult time in their life....meanwhile, business were "robbed" with a click of a button


sidearm

Bankruptcy claims are not admission of guilt Joe. They are legal pleadings filed in court to try and sort out this mess. This guy is probably guilty but you turning it into rich guy vs poor guy is your socialist training being exposed. Almost makes me feel bad for Mr Knan and his firm did steal from mine. Joe , I believe you would mess up a free lunch,


Joe King

If you take money out because you are contracted to do so, yet don’t pay the money to where it is supposed to...isn’t that theft. In the simplest terms? The fact he did it with a push of a button sitting at his desk should make it any less of a crime compared to someone walking in a bank or store taking money...theft and fraud.. rich or poor, same crime..don’t confuse it..


FlyNavy

Seems Mr. Khan should have criminal charges. He seems to be a high flight risk candidate as well. No bail would be in line I would think. What am I missing?


Joe King

Why is he not in jail? Has his passport been taken? All assets from him and his wife should be frozen until this is settled. Steal $120-$200 million and living life large with no consequence (yet).... rob a store for $100 and your in jail quick...


fire111

So Joe we know you have a bias towards people who may have wealth. I guess the real question to ask is, has this guy been charged with a crime and arrested? I don't know! I have not been following this story. Ya just can't put someone in jail Joe without legal charges. And if he has been charged and arrested he has the right to bond out! This is kind of like the guy jumping the gun and accusing a driver of an old Cadillac of being rich and killing some pedestrians! I'll bet he felt like an idiot when the truth came out! So unless this fellow has been charged with a crime... that's why he is out of jail!


Joe King

Well there you go again...it isn’t wealthy people..it wealthy people who use their money they game the system....who makes the rules and laws...ask yourself that...who benefits the most? How much did amazon pay in taxes? 0. How much did trump hide and not pay? We will see...there is a reason he doesn’t want us to know....so it’s not wealthy people, just the ones who game the system.....I think that is easy enough for you to understand....


fire111

Habeas Corpus! Read up on it Joe. If he has been charged and it's not a capital offence, he is allowed to bail! Same with the $100 thief. A thief is a thief Joe! habeas corpus... a writ requiring a person under arrest to be brought before the court to secure the person's release unless lawful grounds are shown for their detention. You wouldn't have it any other way would you? THAT would be discrimination. Imagine discrimination because of wealth!


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