16 News Now Investigates: Waiting for Payday
ELKHART COUNTY, Ind. (WNDU) - A local man is accused of fraudulent conduct to the tune of $122 million.
Local business owner Najeeb Khan quietly built a luxurious life while allegedly skimming money.
Khan owned and operated IOI, a seemingly successful payroll firm based in Elkhart County, serving thousands of clients in Michiana and across the country… but clients didn’t realize that Khan was allegedly engaged in fraud, leading to his bankruptcy filing last year.
But how was he taking money without being detected? With access to clients' bank accounts to process payroll, Khan is accused of holding on to funds meant for state and federal withholding taxes.
“It seems like he had been able to do that for several years, but using a sort of complicated mechanism across different banks using a short-term line of credit known as a float,” explains attorney Andrew B. Jones.
“what started as perhaps a smaller amount of money being taken over accumulated over time to being tens of millions of dollars. so it would have all accumulated over time, and then it all kind of came crashing down in the summer of 2019. That’s what appears to have happened.”
Jones represents 87 clients who lost money, but also knows the frustration firsthand.
“I got involved in this case initially in July/August of last year because my law firm that I own was actually a victim in this case,” he tells 16 News Now Investigates.
The list of Khan victims includes schools, charities, and restaurants… some right here in Michiana. Jones says some of the claimants have six figure losses from this.
But how much money will they get back? Jones tells us that normally the odds aren’t very good.
“The national average in a bankruptcy from a ponzi scheme or a check kiting scheme is about 3 cents on the dollar. so you’re getting about 3% of your money back when you’re a victim,” he says.
But this is no ordinary case. Over the years, Khan amassed a collection of assets worth over $87 million.
Khan owns property, helicopters, and rare and exotic cars that sent collectors into a frenzy when they went up for auction in late October.
The cars brought in over $44 million dollars in sales, with his most valuable vehicle selling for $2.8 million alone. It’s money that attorneys hope can be dissolved to pay back the victims.
For some, a resolution can’t come soon enough. One of the victims in the case is Mark McDonnell, who owns LaSalle Grill in South Bend.
“We log in and see we owe, the total was about $35,000… We called the IRS and said ok we’ve determined what we owe, what kind of terms can we come up with? they said well, it’s really due now, and we need you to pay within the next three days.”
McDonnell and his wife had to pull from their retirement funds to make up the tens of thousands of dollars taken from their account.
“What we do to come up with the money, my wife Nancy and I borrowed from our IRA to come up with that money… so that money’s just gone,” he explains.
Despite an ongoing bankruptcy case and federal investigation, Najeeb Khan still lives in Edwardsburg, leaving many in the community wondering why he isn’t behind bars.
“If somebody goes and knocks off a 7/11 and steals 200 bucks or 20 bucks, they’re arrested that day if possible and locked up immediately. Whereas in this case, it appears that someone has absconded with over $100 million, and they’re still out free walking amongst us. I understand why that is so frustrating,” says attorney Andrew B. Jones.
“When you have a case that involves potentially several years of transactions, the FBI wants to dig as deep as possible and build a bulletproof case… these prosecutions don’t happen overnight.”
In the meantime, legislators are working to protect Hoosier business owners in the future. A bill from Indiana State Sen. Linda Rogers is directly inspired by the alleged actions of Najeeb Khan.
“Well last year when IOI ended up going bankrupt, there was significant dollars lost to local employers, actually all over the country. So a lot of my constituents, a lot of people from the community unfortunately lost many thousands, some of them millions of dollars,” Sen. Rogers tells us.
There are around 7,000 businesses in the same boat as Lasalle Grill, and the timing couldn’t be worse as the pandemic has also hurt their operations.
Mcdonnell, jones, and other business owners hope they can get their money back in bankruptcy court from Khan’s liquidated assets.
Still, Khan has not been charged with any criminal offenses at this time.
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