FORT WAYNE, Ind. (WANE) — The bank that blew the whistle on a massive check-kiting scheme strongly rejected accusations made in a federal bankruptcy court that it was involved in, or knew of, the crime.
Warsaw-based Lake City Bank and four of its officers were named in the suit filed in the U.S. Bankruptcy Court, Western District of Michigan, Southern District, stemming from the collapse of payroll company Interlogic Outsourcing Inc. (IOI) of Elkhart in 2019.
The company also had an office near Ludwig Road in Fort Wayne.
IOI owner Najeeb Khan, 69, of Edwardsburg, Michigan, was charged with operating a long-running check-kiting scheme that caused a financial loss of nearly $150 million to businesses around the country and KeyBank, headquartered in Ohio.
According to a release from U.S. Attorneys in Ohio, “In a check-kiting scheme, checks are continually written back and forth to fraudulently inflate account balances deceiving banks into honoring checks written with insufficient funds.”
Khan, who was widely admired as a philanthropist and successful businessman who lived a lavish lifestyle, pleaded guilty in federal criminal court in Cleveland on Jan. 12.
Now, the bankruptcy court is trying to claw back some of the losses by targeting the $13 million Lake City made over nine years through “uncollected funds fees” paid by IOI.
Lake City Bank President and CEO David Findlay rejected any hint of impropriety.
“Unfortunately, the good thing we did in terminating this kite...
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