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Elkhart-based payroll company seeks bankruptcy protection

ELKHART, Ind. (AP) — An Elkhart-based payroll processing company has filed for Chapter 11 bankruptcy protection, blaming its financial woes on a "complex scheme" orchestrated by its founder.

Interlogic Outsourcing Inc. sought Chapter 11 protection in documents filed Saturday in federal bankruptcy court in South Bend. The move comes amid efforts to sell the Elkhart-based company, which handles payroll and other human resources services for thousands of clients nationwide.

The company is now led by consultants brought in to restructure the operation after its founder and owner, Najeeb Khan, resigned as CEO.

Khan stepped down last month after Keybank sued him and Interlogic in federal court in Cleveland on July 9, alleging fraud and breach of contract.

That complaint accuses Khan of fraudulently initiating $122 million in wire transfers through KeyBank without sufficient money to cover those transactions. KeyBank covered that money but has said that it stands to lose $90 million after taxes.

Interlogic's interim president, Daniel Wikel, wrote in the bankruptcy filing that the company and its six affiliates are seeking to financial assistance to keep the business, which employs about 200 people, running and providing services as it seeks a buyer.

Chapter 11 bankruptcies provide a way for insolvent companies to reorganize, stay in business and pay creditors.

Wikel's petition places the blame for the company's financial troubles and the massive overdraft on Khan. That overdraft has affected many of Interlogic's client companies, with some businesses seeing payroll delayed and others learning that their federal and state taxes were not being paid despite money being withdrawn from their accounts.

"Mr. Khan organized and orchestrated a complex scheme of deliberate financial mismanagement that now leaves the debtors in need of the protections of the automatic stay, and seeking a buyer through a structured sale process," Wikel wrote in the bankruptcy petition.

An attorney representing Khan declined to comment.

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