Thousands of business owners who lost money in an alleged fraud scheme linked to businessman Najeeb Khan and his former Elkhart-based payroll company could start getting their money back at a better-than-expected rate.
Under a repayment plan filed recently by the trustees managing Khan’s bankruptcy, the vast majority of his creditors would get at least 65 cents on the dollar and could be repaid in full from his fortune, which some estimates have valued at more than $90 million.
The liquidation plan, which is subject to a vote by creditors and permission from a federal bankruptcy judge, appears to be headed for approval as soon as the end of April.
The creditors have until April 14 to vote on the plan, and a confirmation hearing is scheduled for April 26 in U.S. Bankruptcy Court for western Michigan.
The approval of the plan wouldn’t mean the end of the saga, as Khan still faces potential criminal charges for the case involving Interlogic Outsourcing Inc., and the bankruptcy managers are still investigating whether other people share blame for the alleged scheme.
But it would represent a big win for the thousands of creditors, many of them small businesses, who were left on the hook for unpaid withholding taxes after Khan allegedly skimmed the money.
“The victims could be getting 100 percent of their money back,” said Andrew Jones, a South Bend attorney who represents more than 80 of Khan’s former clients with claims totaling $2 million, including several local businesses. “It’s a miracle we are where we are.”
The repayment plan calls for the single biggest creditor, KeyBank, to get 60 percent of Khan’s fortune, while the remaining 40 percent would be divided among the smaller creditors.
Click here to see the full report from Christian Sheckler in the South Bend Tribune.
Jones said Khan’s former clients should be thrilled with the prospect of recovering even 65 percent of their losses because such creditors typically get pennies on the dollar in fraud cases.
“I’ve relayed it in really positive ways, and my clients have responded unbelievably enthusiastically,” Jones said. “The odds of it being approved are beyond overwhelming.”
The plan hinges on a concession by KeyBank, which accounts for about 80 percent of the total claims against Khan and would normally get priority because it owns collateral on Khan’s assets, unlike the smaller “unsecured” creditors.
