Financial scandals in the payroll processing industry in recent years have followed a similar thread.

Clients find out money that was supposed to be set aside for taxes has gone missing, and unpaid to the Internal Revenue Service and state agencies. An executive at the payroll firm is accused of stealing the money. Questions swirl about where the money went as companies scramble to settle their tax debts.

The current scandal at Elkhart-based Interlogic Outsourcing, Inc., has followed the same pattern, though at a larger scale: the alleged fraud could exceed $90 million.

And the case has put a new spotlight about how and why an industry that handles so much client cash is largely unregulated.

The owner of IOI, Najeeb Khan, hasn’t been charged but his wife said in a recent legal filing that she expects him to be indicted “imminently.” He has been accused of a fraud that has left clients nationwide with missing tax withholding money — some fearing that hundreds of thousands of their dollars are missing.

Previous cases of fraud in the payroll industry have shared many of the details now emerging in the IOI scandal.

• Last year, a payroll processing company owner in Pennsylvania was sentenced to 15 to 30 months in state prison after pleading guilty to stealing $6 million from more than 250 clients. The owner, William Sullivan, made false entries into tax-tracking software and then manually reversed them to make it look like the money had been sent to taxing authorities.
Copyright © 2020, South Bend Tribune