A West Chester, Pennsylvania, company in the same business as the Elkhart payroll processor, Interlogic Outsourcing, Inc., bought it out of bankruptcy for at least $3.5 million earlier this month.
Interlogic was providing payroll and human resources services to clients nationwide. PrimePay, LLC announced Oct. 10 it had hired IOI’s employees and acquired part of its property as well as its client base and intellectual property.
A purchase agreement filed with the U.S. Bankruptcy Court for the Northern District of Indiana showed the closing price could be followed by additional payments of $500,000 and $300,000, depending on revenue generated by the acquired clients.
“We are excited to bring renewed energy, stability and opportunity to IOI’s loyal clients and dedicated employees,” PrimePay CEO Bill Pellicano said in a statement.
“By joining a nationwide family, employees have an opportunity to grow and continue building their careers,” he said.
“For clients, we will be bolstering the high-quality service they’ve come to expect while offering to them valuable resources and an additional suite of services. And for the Elkhart business community, we are looking forward to joining you.”
With 600 employees serving more than 40,000 clients, PrimePay has been in the payroll processing business since 1986.
“We work diligently to be a reputable, dependable partner whom business owners can trust,” Pellicano said.
“We understand that there have been challenges with IOIPay’s ownership, and it is our promise to guide their clients through this transition as easily as possible, and to develop a longstanding relationship.”
IOI and related entities were being sued for fraud along with Najeeb Ahmed Khan, their owner at the time, by a KeyBank subsidiary when the company filed Chapter 11 bankruptcy in August.
Court documents showed IOI estimated its assets exceeded $1 million and were up to $10 million, and its liabilities exceeded $10 million and were up to $50 million. It estimated it had more than 5,000 and up to 10,000 creditors.
Khan, of Edwardsburg, Michigan, filed Chapter 11 bankruptcy Oct. 8 in the U.S. Bankruptcy Court for the Western District of Michigan and estimated his assets at $50 million to $100 million and liabilities at $100 million to $500 million. He estimated he had less than 100 but at least 50 creditors.
IOI Payroll Services, Inc.; TimePlus Systems, LLC; IOI West, Inc.; Lakeview Technology, Inc.; Lakeview Holdings, Inc.; and ModEarn, Inc. were among the related entities filing with Interlogic for Chapter 11 bankruptcy protection.
KeyBank National Association, which is owned by Cleveland-based KeyCorp, filed a lawsuit against Interlogic and Kahn that sought $122 million and alleged fraud July 9 in U.S. District Court for the Northern District of Ohio.
Federal Deposit Insurance Corp. records show that in Business Weekly’s reading area, KeyBank National has eight offices in Elkhart County, two offices in Kosciusko County and an office in Steuben County.
Kahn was IOI’s sole director, and the suit came as a surprise to the company, according to a July 25 announcement on the Interlogic website, www.ioipay.com.
KeyBank had provided financial and cash management to Interlogic since 2008, according to the bank’s allegations in the case, which also named Kahn principal owner of the company.
KeyBank alleged Kahn also owned or controlled TimePlus Systems, LLC, and IOI Payroll Services, which operated out of the same Elkhart location as Interlogic.
On July 3 and 5, “Kahn caused TimePlus and IOI Payroll to issue a series of checks payable to Interlogic drawn from their bank accounts with Lake City Bank in Warsaw,” the complaint alleged.
Kahn then caused Interlogic to deposit those checks in its KeyBank accounts, and on July 8 directed the bank “to issue 41 separate wire transfers to various entities through three different banks: Berkshire Bank, Wells Fargo and JP Morgan Chase,” it alleged.
The amount of the wire transfers came close to $122 million. But, at the time the checks were issued to Interlogic, there was insufficient funds to cover them in the TimePlus and IOI Payroll accounts at Lake City, and Kahn knew it, the complaint alleged.
KeyCorp warned shareholders in a July 16 filing with the Securities and Exchange Commission that it had discovered fraudulent activity associated with transactions of a KeyBank National customer, and was investigating the situation to determine the bank’s exposure.
At the time of the filing, KeyCorp estimated the exposure could get up to $90 million, net of tax.
The company was scheduled to release its third-quarter financial performance figures Oct. 17.