NEW YORK - An American businessman of Pakistani origin, who faces charges of bank fraud after he allegedly wrote a series of bad cheques totalling $82 million within a period of two weeks, is trying to arrange a plea bargain with federal prosecutors, according to a media report.
Saquib Khan - the owner of Richmond Wholesale Company, a Staten Island firm that supplies cigarettes, candy and drinks to bodegas, delis, which sell a variety of sandwiches and other food products, and newsstands across the city - was arrested in December and is free on $500,000 bail.
Khan wrote the cheques after Hurricane Sandy had devastated his businesses, leaving him unable to pay his bills, The New York Times said in an in-depth piece.
According to the report, “Mr Khan saw one way out, federal prosecutors said: He wrote hundreds of checks to himself, then raced across the city from bank to bank to deposit them in accounts under his name or those of his businesses.
“It was one of the largest check-fraud schemes anywhere in the country in recent years,” the Times said, citing the complaint against Khan and interviews with fraud experts.
“This is an era in which thieves steal millions with the click of a mouse. But Mr Khan is accused of carrying out a low-tech fraud that has unexpectedly exposed holes in the security of the banking system,” the Times said. He took advantage of the willingness of banks to allow some customers to overdraw their accounts temporarily, prosecutors said.
The criminal complaint also sheds light on Khan, an immigrant whose life of operatic twists has wound through tribal Pakistan, Staten Island strip malls, fund-raisers for Hillary Rodham Clinton and underground gambling halls, according to the Times.
The banks have recovered most of the $82 million, officials said. More than $11 million of the money that Khan withdrew is now frozen in an account to be distributed to the banks to help repay their losses, his lawyer said.
“It appears he spent at least $2 million of the money before he was arrested on Dec 13, the Times said, citing interviews and the criminal complaint. But his lawyer said that Khan was only trying to save his business, and that he was working hard to pay back the banks.
But the Times said even experts were taken aback by the accusations. “It blows my mind,” said Frank Abagnale, the celebrated con man who inspired the Steven Spielberg movie ‘Catch Me if You Can’ and now works as a fraud-detection consultant.
“That’s way, way out there,” Abagnale was quoted as saying.
Khan, 51, comes from a prominent family in Pakistan — relatives, according to the Times, said he was a favourite nephew of Bashir Ahmad Bilour, a well-known politician who spoke out against the Taliban. Bilour was killed in a suicide attack in late December.
Trained as a doctor, Khan came to the United States in the 1980s, but ended up working with his sister and her husband, who owned some two dozen delis across Staten Island, the report said. From there, Khan set out on his own, building up Richmond Wholesale Company, the cigarette and grocery business that recorded $125 million in sales last year, according to Dun & Bradstreet, a financial information provider. Richmond Wholesale supplies products to delis and gas stations across the New York region. Khan also owns three delis.
Khan, until recently the chairman of the board of a prominent Staten Island mosque, was known in the borough’s close-knit Pakistani community as a flashy businessman, the report said. He once had a mansion in the Todt Hill neighbourhood and drove a Mercedes with a licence plate that read ‘SKHAN’.
He was also a generous supporter of politicians of both major parties, giving more than $65,000 to more than 40 campaigns in the last decade, including those of Mrs Clinton, former Representative Anthony Weiner, former Governor Eliot Spitzer and former Governor George Pataki.
His friends, according to the Times, said that while he reveled in his achievements, he was also a hardworking entrepreneur who built a life for himself deli by deli. “I’d rather be working in my store,” he said in 2010. “I’d rather be doing my daily business.” That comment, though, hinted at the dark side of his success, the Times said. He made it while testifying at a mob trial.
As he rose in the business community on Staten Island, he developed a close relationship with a soldier in the Genovese crime family, John Giglio, also known as Johnny Bull or Fat John, according to the court testimony.
Khan testified that he had used that connection to pressure at least one reluctant deli owner to sell his business to him.
Through Giglio, Khan said he met other high-ranking organised crime figures in gambling halls, though he was never charged in connection with these relationships. (Mr Khan’s testimony came at the trial of Anthony Antico, who was convicted of racketeering.) Prosecutors who put together the recent criminal complaint against Khan said his fraud was an outsized version of a familiar swindle — check kiting — in which the thief takes advantage of the time it takes for banks to clear checks.
The thief deposits inflated checks and then quickly transfers the money to another account before the checks bounce.
Hurricane Sandy hit Staten Island particularly hard, leaving Khan desperate to recoup business lost during power failures and worse, his lawyer, Sharon McCarthy, said.
“All he was trying to do was run his business and pay his employees,” Ms McCarthy said. “He did not intend to hurt any of these financial institutions.” The transfers and withdrawals are complicated, but suggested a simple plan: he deposited worthless checks and withdrew real money — tens of millions worth, according to the criminal complaint.
Over two weeks in November, he wrote hundreds of checks to himself, more than a dozen a day, drawing from accounts at about six banks, the complaint said. The pattern of precise amounts — $886,841, then $874,532, then $461,232 — was an indication of fraud, experts were cited as saying.
The pace grew increasingly frantic. He deposited $49 million worth of checks into accounts at Capital One, a mix of legitimate ones from vendors and fraudulent ones written to himself, according to court records and interviews.
The bank made those funds available without waiting for the checks to clear. That turned his fictions into millions, allowing Khan to transfer $42 million into accounts at other banks, according to a lawsuit that Capital One filed against Khan’s company.
He then withdrew and transferred more money to other accounts as the fake checks kept piling up. He wrote checks worth $82 million that did not “appear to have had any legitimate purpose other than to support the ‘check kiting’ scheme,” the criminal complaint said. Ms McCarthy, Khan’s lawyer, called the $82 million figure “an artificial number” that represented the amount of overdrafts, but not the banks’ total loss.
Soon, auditors at some of the banks — including Capital One, M & T Bank and Flushing Savings Bank — realised what was going on.
Ms McCarthy said Mr Khan blew the whistle on himself, alerting the banks that he had withdrawn far more than was in his accounts and planned to pay it back.
The banks declined to comment, and several civil lawsuits against Khan are pending.
His friends on Staten Island said they were shocked by the accusations, and described him as a humble man who was always on the job.
“If you had called him when he was doing cigarette wholesale, he would arrive there at 5 a.m. and be there until 8 p.m.,” one of them, Suhail Muzaffar, was quoted as saying.
Khan’s arrest has also caused turmoil at the mosque where he was chairman, Muslim Majlis of Staten Island. He resigned late last month.