Milwaukee is a blue-collar industrial city. It is not known as a center of financial fraud. That changed with the arrest and conviction of Sujata Sachdeva, former vice president of finance for Koss Corp.Koss is a manufacturer of stereo headphones headquartered in Milwaukee. While stories of insider fraud are nothing new, the magnitude of the Sachdeva’s theft makes this story a tale worth telling.
According to Koss’ annual report, the company had net sales last year of $41.7 million. Ms. Sachdeva was convicted of embezzling $34 million.In other words, over a few short years, Sachdeva stole almost as much money as the company made in a year.
Because Koss is a public company, its books and records are audited yearly.Notwithstanding the huge embezzlement, no one seemed to know that tens of millions of dollars went missing. Not the CEO, not investors and not even the company’s auditors, Grant Thornton.
According to their website, Grant Thornton is one of the largest accounting firms. They claim to understand “how important audited financial statements are to business, shareholders/owners, lenders, investors and other stakeholders.” They also say, “We consider it our job to keep our clients informed all year long of accounting, financial and regulatory developments that may impact their business.” Koss says that Grant Thornton failed in its mission and has filed suit against them.
If not by the auditors, how did Sachdeva get caught? She was caught after a security officer at American Express noticed she was using company wire transfers to pay her staggering credit card bills.
The stolen money was spent primarily on shopping – clothes, shoes and jewelry. According to federal prosecutors, she spent $1.4 million at one women’s boutique alone.
Sachdeva was just sentenced to 11 years in a federal prison.With good time, she will be eligible for release in about 9 years.
At sentencing, her lawyers argued for leniency.According to published press reports, one of her lawyers said she was driven to steal by a “compulsive shopping disorder.”Apparently she had so much stuff that she needed to rent storage facilities because there was no room left in her house.
U.S. District Court Judge Lynn Adelman wasn’t easily persuaded. He did show some leniency, however, because of her cooperation and remorse.
Because Koss is a public company, many people were hurt by her actions. Thousands of shareholders, some of them pension and retirement plans, saw their stock plummet by 50% in the wake of the embezzlement. Employees were denied profit sharing bonuses. A few corporate accounting people lost their jobs. And lawsuits will probably linger for years.
Mahany & Ertl is an asset recovery and fraud recovery law firm concentrating in a wide array of fraud, tax and professional malpractice issues. We help individuals and businesses who are victims of fraud including embezzlement, insider theft, employee dishonesty and securities fraud. We also help collect court judgments where the assets are hidden or protected by phony trusts or corporations.
Call Brian Mahany at (414) 704-6731 for more information or visit our website at http://www.mahanyertl.com. Comments and questions are welcome