Koss Gets Ripped Off

This story has me fascinated on a number of levels.

The alleged embezzlement from Koss Corp. may be far greater than was first apparent, with the company saying late Thursday that “unauthorized transactions” over the last four years could exceed $20 million.

The firm’s longtime vice president of finance already stands accused of stealing $4.5 million from the small, publicly traded maker of stereo headphones over three months this fall and covering her tracks by falsifying balances in Koss’ bank account.

Now, the company’s continuing internal investigation indicates that the unauthorized transactions may extend as far back as fiscal 2006 and amount to more than $20 million.

Koss said Thursday it has fired Sujata “Sue” Sachdeva, the executive accused of embezzlement. Two members of the accounting staff who served under her have been suspended without pay, the company said.

Sachdeva, who is accused of spending millions on expensive clothing and jewelry, including more than $1.3 million over two years at a single Mequon boutique, told FBI agents that she directed her assistant to make fraudulent wire transfers - paying down her credit card balances out of Koss’ bank account, according to the complaint.

First off is just the amount… possibly $20 million was taken from a company that only makes about $38 million per year.  The theft possibly constitutes the entire net earnings of the company for four years.  Which leads us to the next conclusion… the internal financial controls at Koss were non-existent.  The value of the stock over the past few years has been a total fantasy. 

The second thing that strikes me is the people involved.  This isn’t the widow book keeper who blew $50k at the dog tracks and needed the cash.  The Sachdevas would be considered well off by most standards.  The story doesn’t reveal what the husband made, but as a head honcho at Children’s Hospital and a law professor, it is probably pretty substantial.  She was comfortably making six figures.  They aren’t the super rich, but are certainly middle-upper class or higher.  It seems that one of two conclusions are most likely.  Either Sue Sachdeva is a kleptomaniac, or she was traveling in circles above herself and wanted to be like them.  In either case, she’s a wretched woman to rip off her company that had provided her a job and social status for the past 15 years. 

The last thing that makes me curious is what did the husband know?  How could he not see how much money was slushing around?  Did he know or was he so absorbed with his own work and such that he was oblivious?  For all we know, this couple led separate lives and showed up at parties together.  But if I were the FBI, I’d be looking at any budget he had control of too. 

In any case, I feel bad for Koss’ employees and shareholders.  They are going to get hosed through no fault of their own.  The company might not survive this.