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. 

1. This was topic #2 at the x-mas gatherings I was at after healthcare.

   Maybe some people who work for big accounting firms can chime in.  How does Grant Thornton, the auditors not figure this out?

   Unlike Madoff, who had a one-man CPA firm who was in on the fraud, something of this magnitude relative to the small size of Koss would be hard to miss for a major accounting firm.  (unless somehow a Koss family member was in on it, but even then it would be hard)

   And what about the merchants?  That boutique in Mequon that sold $1.3 million to her last year.  Wouldn’t that have been 50 to 90% of that store’s total annual sales?  Don’t they ask questions?

   This story is fascinating on many levels.

   Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 1210 hrs




2. Very much like our own Government. The pigeons are there to be taken advantage of and there is always someone who will.

   Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 1317 hrs




3. And what about the merchants?  That boutique in Mequon that sold $1.3 million to her last year.  Wouldn’t that have been 50 to 90% of that store’s total annual sales?  Don’t they ask questions?

   If I were the merchant, I’d probably wonder about it, but I probably wouldn’t ask questions.  Hey—some insanely rich woman wants to come and be my shop’s chief patron?  Fine with me.  I don’t know that a shop owner would have a moral duty to acsertain the source of the income being spent by their customers.
    
   I do wonder if Koss will try to force these merchants to eat some of this.  If you’re some little independent business owner in Mequon, and Koss’ 16 lawyers show up and notify you of their intention to tie you up in court for the next five years over it, maybe you decide to avoid the trouble and negotiate some kind of settlement.  But I’m sure the shops have already paid their vendors for the product and spent the profits.  A buyback of the merchandise, even at 50% of original retail, could put one or more of them out of business.

   Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 1332 hrs




4. Koss is also at fault for not having any internal controls.  Even some, should have detected the fraud.  It sounds like she bought tons of clothes and stored them somewhere and never wore them.  Koss should begin immediate legal proceedings to freeze the couples bank accounts and begin trying to recover the money.  I think the company will be lucky to stay in business.

   Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 1423 hrs




5. Is she even an American citizen? Seems like an awful lot of non-citizens are holding positions of authority in “American” companies these days.

   Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 1602 hrs




6. I’m guessing the vendors are in the clear, since you can’t be responsible for where your customers get their money so long as it’s reasonable to assume it’s legal funds. The only real exception is if you accept counterfeit Monopoly Money (that’s what we call U.S. currency nowdays) and your bank spots the fakes.

   I’m also going to guess that, being married, her hubby is on the hook for any and all bills she incurrs - the downside of marital property and debt.

   I like Koss products, and I hope they get their money, either out of these two birds or via a lawsuit against the auditor’s insurance company.

   Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 1612 hrs




7. Accounting fraud goes on in many companies - but obviously not to this scale. I am also amazed at the level of the fraud. Koss is not a billion dollar company. We are talking over 50% of their earnings in one year - taken over several years.

   Any accounting firm worth their salt is going to tell you how to set up your accounting department if you even hint at asking. I wonder how many clients Grant Thorton will lose from this? They were clearly asleep at the switch - as well as the CEO. Plenty of blame to go around here.

   This will be in the courts for a long time.

   Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 1634 hrs




8. Is she even an American citizen? Seems like an awful lot of non-citizens are holding positions of authority in “American” companies these days.

   WTF? Way to suddenly bring xenophobia into the conversation.

   Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 1800 hrs




9. WTF? Way to suddenly bring xenophobia into the conversation

   Really?

   His question did not express fear, nor hatred of foreigners. Learn the definition of the word before you start race baiting.

    

   That said, the question has no bearing on the issue either.

   
   I worked for a store in that mall for some time, and Mrs. Sachdeva was a very good customer of ours as well. She holds a position of some notoriety and her husband is a well regarded physician (I believe)... There was never any reason for us to question her spending habits, but we all knew who she was.

   I am utterly astounded at this revelation. With the volume of cubic dollars she was taking and spending, the notion that Koss could have missed this for so long is almost ridiculous. If the 20 million number is correct, there need to be lots of heads rolling over there. The evidence of abject incompetence at that company couldn’t be more clear, this goes beyond being just a crime, it is an embarrassment.

   Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 1815 hrs




10. It makes you wonder if the money was being used for illegal purposes. Perhaps the retailers were a vehicle to send it through.

    Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 1833 hrs




11. This will be in the courts for a long time.

    I agree, and if it were a Fortune 100 company, we’d be looking at SOX 2.0 to be an end result at some point in the future.  Since it’s no where close, nothing much other than print will result.

    Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 1840 hrs




12. Scott, what makes you think that she is not an American citizen? Is her brown skin and “foreign sounding name” the reason why you suspect why she may be non-US citizen. For your information, there are lot of brown skinned and people with “foreign names” who are American citizens. If this was a white woman, i doubt that this question about her nationality was going to asked. Perhaps there is a lot of jealousy involved when a person from immigrant background is able to attain high positions in this country. You also suspect whether Koss is an “American” company. Perhaps your definition of an American company is a company who only hires Caucasian people.

    Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 2026 hrs




13. So, to question anything now makes a person fearful, or “phobic” in your pathetic little minds?  The only thing I fear is that there is an epidemic of the brain dead like “no name, and Tim” who are giving this country away in the name of “political correctness”. If she is or isn’t an American certainly doesn’t minimize the severity of the crime, but it does make me wonder why an American (yes Tim, KOSS was created in America by an American) company would hire a non-citizen (and I haven’t learned whether this is the case or not because of selective reporting) over an American with the same qualifications? Yes I am so forward as to ask, just like you feel you have a right to think she need not be an American to hold the position. I give a damn if the question bothers you, your being a fikking, politically correct, anti American Liberal pansy bothers me. Tough, if I have to live with the likes of you, you learn to live with the likes of me, and yes, I’ll continue to ask especially if it bothers your sensitivities. Too many have stayed silent for too long, and this whole country is paying the price. There’s plenty wrong with what has become of this country, and every one of those problems can be traced back to Liberal policy and pusses like you two.

    Posted by (JavaScript must be enabled to view this email address) on December 26, 2009 at 2240 hrs




14. Husband knew?  I doubt it.

    You cannot name ONE husband who can tell a $100K dress from a $2K dress, can you?

    Posted by (JavaScript must be enabled to view this email address) on December 27, 2009 at 1222 hrs




15. Dumb, dumb comments by Scott(I-C).  You sound like a real piece of work, pal!

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 0949 hrs




16. Why RO, because I find you pieces of excrement to be disgusting liars? Don’t break your arm patting yourself on the back, your retort is no show stopper, it just re-enforces what I stated, another attempt to shut me up. State your case, or buzz off.

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 1010 hrs




17. Scott (I-C)- Please show us your Green Card.  I think you are taking valuable ranting time away from true blood Americans.

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 1109 hrs




18. The only “green card” I’ve ever had, or wanted was my military I.D. Where’s yours, or are you more of the clinton, obama type of American, which doesn’t really have much to do with “being” an American at all. Shouldn’t you be over at daily KOS justifying Napolitano?

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 1209 hrs




19. Twenty three years in the military and another ten in the intelligence community.  Of course your two years fixing trucks qualifies you…

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 1303 hrs




20. Oh, and I never go to Kos.  I am a very conservative southern democrat, a lot more conservative than some of the republicans up here.  I am just not a racist prick like you, but growing up in a military family and spending over 20 years flying will keep your mind out of the trailer park.

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 1306 hrs




21. Yeah John, you pegged me. Glad to see I’ve been on your radar long enough for you to have spent your entire career in (which I seriously doubt) intelligence keeping tabs on me to know everything about me.(Was it that unfortunate incident with the cook aboard ship that got me on your “watch list”?) Your Liberal angst is causing you to have fits, time for you to take a few meds and sit in your “quiet” room. By the way, how many confidential documents were you able to sell? Conservative Southern Democrat? Like in the fashion of “The South Shall Rise Again, or “Imperial Wizard” (or was it Grand Dragon?) Robert Byrd? 

    Racist? So worn out, and incidentally not true, but still better than being a brain dead, anti-American Liberal. Prick? Yeah OK, real classy. Is this supposed to make me take you seriously?

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 1441 hrs




22. May I suggest pistols at dawn?

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 1447 hrs




23. oh, you were in the navy, that explains it.  To much time away from port.  I spent 17 years flying, 6 in intelligence (23 years air force), and 10 in the intelligence community.  I had paid you no attention, until you spewed the racist xenophobic statement. 

    Thanks for proving my point with your last bit of drivel.

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 1521 hrs




24. Congratulations, Scott(I-C) for demonstrating conclusively to one and all that you are indeed a cosmic hemorrhoid!

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 1553 hrs




25. Now,now boys, where’s your “tolerance”, your compassion? Must I declare jihad upon America before I’m afforded those considerations? Surely the right Reverend Wright, Iranian President Ahmadinajad, or bin Laden himself wouldn’t be so demonized, but such charges coming from lying, thieving, Liberal hypocrites hold little weight in the real world so spew away, I’m sure those of like mind find “your” drivel quite amusing.

    John, if you’re the face of America’s intelligence community, it’s no wonder we’re in such dire straights, and I hope you realize 17 years of “acid trips” don’t actually qualify as flying. Your innuendo concerning America’s Navy, and those who serve aboard her ships are as moronic as your assertions of my alleged racism. For being in the court of the “enlightened” intelligentsia, you Liberals have proven yourselves pathetically incapable of any role other than jester. Spare me any further displays of your silliness.

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 1855 hrs




26. Scott, wipe the cheeto dust from your hands and step away from the computer. Fresh air does wonders for narrow-mindedness.

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 1943 hrs




27. jenny, jenny, jenny, you obviously wish to provoke, but unfortunately you lack the wit to attain arousal. You haven’t addressed anything of importance, just added your voice to the din of nonsensical blathering. Forgive me if I’ve offended you by calling out your fellows for their blatant ignorance. You wish to label me as “narrow minded”, but that is only because you are incapable of seeing the broader person who doesn’t fit your preconceived notion of who and what people are “supposed” to be. Who really is the one being narrow here?
    I don’t recall ever having an exchange with you prior to this, and if this is your best attempt at intercourse, let’s keep it that way.

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 2050 hrs




28. I at first thought Scott(I-C) was a sock puppet created to make us conservatives look bad, but I have come to the conclusion he is just a nutbag.

    I still have no idea why you asked if she was a citizen.  Why does it matter, she stole $20 million.

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 2204 hrs




29. I am not sure wait I said in this thread that would allow you to come to conclusion you did about my abilities or what I even do.  But hey, continue your delusions, because of course anyone who does not agree with your warped xenophobic view of life must be a pot smoking hippie who wants to destroy this country.  Oh, and by the way sailor, it’s Colonel.

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 2217 hrs




30. Why is it important terror suspect Abdulmutall is from Nigeria, or that Bernie Madoff is Jewish? Could it be because it’s part of the story? Has it become intolerable for someone to ask questions now? Like I said, it’s selective reporting, and for simply asking the question I’m labeled racist. Seems a little over the top to me, but I guess in our brave new politically correct America it’s only a pertinent question if a reporter asks. I’m not going to justify everything I question just to satisfy people who have nothing better to do than nit pick everything they “feel” is racist. If you people are too stupid to see the question for what it is, or feel you need to spin it to suit your own prejudices that’s your problem. I won’t be intimidated, or kowtowed to silenced. The first amendment is alive and well, at least until you jelly spine cowards give that up too.

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 2259 hrs




31. If Scott(I-C)‘s brain were placed on the edge of a razor blade, it would be like rolling a marble (and a small one at that) down I-94.

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 2300 hrs




32. I had heard, but never really believed political correctness had insidiously permeated our military, Colonel. I stand corrected. Surely you can’t be so clueless as to not know what you posted that put me on the defensive, but if that is indeed the case my conclusion as to your cognitive abilities is spot on.
    Xenophobic, racist, catch phrases straight out of Alinsky’s Rules For Radicals to shut down those who refuse to get in lock(or maybe more accurately, Goose) step with the Liberal’s agenda.
    I won’t apologize for loving my country, or for vocalizing what I think is wrong. I’m not under your command Colonel, and if you think what you’re trying to do to my right to speak my mind is what your time in the military was about, you’re no more a loyal American than Fort Hood’s Major Hasan.

    Posted by (JavaScript must be enabled to view this email address) on December 28, 2009 at 2350 hrs




33. Clever RO, you are definitely the master of the analogy, but do you have anything of “substance” to contribute?

    Posted by (JavaScript must be enabled to view this email address) on December 29, 2009 at 0000 hrs




34. Never read Alinsky, but I did read a lot of Greek philosophers at the War College in Carlisle.

    Posted by (JavaScript must be enabled to view this email address) on December 29, 2009 at 2124 hrs




35. This, however, is not a thread about the terrorist from Nigeria.  This is a thread about a woman who stole $20 million from Koss.  It is not relevant whether she is a citizen or not, and I suspect she is, and the fact that you asked it shows your thought process.

    Posted by (JavaScript must be enabled to view this email address) on December 29, 2009 at 2127 hrs




36. Well I’ll give you one thing Colonel, when you fixate you’re as relentless as a Pit Bull. I can see you’re well schooled in the art of manipulation and anything I post is going to be twisted, so realizing this discussion has become redundant and has no chance of advancing past that, my only recourse is to no longer engage you. Have a good day Colonel, it’s been a slice.

    Posted by (JavaScript must be enabled to view this email address) on December 30, 2009 at 0043 hrs




37. Thanks John.  Both sides have their nuts, the left nuts make me angry, the right embarassed.  I think I prefer angry.

    Posted by (JavaScript must be enabled to view this email address) on January 03, 2010 at 1544 hrs




38. Yes guys like ScottI-C are an embarrassment and allow people paint conservatives as wackjobs.

    Posted by (JavaScript must be enabled to view this email address) on January 03, 2010 at 2005 hrs