Legal News

Koss Executive Accused of Embezzling Company Funds to Pay Off Shopping Spree

By WSJ Staff

WSJ reporter Susan Carey delivered this post from the Chicago bureau:

An alleged $4.5 million personal shopping spree by Koss Corp.'s long-time vice president of finance has resulted in a criminal complaint being filed against her by the U.S. Attorney's office in Milwaukee.

The government alleges Sujata Sachdeva embezzled company funds to pay off her personal American Express credit-card charges for the purchases of furs, jewelry, apparel and home décor.

Sachdeva, Koss's finance executive, principal accounting officer and corporate secretary since 1992, was put on unpaid administrative leave pending the company's investigation of the alleged unauthorized transactions, the company said this week.

Chief executive Michael J. Koss declined to comment beyond the contents of a brief press statement Monday. Sachdeva–who was 45 years old at the time of Koss's annual report for the year ended June 30 was filed with the SEC — couldn't be reached for comment. One of her attorneys, Michael Hart of Kohler & Hart of Milwaukee, said a court hearing has been set for Jan. 11 in U.S. District Court in Milwaukee.

American Express brought the alleged scheme to light. According to an FBI affidavit filed in federal court this week, Koss, the CEO, was recently informed by a security officer for American Express that the charge-card issuer noticed a customer's personal account balances were being paid down via "numerous large wire transfers that were originating from a Koss Corp. bank account." An American Express spokeswoman declined to comment.

According to the affidavit, Koss entered Sachdeva's office and found numerous American Express credit-card statements in her name. He also found "several large piles of women's clothing, with the price tags still attached." Some of the items were priced at more than $2,000, according to the affidavit.

Koss personnel determined that between Sept. 2 and Nov. 25, wire transfers totaling more than $4.5 million were made from a Koss bank account to a bank account maintained by American Express, the affidavit said. All of the wire transfers were used to make payments on personal American Express accounts in Sachdeva's name.

FBI agents went to Sachdeva's residence in Mequon, Wis., on Monday. According to the affidavit, she told them she had been using her position at Koss to authorize wire transfers from the company's bank account to pay her American Express bills. She said she carried out the scheme on her own, directing her assistants to make the allegedly fraudulent wire transfers, then falsifying the balance in the Koss account herself to conceal the transfers.

According to the affidavit, Ms. Sachdeva shopped extensively at high-end shops in the Milwaukee area, but also amassed bills from a formal-wear store based in Los Angeles, a jewelry store in Houston, a luxury watch retailer based in Brooklyn, N.Y., and a bridal salon in Whitefish Bay, Wis.

Sachdeva's fiscal 2008 compensation, according to an SEC filing, was $206,462.

Full post as published by Law Blog - WSJ.com on December 23, 2009 (boomark / email).