Litigation

More fallout from Koss fraud, but Michael Koss stays on Strattec board

By Tracy Coenen

The latest news related to the $31 million fraud committed by Koss Corp.’s ex-VP of Finance Sue Sachdeva is activity at Strattec. Laughably, Michael Koss was the chairman of Strattec’s audit committee since 2003. In January, he was removed as head of that committee, but still remains on the board and on the audit committee. It’s interesting that Strattec didn’t announce the developments related to Michael Koss anywhere, and we’re only finding about it now because Journal Sentinel reporter Cary Spivak started asking questions.

So Koss was removed as audit committee chairman but remains on the board and on the audit committee. I think it’s time for the Strattec board members to ask themselves a serious question: If Michael Koss didn’t care enough about his own company to pay attention to the financial statements, what makes you think he’ll pay attention at Strattec?

I’ve been more than happy to publicly state that Michael Koss and the rest of the executives were asleep at the wheel while Sachdeva was stealing at least $31 million from them in a fraud scheme that lasted over five years.  And amazingly, the executives don’t seem to have plans to change much in wake of the fraud, as they stated in their most recent 10-Q (bold added by me):

Although numerous actions were taken beginning in late December 2009 following the discovery of the unauthorized transactions, including changes relating to the Company?s banking procedures and certain other internal policies and procedures, as well as the other actions described in the Explanatory Note, the Company implemented no formal changes in the Company?s internal control over financial reporting during the Company?s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company?s internal control over financial reporting.

The company hasn’t said anything regarding how the fraud was actually carried out or covered up, but they have detailed how much was stolen each year.

Why do you suppose they haven’t provided any details about how the theft occurred? My suspicion has been that they are going to look like complete idiots because the fraud and the cover-up were carried out in a very simple way.  I doubt that this was some elaborate scheme by Sachdeva. My guess is that she had a simple method and anyone with an ounce of brains in the C-Suite should have caught on quickly.

So back to Strattec… Michael Koss didn’t care enough about his own company to have his auditors or any other professionals do any additional work related to internal controls, which likely would have stopped Sachdeva’s fraud much earlier. Why do you think he’ll care about your company?

It’s not like Strattec isn’t looking out for it’s own interests. The company just fired Grant Thornton as its audit firm. I highly doubt that decision was made independent of the troubles Grant Thornton is having because of the Koss fraud. So why leave Michael Koss on the board of directors, and specifically on the audit committee?

Michael Koss is a clown. He does not belong on the board of directors of any company. He needs to be minding his own company, and until he can clean things up there, he should not be allowed to go outside and play.

Full post as published by The FRAUDfiles Blog on March 04, 2010 (boomark / email).