Koss Claims Auditor Overlooked $30M

CHICAGO (CN) - Koss Corp., the headphone maker, claims that its auditor, Grant Thornton accountants, failed to detect that a vice president of finance embezzled $30 million. Sujata Sachdeva vacuumed up the money for 4 years and is facing criminal charges, according to the complaint in Cook County Court.

Grant Thornton audited Koss' books from June 2004 to June 2008, when the embezzlement occurred, according to the complaint.

Sachdeva, who had worked for Koss since the 1990s, used cashier's checks, traveler's checks and manual checks from company accounts to pay personal bills and withdraw cash, Koss says. Sachdeva even had cashier's checks issued to high-end retailers such as Nieman Marcus, Sachs Fifth Avenue and Valentina, Koss claims. Sachdeva also paid millions of dollars on her personal credit card account using cashier's checks from Koss' account at Park Bank, and through wire transfer from its account at LaSalle Bank, according to the complaint.

Yet Koss says that Grant Thornton repeatedly assured it that its financial controls were satisfactory.

"Had Grant Thornton properly performed its audit and review responsibilities beginning with the July 1, 2003 to June 30, 2004 fiscal year and continuing through fiscal year 2008, defendant Sachdeva's embezzlement would have been discovered and Koss would have avoided all or substantially all of its financial losses, which total in excess of thirty million dollars," according to the complaint.

Koss says it did not discover that Sachdeva was stealing from the company until December 2009.

Sachdeva was arrested after an FBI investigation and is facing criminal charges for fraud and embezzlement, according to the complaint.

Koss demands damages from Grant Thornton for negligence and from Sachdeva for fraud and breach of fiduciary duty.

Its lead counsel is Joseph Power Jr. with Power Rogers & Smith.

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