Sujata “Sue” Sachdeva pleads Guilty and agrees to $34 million in Restitution!

July 29, 2010

From SIFY News:

A former Indian-American executive faces up to 20 years in jail after pleading guilty to stealing $34 million from stereo headphone manufacturer Koss Corporation for her ‘irrational and excessive buying sprees’.

Sujata Sachdeva, 46, a former vice president of finance at Koss Corporation, pleaded guilty to all the six counts of wire fraud, for which she was charged early this year, before a Milwaukee court in Wisconsin Tuesday.

US District Judge Lynn Adelman accepted her guilty plea to all six counts of felony fraud in connection with the federal government’s $34 million embezzlement case against her and set a sentencing date of Oct 22.

Each charge against Sachdeva carries a maximum penalty of 20 years in prison and a fine of $250,000. Each charge also carries a mandatory special assessment of $100 and a maximum term of supervised release to follow any term of confinement of up to five years.

She has also agreed to pay an estimated $34 million in restitution to Koss under a plea deal that calls for at least five years in prison, although prosecutors may recommend a much longer sentence.

Sachdeva has been free on a $50,000 signature bond since she was charged in December.

The government plans to auction more than 22,000 items of luxury clothing, shoes, jewellery, furs and art objects that Sachdeva bought with the stolen money. Koss will receive the proceeds of the auction. No date has been set for the online auction, which needs the approval of the court.

After the hearing, her attorney Michael F. Hart stood beside Sachdeva on the steps of the federal courthouse and read her statement, according to Milwaukee Sentinel Journal.

In it, Sachdeva, 46, said she most regrets the pain and public embarrassment she caused her husband and two young children. Ramesh Sachdeva, a paediatrician who is an executive with Children’s Hospital of Wisconsin, was in court Tuesday with his wife.

‘Ms. Sachdeva engaged in irrational and excessive buying sprees that escalated over time,’ the statement says. ‘When the bills piled up, she took money from her employer to pay for her purchases.’

‘A large portion of the funds were used to pay for items that Sue Sachdeva never possessed, clothes she never wore and items she never picked up.’

WHERE FROM HERE?

Well…this was a smart move on Sachdeva’s part.  Not only would her sentence have been worse if she had tried (like so many) to go to a jury trial, but the emotional stress would have been much more straining that it already is.  Likely, her prison sentence will be longer than the 5 years she is expecting, but shorter than the potential time she could face.

On the other hand, making $34 million in restitution…well I don’t see that happening, but?

YOUR COMMENTS ARE WELCOME!


Sujata “Sue” Sachdeva pleads not guilty by reason of a “Spending Disorder?”

February 4, 2010

With her attorney again signaling that he will mount a mental-illness defense, a former Koss Corp. executive pleaded not guilty Friday to accusations that she embezzled $31 million from her longtime employer.

Sujata “Sue” Sachdeva, 46, of Mequon, Wisconsin, pleaded not guilty yesterday to charges she embezzled as much as $31 million from Koss Corporation, a publicly traded head phone manufacturer where she had been employed as Vice President of Finance, Secretary, and Principal Accounting Officer. According to the indictment, Sachdeva authorized numerous massive wire transfers of funds from company bank accounts to pay for her American Express credit card bills and obtained cashier’s checks to pay for personal expenses, among other things. The scheme dates back to at least 2004, according to reports.

Michael F. Hart, her Attorney, said in a brief interview, “As this case proceeds . . . we intend to show that Ms. Sachdeva’s mental and emotional health played a significant role in her conduct.”

Asked whether that was the basis for Friday’s not guilty plea, Hart declined additional comment. Later, he issued a statement reiterating his remarks in the interview and added, “This is the beginning of an ongoing process, and our focus will be on the arguments we make in court. However, the issues of Ms. Sachdeva’s mental and emotional health are essential to this case.”

In court, Hart agreed to a new condition of release requested by prosecutors that prevents Sachdeva from disposing of assets that might be confiscated if she is convicted. According to the indictment, the government will attempt to seize her $800,000 Mequon home, her 2007 Mercedes Benz E350, a Hawaiian vacation timeshare and other assets if she is convicted.

The U.S. Marshals Service also is working to inventory approximately 22,000 items FBI agents gathered at the Sachdeva home and from local luxury stores and resale shops.

Several stores kept paid-for clothing in their storerooms for Sachdeva. She also sold thousands of dollars’ worth of merchandise through local resale shops, according to several retailers.  The government expects to sell the items, probably in an online auction, and return the proceeds to Koss.

Sachdeva also was ordered Friday to refrain from using alcohol and to submit to drug and alcohol testing.

If Sachdeva is convicted, she faces up to 120 years in prison plus fines, restitution and forfeiture of merchandise.

Her trial is scheduled for April 19th.

COMMENTARY:

I know there is a vast difference, but Sachdeva’s defense is a bit like the fellow who killed the abortion doctor – there is a justifiable reason?  Clearly stated…I am unaware that using a spending disorder as a defense has been successful in achieving a verdict of “not guilty”.   Certainly this case will be watched closely, as there are many white collar criminals who have either embezzled or created Ponzi schemes and lived lavish lifestyles who would welcome the opportunity to be found not guilty by reason of a “spending disorder.”  If this defense wins…I would suspect that Bernie Madoff would be regretting his guilty plea.

IF I were a betting man, I’d bet she’ll face time in prison…but?

YOUR COMMENTS WELCOME!


Sujata Sachdeva – Koss former Executive Charged in $31 Million Fraud – Mental Illness Likely Defense

January 21, 2010

United States Attorney James L. Santelle announced that a grand jury sitting in Milwaukee returned a six-count indictment charging Sujata Sachdeva (46) of Mequon, who is also known as Sue Sachdeva, with six counts of wire fraud.  Ms. Sachdeva is the former Vice President of Finance, Secretary, and Principal Accounting Officer for Koss Corporation, a publicly traded company located in Milwaukee, Wisconsin.

The indictment alleges that Sachdeva used her position at Koss to fraudulently obtain more than $31 million from Koss, which she used to purchase personal items and pay for personal expenses.  According to the indictment, Sachdeva authorized numerous wire transfers of funds from bank accounts maintained by Koss to pay for her American Express credit card bills.  In addition, Sachdeva used money from Koss’s bank accounts to fund numerous cashier’s checks, which she also used to pay her personal expenses.  Sachdeva used the money she fraudulently obtained from Koss to purchase personal items including women’s clothing, furs, purses, shoes, jewelry, automobiles, china, statues, and other household furnishings.  Sachdeva also used the money to pay for hotels, airline tickets, and other travel expenses for herself and others, to pay for renovations and improvements to her home, and to compensate individuals providing personal services to her and her family.

According to the indictment, Sachdeva sought to conceal her fraud by directing other Koss employees to make numerous fraudulent entries in Koss’s books and records to make it appear that Sachdeva’s fraudulent transfers were legitimate business transactions.  Sachdeva directed Koss employees to conceal her fraudulent transfers as well as the fraudulent entries in Koss’s books and records from Koss’s management and auditors.

According to United States Attorney James L. Santelle “this case is one of the largest embezzlement cases ever brought in this district, and demonstrates the ongoing commitment of this office and the FBI to investigate and prosecute white collar offenses”.
Each count of the indictment carries a maximum possible penalty of up to 20 years in prison and a fine of up to $250,000.  Sachdeva, therefore, faces a total maximum penalty of up to 120 years in prison and fines of up to $1.5 million, plus forfeiture of the items identified in the indictment and restitution.

WELL NOW WITH THAT ALL SAID…WHY?

According to her attorney, Michael F. Hart, Esq., principal in the law firm of Kohler & Hart, LLP, and a prominent criminal defense attorney in Milwaukee, one defense planned for Sachdeva is mental health. Hart is quoted as saying, “We intend to show that mental health issues played a substantial role in Ms. Sachdeva’s conduct.”

What kind of mental health issue(s) would he be referring to?  My guess…Compulsive Shopping Addiction or Spending Addiction.  The following is a reprint from a popular web site on the subject (the full article is here).

Most of us who suffer from compulsive shopping addiction (sometimes called spending addiction) are unaware of the problem. After all, everything around us seems to be saying, “Buy, buy, buy!” So…we do! We usually discover the problem only when we run out of money. Then, sadly, we think it’s an income problem. The problem isn’t income…it’s being out of control with the outgo. We addicts tend to spend money to compensate for areas in our lives where we are emotionally out of control or damaged. I’m sure the millionaire’s wife felt neglected for all the years he was pursuing his business goals while she was left with their several children to manage. The problem is triggered by emotion and shows itself as spending but we have to understand the cause of compulsive shopping addiction in order to get a handle on the solution.

Compulsive Shopping Cause

Since most people believe the problem is income, they mis-identify the cause as something outside of themselves; their job, boss, spouse, taxes, the creditors, prices, etc. This form of denial effectively blocks any kind of solution, locking us into an ever deepening problem. Though spending is usually the main symptom, and this, triggered by emotion, the cause goes much deeper. When we continue to pile up spending, the cause is usually rooted in the Spending Cycle: 1. We start with an emptiness, or negative self-esteem; a feeling of incompleteness. 2. Signals all around us tell us if we had some thing, we’d be seen as more important, successful, loveable, or complete, etc. The signals come from family, friends, co-workers, TV, radio, the Internet…anyone who has influence over us. 3. We spend to get that success feeling, sharing news of our shrewd acquisition with anyone who will say, “oooooooo.” 4. When the bills come in we feel even more incomplete and powerless than before, starting the cycle all over again. Until we own the cause as something within us, we will never have a solution. The actual cause of compulsive shopping addiction, then, is that feeling of emptiness and low self-esteem. Solving this incompleteness is key to finding the solution to compulsive shopping addiction.

Now, assuming this is a route the defense is taking, will it be successful?  Only time will tell, but it would appear from a distance look at the facts, it would be hard to argue that she was ‘mentally’ screwed up somehow considering the lifestyle and theft that supported it.  She was educated, so there had to be something other than – oops I didn’t know it was wrong as a defense.  The interesting side of this – is whether there is legal support to find her not guilty by reason of mental insanity?

Now, I’m not a lawyer (I’m a business ethics speaker)…so I would welcome those who are to share their opinions regarding using Compulsive Spending Addiction as a defense.

YOUR COMMENTS ARE WELCOME!


Sujata Sachdeva’s Embezzlement from Koss – Is Koss At Fault?

January 21, 2010

Sujata Sachdeva – former vice president of finance and secretary allegedly embezzled nearly $31 million from the company through unauthorized purchases.  The result – well a domino effect that has caused Koss, the company is known for manufacturing headphones and audio-related equipment to halt it’s stock trading.  The ripple effect continues with restatement of financial statements for multiple years back and, of course, Sachdeva has been indicted.  Likewise, Koss has now fired Grant Thornton LLP, its independent auditors, and is now working to fix a mess that could leave the company near bankruptcy.  (You can bet that Grant Thornton’s errors and omissions carrier has been notified of a prospective claim).

The question here is – who is at fault or shares responsibility in this massive financial scandal.

Now, I can hear folks (as you read) saying, “Dummy, Sachdeva – obviously.  She’s the one who embezzled the money and spent it on a lavish lifestyle.”  And, frankly, to most that is obvious.  But, the larger question is – how does a person who made approximately $200,000 per year live a lifestyle like she lived and no one in the company stop and take notice asking – HOW DOES SHE DO THAT?

PERSONAL EXAMPLE: (Note: I am not proud of the following, but it serves as an excellent example and today I use my personal experience to help others with ethical choices and fraud prevention).

As a CPA, in the mid-’80’s, I embezzled money from clients trust funds.  The funds were used for a lavish lifestyle – expensive cars, expensive home, expensive clothes, etc.  Now, having inadequate internal controls, I saw a way to perpetrate my fraud and did so for a number of years.  Of course, every choice has a consequence and like, Bernie Madoff, there was a time when a card was pulled from the house of cards I built and they all came tumbling down.

People asked…once they found out I was a liar and thief, what did you do with the money.  Then, as if a veil had been lifted, they looked around and there it was – spent on my material surroundings.

The question that arose then was – how was it that my partners in the CPA firm who know my income – along with their – didn’t question how I was able to live such an extravagant lifestyle when they couldn’t afford to do the same?  Was it possible that the fraud could have been caught or stopped if simple questions had been asked?

THE KOSS QUESTION:

According to published reports, it was American Express that helped catch Sachdeva’s activities. Amex noticed that Sachdeva was paying for large balances with wire transfers from a Koss account.  Dumb move, but most who create a fraud make dumb moves at some point.

BizJournals is reporting that two East Coast law firms are preparing class-action lawsuits against Koss for Sachdeva’s actions. Specifically, the problem at hand is the aforementioned accounting issues that date back to 2005. If the suits go through, Koss may find itself too weak to continue as a company and may be forced to liquidate in order to meet its obligations.

What liability does Koss have?  Are they responsible for sufficient internal controls to prevent an embezzlement such as this?  Will others be indicted as co-conspirators?  Should Senior Management (outside of Sachdeva) have questioned her lifestyle vs. her income?

It’s easy to blame Sachdeva – she allegedly did steal the money – but there is a greater question that faces Koss management – what should they have done or questioned to prevent such a multiyear theft?

YOUR COMMENTS ARE WELCOME!


Sujata Sachdeva, Koss Corporation Vice President of Finance Arrested for Embezzlement and Fired!

December 31, 2009

As the year and decade draw to a close the news of unethical activity just keeps on coming.  And…as a business ethics speaker who studies ethics and ethical trends, I don’t see any end to these type of reports.  Whether we have a robust economy or an economic crisis, it seems that the personal motivation for money (or what it represents) outweighs the simple ethical choices that should be made daily.

According to a report in the New York Times, “the Koss Corporation, a maker of headphones and equipment, said it fired its vice president of finance after she was accused of embezzling more than $20 million from the company for a multiyear shopping spree of expensive clothes, jewelry and other personal items.”

Sujata Sachdeva, vice president of finance at Koss since 1992, was charged with wire fraud, said Assistant U.S. Attorney Matthew Jacobs, prosecutor in the case. She appeared in federal courtand was released on an unsecured bond, Jacobs said.

The maker of stereo headphones said in a brief statement that the request to halt trading followed its discovery of “unauthorized transactions” and fired Sachdeva following the discovery of unauthorized financial transactions.  Sachdeva served as the company’s Principal Accounting Officer. Also, two members of the company’s accounting staff who served under Sachdeva were placed on unpaid administrative leave.

The firm said its board has appointed a special committee of independent directors to internally investigate the transactions and determine their effect, if any, on Koss’ financial statements.  Preliminary estimates indicate that the amount of unauthorized transactions since fiscal year 2006 through the present may exceed $20 million.

According to a Forbes report – Sachdeva’s income was slightly in excess of $170,000 per year.

WHY – WHY – WHY?

Whenever there is such a high profile ethics breech and fraud the question that is often asked is why?  What would cause someone, who otherwise knows better, to do such a thing?  Much as I hate to admit it…that question was asked of me many years ago when my fraud scheme came to light.  And like Sachdeva…I, too, lived an illusory life style.

According to published reports, Sachdeva reportedly used much of the money to purchase luxury items, and was ballsy enough to often leave her price-tagged clothes casually strewn about her office. When confronted by authorities, Sachdeva confessed, saying she covered up her two years of embezzlement by falsifying company financial statements.  Ouch…  I can speak from experience, the comfort that she might have enjoyed from her high flying lifestyle bring no lasting joy when facing the reality of prison – a place she is most certainly headed.

QUESTIONS:

1.  For those close to the situation, is it possible that Sujata Sachdeva suffered from Oniomania. (Oniomania is the technical term for the compulsive desire to shop, more commonly referred to as compulsive shopping, compulsive buying, shopping addiction or shopaholism.)

2.  Do you believe that others were involved in the fraudulent cover up associated with Sachdeva’s scheme?

As always…YOUR COMMENTS ARE WELCOME.