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SEC Pursues Small Company Over Lax Internal Controls

Tammy Whitehouse | November 22, 2011

The Securities and Exchange Commission is sending another warning about fraud prevention by pursuing top executives at a small company for failing to stop a massive fraud, although legal experts are divided on whether it sends the right message.

Koss Corp., which produces consumer electronics, and its president and CEO, Michael Koss, recently settled an enforcement action with the SEC for an embezzlement and accounting fraud of more than $30 million. Koss, however, was not the perpetrator; former finance vice president Sujata Sachdeva and her senior accountant, Julie Mulvaney, carried out the scheme.

Michael Koss, who remains president and CEO, agreed to pay back bonuses totaling more than $450,000 in cash and 160,000 options. The company faced no monetary penalty. Sachdeva is already serving 11 years in prison for helping herself to more than $30 million from corporate accounts beginning in 2005 to support her lavish personal spending.

The SEC charged that... To get the full story, subscribe now.