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Five Dumbest Things on Wall Street: Jan. 15

Welcome Back Koss Corp.

Welcome Back Koss Corp. (KOSS - Get Report), to that same old place that you laughed about.

Yeah, we may tease them a lot -- because we got them on the spot -- but stereo products maker Koss Corp. is once again trading on the Nasdaq. Shares of the Milwaukee-based Koss had been halted since Dec. 21, after the company's management became aware of unauthorized transactions by its vice president of finance, Sujata "Sue" Sachdeva. The stock stopped trading at $5.50 in December and now changes hands close to $4 a share.

Sachdeva has since been fired and should soon be indicted for embezzlement. The company, however, still has a lot of work to do to repair itself. Koss estimates that Sachdeva's illegal transactions amounted to more than $31 million since fiscal year 2005, nearly the size of the company's current market capitalization.

So what was Sachdeva spending all that dough on? Mostly high priced fashion goodies for herself. Law enforcement authorities seized at least 22,000 items -- including high-end women's clothing, shoes, handbags, and jewelry -- as part of the investigation, according to the company.

Oh come on! Did nobody at the company think it was a bit odd when Sachdeva showed up to work in a different pair of high-priced shoes every day? No offense, but we're talking about a small company in Milwaukee here, not Madison Avenue during Fashion Week.

Koss anticipates restating its financial statements, at least, for fiscal years 2008 and 2009, and the first quarter of fiscal year 2010 ending Sept. 30, 2009. The headphone maker also recently fired Grant Thornton as its independent auditor for missing Sachdeva's shenanigans.

That seems like the smart move to us. Even Arnold Horshack, Vinnie Barbarino and the rest of Mr. Kotter's Sweathogs could have spotted that scam a mile away.

Dumb-o-meter score: 75 -- Instead of an extensive audit, Grant Thornton gave Koss a note from Epstein's mother.
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