Koss Corporation (NASDAQ:KOSS) filed a lawsuit today in the Circuit Court of Cook County, Illinois against the company’s former Vice-President of Finance, Sujata Sachdeva, and Grant Thornton, LLP, its former auditor, alleging fraud and deceit, professional negligence and breach of fiduciary duty. The lawsuit stems from Koss’ discovery in December of last year that Sachdeva had embezzled tens of millions of dollars from the company in order to fund a lavish lifestyle complete with furs, jewelry and high-end clothing.
The Complaint alleges that Sachdeva, who presently faces federal criminal charges relating to her conduct, embezzled the funds across at least five years and purposely concealed her fraud from the company, its Board of Directors, Audit Committee and Management. The Complaint further alleges that Grant Thornton, the company’s auditor during those same years, failed to properly perform audits of the company’s financial statements and failed to properly assess the company’s internal controls, thus allowing the embezzlement to continue and the damage to the company to escalate. In particular, the lawsuit claims that Grant Thornton repeatedly assured Koss’ management and its board that the company’s internal controls were effective and that Koss could rely on those same internal controls and Grant Thornton’s work.
“There is no question that Sachdeva stole from Koss and there is no question that without Grant Thornton’s failures, the theft would have never occurred,” said lead attorney Michael Avenatti of Eagan O’Malley & Avenatti, LLP, the law firm representing Koss. “Grant Thornton was paid hundreds of thousands of dollars to properly audit the company’s financial statements and they failed miserably. This failure included repeatedly assuring the company and its board that the company’s internal controls were effective. A company should be able to rely on its auditors.”
About Koss CorporationHeadquartered in Milwaukee, Wisconsin, Koss Corporation is known worldwide for its high fidelity stereophones and audio accessories. Koss Corporation markets a complete line of high-fidelity stereophones, speaker-phones, computer headsets, telecommunications headsets, active noise canceling stereophones, wireless stereophones, and compact disc recordings of American Symphony Orchestras on the Koss Classics label.