$65 Million Fraud Via a Shell Company Scheme

The IRS is accusing Ausaf Umar Siddiqui, vice president of Fry’s Electronics Inc., of embezzling more than $65 million from the company via a shell company scheme. They say he used the money to pay gambling debts in Las Vegas

A textbook shell company scheme would go like this: Set up a company that sources goods from a legitimate supplier, then mark up those goods and sell them to Fry’s. The shell company acts as a middleman,  keeps the markup, but adds absolutely no value to the transaction.

In this case however, the shell company scheme was a little different. The shell company purchased goods at inflated prices from the suppliers, and purchased more goods than needed.  The suppliers then split the excess profits with Siddiqui. The kickbacks to Siddiqui allegedly went as high as 31% of the sales price.

Siddiqui was allegedly able to pull off this shell company scheme because he supervised a staff of 120 people who bought merchandise for Fry’s 34 stores in the U.S.

And how did this scheme come to light? Apparently carelessness on the part of Siddiqui. Another executive saw a spreadsheet on his desk which detailed the kickbacks. The evidence was given to the IRS, who looked at Siddiqui’s bank records and found $167.8 million in deposits to the shell company. $65.6 came from 5 suppliers alone.

Arrogance is often the catalyst that brings fraud schemes by executives to light. They feel invincible, and get sloppy in covering their tracks. It looks like that’s exactly what happened here.

 

1 thought on “$65 Million Fraud Via a Shell Company Scheme”

  1. I’m curious why it’s only the IRS who’s investigating him?

    Hmmm.. let me look into my crystal ball and see what type of punishment he’ll receive. Yes.. it’s becoming clearer..

    The crystal ball shows that Mr. Alphabet will be fined $100,000.00 and asked to serve a 6-month sentence, reduced to time served if he agrees to follow the rules next time.

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