Cary Spivak – Milwaukee Journal Sentinel

Koss Corp. collected $8.5 million from Grant Thornton, the accounting firm that audited Koss’ books during a portion of the time that Sujata “Sue” Sachdeva was stealing millions from the company.

The payment made Wednesday settles a lawsuit filed in Cook County, Ill., in which Koss charged Grant Thornton with negligence for not discovering Sachdeva’s thievery. Sachdeva’s scheme ran for about 12 years and cost Koss, a maker of headphones, about $34 million. Her embezzlement, which financed an extravagant lifestyle that included trips and shopping sprees, intensified in the final years of the scheme.

Sachdeva, who had been the company’s vice president of finance, is serving an 11-year federal prison sentence and is expected to be released in August 2020, according to the Federal Bureau of Prisons.

“I don’t think it is possible to look at the size of the settlement and conclude that Grant Thornton didn’t see some risk if this case came to trial,” said Jeremy Levinson, a Milwaukee attorney not involved in the case. “Every story that gets written on this case, including this one, is bad for Grant Thornton.”

Grant Thornton charged Koss nearly $700,000 for work it performed from 2004 until it was fired shortly after Sachdeva was arrested in December 2009, according to records filed with the U.S. Securities and Exchange Commission. Baker Tilly, the auditing firm that replaced Grant Thornton, collected $570,679 for its first year of work — a time when the FBI, auditors and company officials scoured Koss’ books to determine the level of damages she caused.

Tracy Coenen, a Milwaukee forensic accountant who criticized Koss management on her Fraud Files blog, said the company should shoulder the blame for not detecting Sachdeva’s crimes earlier.

“Upper management was at least negligent in not properly overseeing what she was doing and for not having proper internal controls,” Coenen said. Koss “management bears the bulk of the responsibility, if not all of it.”

In 2011, Koss settled a shareholder’s suit resulting from the Sachdeva crimes for $1 million and resolved an SEC action by agreeing to institute better internal controls.

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