Finance News & Insights

How’d she do it? Small-biz finance exec steals $34 million

15-year veteran of the accounting department, served as VP of Finance … all while embezzling more than half the small company’s pre-tax profits! It can happen.

Of course this company never thought it would.

In fact, Koss Corp. wasn’t even the one to detect the fraud. The crime was ultimately discovered when American Express noticed extraordinarily large wire transfers from a corporate account being used to pay the woman’s personal credit card bills!

And you certainly don’t like to think it would happen in your company with any of your employees.

Sujata “Sue” Sachdeva will spend the next 11 years in prison and must repay the $34 million she stole. Her story can keep companies like yours protected from similar mistakes with similar consequences.

Let’s Monday-morning quarterback what happened here to see where this company went wrong and how you can avoid such a fate.

Mistake #1: Controls too easy to get around

You’d think to let $34 million get stolen, this company would have to be asleep at the wheel. It wasn’t. In fact, the company had a system of internal controls in place. Grant Thornton even audited the company’s controls and assured the company they were effective! Apparently not. They were still too easy to circumvent by someone “in the know.”

Mistake #2: Other employees didn’t know the warning signs

That may have been in part because this crook actually involved other employees throughout the company to defraud it:

  • She issued checks from petty cash, had company employees negotiate and then return the extra money to her, which she then kept, and
  • She converted unused traveler’s checks from employee business trips and used them herself.

Granted, few employees probably had their radar up for scams, but if warning signs of fraud had been better publicized, someone might have suspected something was fishy.

Mistake #3: There appears to have been no whistleblower mechanism

And even if they did sense something was off, there may have been no obvious ways to report it.

The killer in this case? Two other finance staffers knew what was going on and failed to speak up. One actually falsified journal entries to help cover up the fraud (she has been charged with civil crimes) and a staff accountant knew but simply kept quiet (no charges have been filed her yet).

Of course, it’s a lot easier after the fact to step back and see all the places the company could have caught this earlier. After all, this fraud went on for five years.

But in a smaller company, where segregation of duties is often tougher to maintain, it’s easy to see how things can slip by. This case is a dramatic example worth sharing of why it’s worth the extra effort.

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  • Michael

    Fraud Case