Koss Corp. has settled a lawsuit against American Express for its role in former Koss executive Sujata “Sue” Sachdeva’s embezzlement of $34 million from the company.
Koss sued the credit card company and Pamela Hopkins, the company’s vice president of global fraud protection services, in 2010 alleging they were involved in aiding and abetting fraud, breach of fiduciary duty and negligence.
The Milwaukee-based headphone and speaker maker will receive the gross proceeds of $3 million, offset by some attorneys’ fees and other costs. The case, which was filed in Superior Court of Maricopa County, Arizona, was set to go to trial in the near future.
The suit alleged that Sachdeva had embezzled $16 million by wiring money from Koss accounts to pay her personal American Express credit card bill. She also had paid American Express and other bills with $4 million in cashier’s checks drawn on Koss accounts.
Koss’ lawsuit claimed that American Express and Hopkins accepted more than 50 wire transfers from Koss accounts for payment on Sachdeva’s credit cards.
The lawsuit contended American Express failed to maintain a program to detect and report suspicious activity. That included only confirming Sachdeva was employed at Koss when she wired $120,000 to pay for charges on her personal card. An American Express employee realized in August 2009 that Sachdeva had purchased $3.5 million in luxury goods and paid for them with company money, but the credit card company didn’t notify Koss until December 2009.
“The matter has been resolved to the mutual satisfaction of the parties,” said Michael Koss, Koss Corp. chief executive officer.
Sachdeva pleaded guilty to embezzlement and was sentenced to 11 years in federal prison in 2010. Her sentence was reduced to eight years and three months in 2015 after she helped prosecutors in at least two cases involving other individuals involved in her embezzlement.
Koss has also settled a lawsuit against Grant Thornton LLP, Koss’ auditor during the time Sachdeva was embezzling money from the company.
