This story appears in the November 2010 issue of Milwaukee Magazine.
by Mary Van de kamp Nohl,
research assistance by Brooke McEwen
By late afternoon, the packages on Sujata “Sue” Sachdeva’s front porch reached 6 feet high. All day long, UPS and FedEx trucks whizzed up and down Mequon’s North Gazebo Hill Parkway headed for the Sachdeva home.
The endless deliveries convinced some neighbors Sachdeva was running a surreptitious business out of her home. Julie Anderson, who lives across the street, had been complaining about it to the neighborhood association since December of 2006 – all the traffic, eight or nine cars in the drive, the constant deliveries.
She describes seeing Sachdeva return home “in tight leather pants and high heels, and there’d be a click-click as she snapped her fingers and her servants would run out to get her packages and carry them in.” Sometimes they needed a dolly to move the larger shipping bags.
Once inside, they’d open the packages one by one as Sachdeva watched. Sue never opened them herself. “She might break a fingernail,” says a friend who often witnessed the ritual. But as the contents spilled out, she “had a gleam in her eye … like an addict getting cocaine.”
When a cache of expensive Cartier watches spilled out from one box, the friend gushed: “Nice gift.” He assumed they were for Sachdeva’s husband. “They’re not for Ramesh,” she cut him off. “I collect them.” The friend never saw the watches again.
With the last package opened, Sachdeva would order her household caretaker Jim, a burly man in a cutoff T-shirt with tattoos running down his arms, to break down the boxes and dispose of them in the dumpster outside stereo headphone maker Koss Corp. – where Sachdeva was the company’s vice president of finance – or in the dumpster outside A.C. Zuckerman Jewelers, which was owned by a Sachdeva friend. The items she rejected went to Koss headquarters, where an employee was charged with making returns.
By the time Sachdeva’s husband came home that evening, all the purchases would be tucked away, the telltale wrappings disposed of, the cars of her assistants driven away. The $800,000 Sachdeva home would look like any other in the 1990s neighborhood of peaked McMansions. Says Anderson: “It was a complete transformation.”
But on Dec. 21, 2009, the double life of the 46-year-old embezzler ended. As Sue prepared to meet friends for breakfast, the FBI descended. Sachdeva’s staff “scattered like mice,” running off through the yards, one woman in her slippers, says Anderson.
Indicted on six counts of felony wire fraud, Sachdeva could have faced 120 years in prison. Instead, she signed a plea deal slashing her sentence to as little as six years and requiring her to pay $34 million in restitution. As part of the deal, she admitted to stealing as much as $50 million, including the use of Koss money to pay travel expenses, fund $269,334 in home improvements and compensate her servants.
It was the largest embezzlement in the United States in 2009 and estimated to be one of the largest in Wisconsin history.
“I wondered how long it would take to get caught,” Sue told the FBI, according to a friend who’d come to see why Sachdeva hadn’t shown up for breakfast.
Wearing dark FBI T-shirts, some 30 agents spent three days packing more than 22,000 items bought with stolen money – minks, a Mercedes, racks of ball gowns, designer handbags and shoes, fine china, artwork and jewelry – into two long U-Hauls.
Shareholders soon launched suits charging Koss management with negligence for allowing the massive fraud. Koss Corp. not only sued Sachdeva, but also its accounting firm, Grant Thornton, and even the credit card company that tipped off management, American Express, saying the latter two should have alerted company officials sooner.
Yet for Sachdeva, the day of reckoning was almost a relief. “If you’re on the road to hell with no brakes … when the feds come and stop you, that is a good day,” says the breakfast buddy. (Sachdeva declined to be interviewed for this story.)
Big questions remain. Howdid Sachdeva get away with it for so long – for 12 years, often stealing more than the small company cleared in profits?
And why the urge to splurge? Retailers say Sachdeva probably never wore 90 percent of the things she bought. Was it some kind of mental disease, a burning need to project a high-class image, or just a case of pure greed?
In the world of Milwaukee philanthropy, Sujata “Sue” Sachdeva had a reputation for creating elegant fundraisers. Officials at Cardinal Stritch University went to some lengths to recruit her, asking her to join the Catholic university’s board, but exempting her from attending trustee meetings.
“They were held in the early morning … a bad time for Sue because she had two young children to get off to school,” explains then-Stritch President Dr. Helen C. Sobehart, who is now executive director of a Pittsburgh nonprofit.
Sachdeva even had trouble making meetings designed around her schedule. In frustration, the university agreed to Sue’s suggestion that she host one at the Women’s Club of Wisconsin. “It was surreal,” says one male trustee. “Sue spent half the time talking about her St. John outfits.”
But it all seemed part of her style. “She kept on wanting us to do bigger, grander things. She’d say, ‘If you do that, then the fancy people will show up,’ ” says a university official. And so, for the first gala Sachdeva oversaw, “there were fancy chair covers, champagne service tableside, valet parking,” the official recalls. “She set the bar very, very high, but people walked away and said, ‘Wow!’ ”
Says Sobehart: “Sue took great pride in taking people in ahead of time to show them the aura of the place.”
At an October 2009 event she planned, Sachdeva showed up in street clothes as guests began to arrive. As always, she was accompanied by her personal entourage, including Koss senior accountant Julie Mulvaney and “another Koss employee named Mandy, a Paris Hilton lookalike,” says the university official. Dressed “to the nines,” the pair carried Sachdeva’s garb into the ladies room.
When she emerged from it, bejeweled and dazzling, “Sue was the star,” the official says. “She went table to table hugging and kissing people,” in her long, flowing gown, the translucent fabric floating behind her like butterfly wings.
As was her custom, she bought two tables for the gala: one for herself, her husband, Dr. Ramesh Sachdeva, and honored guests; the other for the high-end retailers whose arms she twisted for donations for the fundraiser’s auction.
“If you could be at Sue Sachdeva’s table, wow! That was fantastic!” says Raejean Kanter, a local philanthropy executive and Sue’s friend for a decade. “She was so much fun.” Sachdeva raised more than $1 million a year for local causes, Kanter claims.
Part of that came from Sue herself bidding up the prices of auction items. At one Boys & Girls Club fundraiser, “Sue put $100,000 on her American Express card,” recalls a shop owner. At an American Heart Association fundraiser that did poorly, “Sue let everyone know she’d buy everything that didn’t sell,” says another retailer. “She spent almost $50,000.”
She seemed fabulously wealthy. She told people her husband made a couple million dollars a year, that she made a half-million and both came from wealthy Indian families, says a retailer who was Sachdeva’s close associate.
Her high-profile companions reinforced the legend: prominent physicians, Circuit Court Judge Maxine White, even Wisconsin Gov. Jim Doyle’s former secretary of administration, attorney Marc Marotta. (As vice president of the Gazebo Hill Homeowners Association, he’d deflect complaints from her neighbors, Sachdeva would claim to friends; Marotta declined an interview.)
Then there was Milwaukee County Sheriff David Clarke. In 2003, the Sachdevas hosted a fundraiser at their home to support his unsuccessful run for mayor, and in 2006, another for his re-election bid as sheriff held at the Ozaukee Country Club. “Obviously, the circle of friends she ran with had higher-than-average incomes, and she had great rapport with everyone,” recalls Chris Haworth, a spokesperson for Clarke’s campaign. “She greeted everyone and introduced people around.”
Sue’s party-giving skills wowed people. Sue sat on the Skylight Opera board, once again rarely attending meetings, but hosting two home fundraisers. The second was “over the top,” says an attendee, recalling the backyard tent, fine china and authentic Indian dinner.
“Even birthday parties for the kids were extravagant,” recalls Anderson, with “bouncing houses for the kids, a tent in the backyard and a buffet line with elaborate Indian cooking and lots of help, and nannies to watch the kids.”
In 2001, Sachdeva joined the board of Big Brothers Big Sisters of Metro Milwaukee. From 2004 through 2009, she chaired its fundraising galas. The Boys & Girls Club, at its annual MVP dinner in 2008, gave her the Annabell Cook Whitcomb Award – an honor bestowed on volunteers who make an impact – in recognition for her organization of a fundraising fashion show. And Cardinal Stritch gave Sachdeva its first “Community Builder Award.”
“I was so wowed by both of them, Sue and Ramesh,” says a guest at two Sachdeva home fundraisers. “I thought they were so smart and so dedicated to the community.”
The couple seemed to embody the classic American dream of immigrants made good. The story Sue told friends was that they had been introduced by their mothers, who shared membership in the same sorority. Ramesh’s father had been a high-ranking military official in India and an orthopedic surgeon, while Sue had grown up on Long Island, N.Y., one of three children of Indian immigrants. Her father had become the city’s chief engineer. Sue would often recount how as a girl, she watched her parents go to galas, dreaming of doing it one day herself.
Ramesh’s family was so powerful in India, the couple had spent their honeymoon night in the Taj Mahal, Sue would say, adding that even Lady Di had to be photographed out front – because they wouldn’t let her in.
Yet they were a modern, American, two-career couple. In New York, Sue landed her first jobs with the Smith Barney brokerage firm and then accounting firm Arthur Andersen. By the early 1990s, they’d moved to Milwaukee, where Ramesh began a fellowship at Children’s Hospital. He had a law degree, an MBA and a doctorate in addition to his medical degree, and he’d help start the National Outcomes Center at Children’s Hospital of Wisconsin. There, as a researcher and vice president, he became “one of the nation’s leading experts in quality, improving pediatric health care around the country” with his “breakthrough ideas,” says Larry McAndrews, president and CEO of the National Association of Children’s Hospitals and Related Institutions.
Sue, in turn, became a vice president at Koss.
The Koss name added to the couple’s prestige, and she frequently dropped the name of company CEO Michael Koss. At fundraisers, “She’d say, “Oh, Michael [Koss] will buy a table’… or ‘Michael will see that there are gift bags with headphones for everyone,’ ” recalls Sobehart. “It was nothing out of the ordinary for a high-powered corporate executive.”
Sue got star treatment from Koss. When Sachdeva’s husband got a fellowship in Houston in 1993, Michael Koss allowed Sue to live there and telecommute from Texas. This was highly unusual, High Visibilitymagazine wrote, noting that Sachdeva “may be the only CFO in the country who telecommutes.” She continued the practice for more than 10 years, telecommuting at least two days a week from home, even after the family returned to Wisconsin in 1999.
Her relationship with Michael seemed very close. When his daughter became pregnant, it was Sue who hosted the baby shower in her home. When his son was stricken with Crohn’s disease, Sue helped orchestrate a fashion show to raise money for research. When auction items languished, says one retailer, Sue “personally bought everything so the event was a success.”
Sachdeva awed onlookers. She seemed to have it all. “I thought of her as a mentor, of what a successful businesswoman would be like,” says the owner of an exclusive boutique. “We all did.”
Had anyone checked, the only blemish on Sachdeva’s record was an oddity, a 2005 municipal citation written by Mequon police after a middle school janitor found boxes bearing Sachdeva’s name in the school dumpster. Why would an elite Mequon socialite be transporting her trash to a school? Apparently, the police didn’t ask.
Perhaps no event excited Sue Sachdeva more than one that combined shopping and an elite social setting. At a University Club trunk show for New York’s trendy Zang Toi – designer to Ivana Trump, Sharon Stone and Fergie of the Black Eyed Peas – Sue strode in “like a hen in heat,” says a longtime close associate. Downing champagne, she bought one of everything, spending $85,000 in an afternoon.
“Sue just loved the attention, the glamour that came when they’d greet her at a trunk show,” the close associate says. “She got this adrenaline rush.”
“Over 99 percent of the money she stole, she spent on fashions for herself. Neiman’s would call and say ‘Sue, it’s the last call for these shoes,’ and she’d say, ‘Send me a pair of everything in size 8 1/2,’ ” says the close associate.
Most retailers hesitate to speak by name about Sachdeva, saying they’ve experienced a backlash from customers since news of the fraud broke and fearing federal prosecutors may still charge some stores with complicity.
They portray a woman for whom money was no object. Sachdeva’s purchases ran the gamut from top-end to bargain-basement, from TJ Maxx jewelry to “really, really fine things, especially one-of-a-kind gowns,” notes one retailer. The FBI found at least one gown with a $20,000 price tag.
The names of famous designers and fashion trends rolled off her tongue. She had personal shoppers in New York, Los Angeles and Houston. She amassed more clothing and accessories from Saks Fifth Avenue and Neiman Marcus than anywhere else, yet was the best customer at a long list of exclusive boutiques in Milwaukee.
Authorities estimate Sachdeva spent $5 million here at Valentina, where store owner Tony Chirchirillo said Sachdeva “always wanted the best.” Sachdeva became cozy with Tony’s daughter, the store manager, and the two went to India together, says Sachdeva’s close associate. The associate also says Sachdeva and Tony’s wife, Valentina co-owner Cheryl, limoed to Kohler for a “spa day.”
She spent so freely that retailers came to depend on her business. “She had power over everyone around her. She’d throw her money around and they’d kiss her ass,” says the close associate.
Sachdeva insisted store owners wait on her personally. Wearing a size 16, Sue was “a long way from the 0 to size 10 of most designer lines,” says one store owner. Her things had to be custom-made or drastically altered.
“After Sue was diagnosed with diabetes several years ago,” Sachdeva’s friend Kanter says, “she lost a great deal of weight.” She dropped to a size 6 before putting some pounds back on. The size-shifting necessitated new purchases, something Sue approached “as if it were a job,” notes one shopkeeper.
Sachdeva rarely shopped on weekends – always on workdays between noon and 2:30 p.m. when she’d go pick up her kids at the tony University School, retailers say. All the while, Sachdeva’s cell phone rang incessantly. Fielding calls, she’d delegate duties and defuse disasters at home and the office with the efficiency of a triage nurse.
“Half the time she wouldn’t even try things on, and sometimes, she’d shop in very haphazard ways, never buying matching pieces … [my] really wealthy clients didn’t shop like that. … They’d never say, ‘I’ll take that, and that and that,” says a retailer.
Sachdeva bought several hundred Carlisle garments, yet, in five or six years, she rarely wore them, says a Mequon friend. Most of the time, she was in sweats or a ball gown.
Sachdeva could be notoriously slow to pay. She’d bristle when a storeowner insisted she sign her American Express receipts in person and belittled others who adhered to strict payment rules, asking if they didn’t “trust” her. Shopkeepers weren’t allowed to send a bill to her home or office. They called to tell her the balance, and Sue would decide how much they could put through on her American Express card.
One retailer says Sachdeva might pay entirely in American Express-issued checks, money orders or traveler’s checks. She paid a $7,000 bill in $100 bills. She wrote a $20,000 personal check that bounced.
There were other oddities: Sachdeva called one retailer to warn that Escada’s New York boutique would be calling to get her American Express card number – she didn’t have it with her. She always used Koss’ ZIP code, never her own. And you could never deliver Sue’s purchases when her husband was home, says the retailer.
But the most extraordinary thing about Sachdeva was that she rarely took home her purchases. She refused retailers’ offers to deliver her merchandise, promising to send someone to fetch it, but rarely did. The shops ended up storing hundreds, even thousands of items she’d purchased.
When Harlene Levin of Mequon’s Picardy Shoe Parlour assumed the busy executive had forgotten she already owned a pair of shoes she was contemplating buying, Sachdeva snapped: “I don’t need you telling me what I can buy.”
“It didn’t make sense,” says a store owner. “Everyone had to know Sue had some mental impairment, because 90 percent of what she bought was never picked up – by anyone, except the FBI.”
Gary Holzman and Susy Holzman Sennett, owners of Holzman’s Furs, say Sachdeva had far more furs “than anyone could possibly wear. We suspected Sue had an issue and treated her carefully,” says Gary. The couple refused to sell Sachdeva anything resembling a prior purchase, he says, and tried to sell her older furs on consignment. Still, the FBI confiscated 34 full-length fur coats, 32 short furs and five fur throws.
Sachdeva regularly sat the retailers together at galas, where they’d see her kibitzing with the city’s elite and winning philanthropic awards.
“Every time I thought I smelled a rat, that something didn’t seem right, I’d go to one of those events and think, I must be wrong,” says one store owner. “She’s a pillar of the community.”
But behind this glittering image was quite a different story.
“I thought Sue had this huge income coming in from India,” says a retailer. But the whole story of Indian royalty was pure fantasy,
including the honeymoon night at the Taj Mahal: The 17th-century temple doesn’t have overnight accommodations.
The story of her parents and their galas was probably equally exaggerated. “Her mother was 5-foot-6 and 340 pounds with missing teeth, and she had dyed purplish red hair and wore loud lipstick, and her father always walked around in polyester knit pants,” says one observer. Another says, “There’s a great formality among moneyed families” from India. “Her parents didn’t have that.”
The millions Sue said she and her husband earned? Ramesh’s salary was estimated to be closer to $600,000, sources say. Koss SEC filings show hers peaked at $206,462 in 2008.
The couple gave modestly to most of the charitable groups they supported. “For a few years they made a small donation, barely worth noting compared to what serious donors give,” says a representative of one charity.
With the exception of the Boys & Girls Club, which demands a sizeable donation of board members, and where the 2009 annual report lists the Sachdevas in the $5,000-to-$9,999 contribution range, they were more likely to appear in the $1,000 range.
Yet Sachdeva had the class consciousness of a Brahmin. When one retailer suggested Sue meet his East Indian friend, she declined once she heard the woman’s last name. “Sue could tell the woman was from a lower social class.”
Sachdeva neighbor Anderson says the two families socialized for years. Then, “sometime around 2005 or 2006, Sue thought she was better than me.” She told Anderson her husband was “a scholar,” whereas Anderson’s was “just an orthopedic surgeon.”
Afterward, Sachdeva gave her neighbor the cold shoulder for years, until she spotted Anderson driving a Porsche 911. “Sue was very aware of status symbols,” Anderson says. “She stopped me and asked, ‘Where did you get that?’ ”
“Sue wanted to have the grandest house in Gazebo Hill,” says the close associate. “That’s why she had a giant fire pit and gazebo installed in her backyard. That’s when I started calling her ‘Diva.’ She wanted to be treated like a princess, and she was.”
Sue practically demanded the award she received from Cardinal Stritch, says the university official. “Sue often felt … we didn’t say ‘thank you’ often enough.”
When Sachdeva’s crime spree made the National Enquirer’sfront page, Sue was irate, says a friend. Not over the public disgrace, but because a stock photo of fox furs illustrated the story. “I don’t own any fox furs,” Sachdeva fumed. That was beneath her.
John Koss didn’t want son Michael to major in business. So even though Michael expected to play a large role in the family firm one day, he earned an anthropology degree at Beloit College.
John Koss described himself as “an artist, an innovator, a motivator, a problem solver” to Nation’s Businessin 1990, which concluded he had a “bias toward the intuitive.” It was when he behaved more like a businessman that he got into trouble, John explained.
With only a high school education and a love of music, Koss began his career renting TVs to local hospital patients. Then, with an engineer pal, he planned to market “a small portable phonograph” boasting a privacy switch allowing the listener to use headphones.
At its premiere at a Milwaukee hi-fi show, the phonograph flopped, but the headphones were a hit. For a couple days, Koss tried selling the package. Then, as he often recounted, he “consulted the marketing department – by looking in the mirror” – and soon canned the phonograph and started making headphones. By the mid-1960s, Koss had a successful little company.
Following common business practices, he expanded his product line, adding turntables, electronics and telephones. The newly public company suffered heavy losses before returning to its mainstay, headphones.
A pattern developed. In the mid-1970s, the company went to the financial brink again because business experts – outside management Koss brought in – failed to respond adequately to growing Japanese competition. In the early 1980s, under the direction of an outsider hired as CEO to diversify the firm, the company developed the Koss Music Box. It flopped, and Koss Corp. filed for bankruptcy protection.
Koss did what few small companies do, emerging from bankruptcy in 1985 to once again become a success as the demand for headphones and accessories like earbuds began to explode.
Thrice burned, Koss saw some clear lessons: Don’t follow conventional business wisdom, don’t trust managers from outside the family, and stick with the core product – headphones. So in 1991, Michael added the mantle of chief executive officer to the title of president he’d earned in 1987. Michael’s brother John and brother-in-law Michael Moore also held leadership roles.
Some analysts worried Michael “might be like his father … more promoter and salesman than businessman,” USA Today reported. That fear faded as annual revenue grew to $26 million. Heartland Funds manager Hugh Denison described Michael Koss as both “a real good operating guy and a charismatic leader.”
Michael Koss was given broad powers, eventually adding the titles of chief operating officer, chief financial officer and vice chairman of the board. Within a year, he appointed 29-year-old Sue Sachdeva as vice president of finance and the company’s principal accounting officer. Sachdeva was, in essence, acting CFO, business experts say, given that Michael Koss was spread so thin handling five job titles.
The most driven workaholic would be hard-pressed to handle all these duties at a company with 70-some employees and $38 million in revenue. Corporate governance experts say combining the CEO and CFO positions is both rare and risky, because the two should check up on each other.
Koss seemed to yield great authority to Sachdeva in handling the financials. A retailer who occasionally stopped at Sue’s office encountered Michael several times. Once, Sue put her boss on the speakerphone. “He asked where first-quarter financials were, and she said, ‘Michael, I said I don’t have it done. I’ll get it to you when I’m done.’ She ran all over him,” the retailer says.
Another time, the retailer recalls, “she talked to him like a wife fighting with her husband. She said, ‘Michael, ‘I said I would get it later when I have time.’ Then, she turned and walked away. Who does that to their boss?”
Michael Koss (who didn’t respond to interview requests) told investigators he didn’t see all the things Sue was buying. But the retailer says, “I was only there three or four times a year, and I saw boxes of clothing stacked to the ceiling in the office next door to hers.” The FBI collected 38 boxes of merchandise purchased with stolen money at the company.
Her close associate says a typical Sachdeva workweek began with her arriving in time for her 11:15 a.m. Monday meeting with Michael Koss, then off to lunch until 1 or 1:30 p.m. At 2:30 p.m., she’d leave to pick up her kids.
The grand jury indicted Sachdeva on only six counts of wire fraud, but between February 2008 and December 2009, she authorized 206 fraudulent wire transfers – stealing $16 million from Koss accounts to cover items purchased with her American Express credit card, according to the plea deal Sachdeva signed.
Sachdeva’s plea deal says the embezzlement began in 1997 – five years after she was hired – and continued until her arrest in December 2009. During those 12 years, Sachdeva authorized more than 500 cashier’s checks worth $17.5 million – $10 million went to American Express, Neiman Marcus, Saks and charitable groups. All told, she admits the total may have reached $50 million, money she used to pay local retailers, her servants, travel expenses and home improvement bills.
Retired Koss employee Myriam Ruiz filed a shareholder suit, arguing, “Sachdeva’s continuous theft was so large and so blatant even the most basic review … would have uncovered it.”
How could a company with some $2 million in annual profit not miss as much as $50 million over 12 years? Financial blogs and accounting newsletters charged that having a chief financial officer with an anthropology degree posed “obvious problems.”
In news reports, forensic accountants blamed Koss’ relaxed “family culture” and lack of oversight. They noted that industry standards require not just the CFO, but also the company’s outside accountant, Grant Thornton, and members of the Koss board’s audit committee to review the company’s financials, ever watchful for fraud. But so far, there has been no evidence to suggest Koss senior management or its auditors knew something was amiss.
Instead, there are many signs of lax oversight:
* Michael Koss trusted Sachdeva so much, John Koss described the embezzlement to the Milwaukee Journal Sentinelas a “knife right in the heart” for his son.
* Sachdeva had an out-of-the-office relationship with Koss’ independent accountant. In 2006, she co-chaired a fundraising gala for Big Brothers Big Sisters with Grant Thornton’s Melissa K. Koeppel, then one of Koss’ two outside auditors, and beginning a short time later, head of the accounting firm’s Wisconsin practice.
* Between 2004 and 2009, Koss paid Grant Thornton $625,000 to audit its books, but the nation’s sixth-largest accounting firm never noted any irregularities despite hundreds of fraudulent entries that federal and Koss Corp. authorities say Sachdeva used to conceal her crime. Sued by Koss, Grant Thornton said it was never hired to evaluate the company’s internal financial controls.
* The Koss company’s style appeared remarkably relaxed. In 2007, the Journal Sentinel described the boardroom “still … set up like a living room.” And its corporate board rarely changed. With the exception of a member added in 2006 and founder John Koss, board members had an average tenure of 27 years, noted accountingweb.com. They’d begun serving when Ronald Reagan was president, the Cold War was still going and Michael Jackson was releasing his Thriller album. The “failure to regularly instill new thinking and perspective into the board … has long been considered a likely factor for enabling fraud to occur” noted accountingweb.com.
* Unlike the proxies of typical public companies, Koss made no mention of any accounting expertise among audit committee members. The committee, Koss’ 2008 proxy noted, relied on two meetings a year with Grant Thornton “to discuss their evaluation of the company’s internal [financial] controls,” the evaluation Grant Thornton says it was never paid to do.
* Because it was a small company, Koss could – and did – opt out of the federal Sarbanes-Oxley Act, which requires outside auditors to evaluate the internal financial controls of larger companies. Michael Koss told Family Business magazine in 2007 that the costs of the federal legislation (which sprung from the Enron scandal) were particularly galling to his family. The extra hours, he said, would be “better spent on strategic planning than in additional audit committee meetings.”
* Koss’ “audit fees were cut in half in the middle of this fiasco,” from $114,900 in 2007 to $63,600 in 2008, notes a retired Fortune 500 company CFO, citing SEC documents. As for the embezzlement itself, the retired CFO says, “Several standard-type controls should have easily detected such sizeable, improper activity.”
* In response to attorney James Mentkowski’s shareholder suit charging the board and management with ‘gross mismanagement,” board member John Stollenwerk, former head of Allen-Edmonds Shoe Co., told the Journal Sentinel, “You can put in all of the safeguards, but people will still steal.” Stollenwerk added he was at the company just four times a year as a board member. Which gets this response from Mentkowski: “If you read that idiot Stollenwerk’s comment, he admitted they weren’t doing their jobs … If the Koss family paid more attention to running their business than their social pretensions, it would have been a different story.”
* Ultimately, most corporate fraud is detected by an inside whistleblower, as in the Enron case. But two of the employees most likely to spot the fraud – Koss veterans Julie Mulvaney, who was Sachdeva’s senior accountant, and junior accountant Tracy Lee Malone – were Sachdeva’s subordinates and pals. The plea deal Sachdeva signed admits she told subordinates to make fraudulent entries in company books, concealing the embezzlement by overstating assets, the cost of sales and expenses, and understating sales and liabilities. Koss fired the two, saying they’d helped Sachdeva circumvent the company’s internal financial safeguards on wire transfers, cashier’s checks and invoices exceeding $5,000.
The U.S. Securities and Exchange Commission has charged Sachdeva and Mulvaney with accounting fraud. Through their attorneys, Mulvaney and Malone (who declined interviews) have maintained their innocence. As of September, no criminal charges had been filed against them.
The two subordinates worked with Sachdeva on fundraisers and shopped, lunched and drank with her, say retailers. North Shore Bistro manager Joe Damico says Sue and her pals were “here every other day.” Sachdeva would usually pick up the tab for everyone at her table – including her retailer friends – and always left generous tips and gave high-fashion clothing to the waitresses as Christmas gifts, Damico adds.
Koss’ suit against Sachdeva and Grant Thornton also shows four unauthorized payments totaling $14,000 to Mulvaney and $1,800 to Tracy Bruneau, Malone’s maiden name. Sachdeva’s close associate describes Mulvaney as, “Sue’s one real friend.”
As a favor to Tracy, the close associate says, Sue hired Malone’s husband, Jim, as a caretaker as for the Sachdeva home. James Gerald Malone couldn’t find another job because of his criminal record. State court records show Malone has multiple felony convictions.
Jim Malone was charged with first-degree murder and armed robbery in the Dec. 4, 1988, death of WITI-TV 6 reporter Dennis Owens. According to court records, Malone and a friend went to the city’s gay bars to “roll a queer” and get money to go drinking.
The murder charge was ultimately dropped against Malone, although he’d accompanied the killer when he fired a second round of shots into the victim. Malone claimed the shooter threatened to kill him if he didn’t go along. The pair then stole and used the victim’s credit cards.
Malone had a history of cocaine and alcohol abuse and of purse-snatching, including robbing an elderly woman while on bail. He was sentenced to 10 years in prison. In 2006, he got in trouble with the law again by threatening a South Side family. He pleaded guilty to a reduced charge of disorderly conduct, and the court issued a restraining order against Malone after one victim testified he feared Malone’s “threat of coming back with a gun and killing us.”
Sue told her close associate “Ramesh was never to know” about Malone’s record. He might have objected to having a felon around their children.
When Jim and the other household help – the housekeeper and Sue’s personal assistant – needed to be paid, the close associate adds, Sue would simply order Jim’s wife, Tracy, to pay them out of Koss petty cash. “There’s definitely evidence she took Koss money and paid her household staff,” U.S. attorney Matthew Jacobs says.
The Lonely Wife
On Oct. 27, 2007, a 28-year-old Russian-speaking immigrant from Latvia, Julija Matcena, was found hanging by a cloth from a ceiling fan in her Brown Deer apartment. She worked for Sue Sachdeva as a nanny for her children.
Friends of Sachdeva disagree about Sue’s relationship with the kids. “She was a very caring, loving mother,” says Kanter. But Sue’s close associate says, “She was a horrible mother. Sue was never home.”
Whatever the case, Sachdeva depended on Matcena as a nanny. Matcena’s mother also worked for Sachdeva as a housekeeper.
“Julija had way too many responsibilities,” says one of Matcena’s friends, who was with Julija’s mother when she discovered the body. “Julija had to take care of the kids, do the grocery shopping, take care of the elderly grandma [Ramesh’s mother] … get Sue’s outfits ready, take the kids to buy clothes … then [Sachdeva] would be calling Julija late at night, asking, ‘Where did you put this or that dress?’ ” Yet, “When it was time for Julija to get paid … Sue was never on time.”
Julija left a suicide note scrawled across a wall mirror that raged against her abusive ex-boyfriend. The police report says the girl was “enduring a lot of stress and was not able to pay her bills.”
After the funeral, Sachdeva fired Julija’s mother so the housekeeper wouldn’t slip and say something about the suicide to the children, her close associate says.
Ramesh and Sue had had separate bedrooms for some time, friends say: his upstairs with their son, hers downstairs with their daughter. But they began to drift even farther apart. The couple stopped appearing at galas together. “They were going different ways,” says Kanter.
Ramesh’s work required frequent travel. “He worked incredibly long hours,” a colleague says, adding that Ramesh still pulled shifts in pediatric intensive care and taught a night class at Marquette University Law School.
“They had a very traditional Indian household,” Ramesh’s colleague says. “He was gone most of the time, and when he came home, he was king. He was so consumed in his work and so trusting of Sue in running the household, he didn’t have a clue.”
Kanter says Sue “wanted more than the traditional Indian husband-wife relationship.”
“She was so very, very lonely,” says the close associate.
Sachdeva began to do more without Ramesh’s knowledge. Before the couple left on vacation in 2008, she authorized $30,000 worth of work for bathroom remodeling and changing wallpaper, paying double to have it done before they returned, says a contractor. She ordered a retailer to go to Best Buy and purchase eight flat-screen TVs, then paid an electrician triple-time to stay until midnight installing them, a shop owner says.
The couple argued over her spending on things, such as expensive toys for the children and the cost of the household help. “Ramesh told her to get rid of them,” Sue’s close associate says. “He’d say, ‘Sue we can’t afford this.’ ” That’s why she was hiding all the clothes and shoes.”
Sue’s drinking became a problem. Retailers who lunched with Sachdeva say she downed vodka shots at the North Shore Bistro with Julie and Tracy. “Then they all went back to work bombed,” says one shop owner.
One consignment shop owner recalls picking up Sachdeva and taking her to Harvey’s restaurant in Mequon. “Sue told the waiter she wanted her ‘juice.’ They knew that meant vodka,” says the shop owner, who was surprised by how much Sachdeva drank.
In early spring of 2009, Ramesh threatened to put Sue into an alcohol treatment program in Arizona, say sources close to the family. Sue promised to stop drinking.
“Sue got really loaded, soused once, and I think that scared her,” says Damico. “After that, she just drank tea.”
But she began to shop even more. Koss records show Sachdeva’s unauthorized transactions amounted to $2.2 million over fiscal 2005 and 2006, $3.2 million in 2007, $5 million in 2008 and $8.5 million in the first half of 2009. But between July 1, 2009 – shortly after she officially quit drinking – and her arrest, Sachdeva took another $10.2 million. She was paying her credit card bill $1 million a month, according to the suit Koss filed against American Express.
Yet two local retailers say her visits became less frequent. She began doing Internet shopping instead, says her close associate. Hautelook.com, called a “virtual shopaholic heaven” by the TV show “Extra,” became one of Sachdeva’s favorites, along with gilt.com. Both sites advertise large discounts off some designer goods, posting auction-style sales daily.
The deliveries grew to 20 to 30 packages a day. The Sachdevas’ 4,041-square-foot home overflowed with purchases. “In the garage, there were 30 sets of china from Neiman Marcus. Not settings for eight or 12, but for 24 or more. A new one for every dinner party she gave,” says a Mequon friend.
“When Ramesh was away, she’d buy more and more, and a day or two before he got home, a U-Haul would pull up to the garage, and the caretaker and a buddy spent all day loading it,” says neighbor Anderson.
Sachdeva had a rented storage space on Highway C in Cedarburg, and she sent things there. But when the clothes got mildewed and eaten by mice, she rented a 1,000-square-foot space on the fifth floor of the Third Ward’s Marshall Building, the close associate says. “She’d have five of the same dress, three in size 12 and two in size 10. She was buying the same thing over and over again.”
The FBI would later remove 461 boxes of shoes, 65 racks of clothing, at least 50 plastic storage containers, statues, paintings, Waterford crystal, Louis Vuitton and Canyon luggage, crystal vases, chandeliers, glassware and 71 furs from the Marshall Building storage area.
Sachdeva began selling her best designer things in Cranston Couture, a secondhand store in the Marshall Building, and at a consignment shop elsewhere. “There were loads of St. John, Chanel, Dior. A couple of thousand items in the year and a half leading up to December 2009,” says the consignment shop owner.
One day, Sachdeva stopped by the Marshall Building resale shop with some friends and created a scene. “She wasn’t going to sell her Armani for that,” says one observer. “She tore clothing off the racks and threw it in a pile on the floor. She was psycho near the end.”
In September, Koss Corp. says, Sachdeva siphoned off another $1.6 million from the company in three wire transfers, more than half of Koss’ 2009 profit.
By November, Sachdeva was breaking down in her close associate’s car, crying, “Take me home. Take me home.” When the associate asked if Sachdeva’s husband had done something, Sue said, “It’s not Ramesh.”
“I think she knew the play was coming to an end,” the friend says. As they headed toward Mequon Road, “Sue just kept sobbing and sobbing. But when we got close to her home, she stopped and fixed her makeup.”
On July 16, 2010, Sachdeva pleaded guilty to six felonies. Her attorney, Michael Hart, hinted her mental condition will be part of the case he makes at her Nov. 18 sentencing, and the court ordered a psychiatric evaluation of Sachdeva. Friends say she will claim she suffered from “oniomania,” a compulsive buying disorder.
First described in a 1915 psychiatry textbook by Emil Kraepelin as an impulse control disorder like alcoholism, oniomania was largely ignored until the 1990s. As psychotherapists became more interested in the theory, Chicagoan Elizabeth Randolph Roach used the oniomania defense in court to explain why she’d embezzled a quarter-million dollars from her employer to buy clothes and jewelry.
Roach’s attorney convinced a judge to let her off with a light sentence, but the Seventh Circuit Court of Appeals later ruled the judge’s sympathy misplaced, and Roach’s sentence was ultimately increased. Since then, several attempts at the shopaholic defense have failed.
In her book I Shop Therefore I Am: Compulsive Buying and the Search for Self, New York psychologist April Benson, a pioneer in treating compulsive buying disorder, describes the “image spender” who uses money “in a highly visible way … driven by an insatiable need to be admired and to appear important and powerful.”
“Because it is important for image spenders to be among the elite,” the book says, “they crave preferential treatment … it is very important to be seen as generous … they tend to pick up the tab in restaurants … give lavish gifts.”
“Shopping becomes almost a drug that can offer a break from inner turmoil,” Benson said in an interview. “But it can’t work for long. No amount of material goods can fill internal emptiness.”
But the American Psychiatric Association refuses to include this as a disorder in the latest version of its clinical bible, Diagnostic and Statistical Manual of Mental Disorders.
“Compulsive buying disorder is an excuse, not a disease,” says Dr. Charles O’Brien, chairman of the group updating that section of the manual and vice chair of psychiatry at the Philadelphia VA Medical Center/University of Pennsylvania.
Milwaukee Magazine shared details of Sachdeva’s case with three of the country’s top experts on oniomania, including Benson, Terrence D. Shulman (who runs the Shulman Center for Compulsive Theft and Spending in Detroit) and Coleen Moore (admissions manager for The Illinois Institute for Addiction Recovery).
Independently, all three said Sachdeva doesn’t sound like someone with oniomania, but rather like someone with narcissistic personality disorder.
It’s all irrelevant, says prosecuting U.S. attorney Jacobs. “The issue here is stealing. Not shopping. She wasn’t addicted to stealing. She was rational enough to know if she put her purchases on her own credit cards, her husband would know. That shows she had the ability to control what she was doing.”
Under the plea deal, Sachdeva stands to receive six years in prison, which could drop to five with good behavior. But Jacobs can advance arguments that could increase Sachdeva’s sentence, including: the sophisticated nature of the crime, that it “substantially jeopardized the financial security of a publicly traded company” (trading in Koss stock was halted for a time), or that Sachdeva led the criminal activity and “abused a position of private trust.” Any one of these could push the recommended sentence to 10 to 15 years, Jacobs says. But Sachdeva faces a judge, Lynn Adelman, with a reputation for leniency.
Jacobs is still considering whether to file charges against Sachdeva’s two accounting subordinates. Meanwhile, the FBI continues to investigate Sachdeva’s relationship with a number of individuals, many with Indian surnames, to whom she diverted tens of thousands of dollars in Koss funds.
The plea deal requires Sue Sachdeva to make restitution of $34 million. There is no indication she has anywhere near that, but because Wisconsin is a marital property state, one half of the couple’s assets is considered Sue’s and will go toward restitution.
Koss will recoup some of the money when confiscated merchandise she purchased with company funds is sold in an auction set up by the U.S. Marshals Service. But Koss family members own 73 percent of the company and likely lost many millions in dividends over the 12 years Sachdeva systematically reduced profits. Other stockholders lost as well.
Jacobs says he also sees Ramesh as a victim of the crime.
A colleague says the “rumpled professor” told him, “ ‘I don’t even know what I own anymore.’ He literally moved out of the house with the clothes on his back.” He leased a car, checked into an extended stay hotel, “and went to Macy’s and bought everything from underwear to ties.”
The colleague says Ramesh has been “supportive in terms of getting Sue the medical and legal help she needs, but that’s it. The marriage is over.”
The staff at Children’s Hospital has “really rallied around” Ramesh, the colleague adds. “We all realize he was just shocked. He’s the kindest, nicest man.”
Representatives at Hindu organizations patronized by the Sachdeva family say they were saddened by news of her criminal activities. Her deeds brought shame to the entire culture, they say.
Just days after her arrest, Sue called one of the Hindu monasteries she’d once visited. She was put through to a counselor. “Even though she had lost her children … her life was falling apart, and she was heading for incarceration, she was still insisting it was not a serious matter,” the swami says, insisting on anonymity.
“There is nothing anyone could do to save her from going into the dark night of the soul,” he adds. “She will probably need to wait until her next incarnation to get this all right again.”
Mary Van de Kamp Nohl, a senior editor at Milwaukee Magazine, is retiring after more than a quarter-century of service here.Write to her at firstname.lastname@example.org.
Corrections: The statement that Sue Sachdeva admitted to embezzling as much as $50 million is untrue; the best estimate at this time is $34 million. The magazine erroneously used a figure from the plea agreement’s sentencing guideline for Sachdeva, which indicates that “for purposes of determining the defendant’s offense level” the government can establish the loss amount in the indictment is “more than $20 million but less than $50 million.” The story wrongly identified a retailer and co-owner who Sachdeva bought furs from: It was not Holzman’s Furs but rather Furworks in Mequon, co-owned by Gary Sennett. And The late Dennis Owens was wrongly described as a news reporter for WITI-TV; he actually worked behind the camera as a floor director.