The SEC would like everyone to know that it was “actively investigating” Stan the Man “well before the multibillion-dollar fraud by Bernard Madoff was revealed” but was “hampered by a lack of cooperation” from the Gun Show.
The investigation started back in 2005 but the SEC decided it wasn’t really time to get serious with Stan until after the whole Madoff SNAFU broke. So it sounds like from 2005 to late 2008, the “actively investigating” consisted of the following:
SEC: Hi. Are you running a Ponzi scheme?
Stan: I’ll die and go to hell if it’s a Ponzi Scheme
SEC: Good enough for us. Thanks for your help.
Give the SEC a break people. They were really trying on this one.
Stanford Hampered SEC Probe [WSJ]
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This Is How You Spend Stolen Money
So you’ve been embezzling money from your employer for awhile and what’s a girl to do? Well you could spend it on your wedding but if you’re already hitched then it’s has to get blown elsewhere. Besides, the £470,000 that Joanne Kent stole is chump change compared to what Sue Sachdeva had on her hands:
• $225,000 at Karat 22 Jewelers.
• $1.4 million at Valentina Boutique a high-end joint in Mequon, WI.
• $20 million on artwork.
• $649,000 at Zita Bridal Salon, even though she was already married. Probably just wants to wear a gown to slob around in.
• $670,000 at Au Corant a Milwaukee-based fashion retailer.
• $4.5 million on credit card bills.
A decent haul although the new GT leadership can’t be thrilled to have this shopping spree land in their laps.
Btw, congrats to Baker Tilly Virchow Krause, the new auditors, on the pickup. We’re sure it’ll be a breeze from here on out.
Toys R Us Accountant Will Probably Not Have Much Success Asking Hookers to Return Stolen Money
Back in fall we mentioned a run-of-the-mill whore-supporting accountant that pleaded guilty to ripping off Toys R Us to the tune £3.7 million. Paul Hopes is described as a ‘Walter Mitty character’ by the Telegraph who can now fantasize about what Oz character he is, now that he’s spending 7 years in prison.
Hopes got more bad news recently as he learned that he has to repay £3.36 million of the £3.68 million from Geoffrey.
If he fails to repay the money, he see his sentence more than doubled with an extra 10 years in prison.
The court heard that Hopes, an “accounts payable manager” at the retailer, diverted regular instalments of £300,000 to an account of a fictitious toy manufacturer which he controlled.
He named the fund Dunbar Associates after a prostitute with whom he had become besotted and to whom he eventually handed a total of more than £1.5 million pounds.
He spent at least £2.4 million of the money he stole on five female escorts in all.
That’s a bitch about the additional 10 years if doesn’t repay. But we’re sure that he placed the remaining £900k into a safe, no-load mutual fund so he’ll be able to at start paying at least part of it back ASAP. The sensible accountant in him had to have made one decision with stolen money.
As for the rest of it, we don’t know how successful Johns are at getting refunds in circumstances such as these but if those girls were 100% satisfaction guaranteed, he’ll have to explore other options.
Toys R Us accountant ordered to pay back £3.4m after escort girl fraud [Telegraph]
Koss Files Restated Financial Statements, Just in the Nick of Time
As you may recall, restated financial statements for headphonesmith company Koss were due yesterday and they used all the time they were allowed.
According to our friends at y filed its restated 10-K for June 30, 2009, and 10-Qs for September 30, 2009, December 31, 2009 and March 31, 2010 5 pm, 5:06, 5:11, 5:16 and 5:17 respectively.
Oh and they topped everything off with an 8-K at 5:27 that explains the barrage (not that we need it but, you know, securities law and stuff):
On June 30, 2010, Koss Corporation (“Koss”) released restated consolidated financial statements for the fiscal years ended June 30, 2009 and 2008, and the quarter ended September 30, 2009. Koss filed amendments to its Annual Report on Form 10-K for the fiscal year ended June 30, 2009 and its Quarterly Report for the three months ended September 30, 2009 containing the restated consolidated financial statements for the applicable periods. The restatements were required as a result of previously disclosed unauthorized transactions by Sujata Sachdeva, Koss’s former Vice President of Finance and Principal Accounting Officer.
Koss also amended its Quarterly Reports on Form 10-Q for the three months ended December 31, 2009 and March 31, 2010 to include financial statements, which were omitted from the Company’s reports when previously filed. The release of these financial statements was delayed due to the restatement of Koss’s financials statements required by the unauthorized transactions. With the filings of these amended Quarterly Reports on Form 10-Q, Koss understands that it will regain compliance with Nasdaq Listing Rule 5250(c)(1), which requires the timely filing of periodic financial statements.
That about covers it, doesn’t it? Oh right, the actual numbers. We checked in with forensic sleuth and GC friend Tracy Coenen on these and she gave us some perspective on the restated numbers:
So I’ve taken a run through the restated numbers for 6/30/09 and 6/30/08. Very interesting.
2009 – Revenue was understated by $3.5 million to conceal the fraud, while COGS was overstated by $1.7 million. Overall there is now a loss for 2009, thanks to $8.5 million of theft, but without that, the company would have had profits of $8.2 million, or 19.6% on net sales. Wow!
2008 – Revenue was understated by $2.1 million to conceal the fraud, while COGS was overstated by $1 million. Overall there is now a loss of 2008 of $1.3 million thanks to $5.1 million of theft, but without that, the company would have had profits of $10.7 million or 21.9% of sales.
Pretty impressive stuff. Maybe the company was right when they said everything would be hunky-dory once they got this little mishap out of the way. Chief headphone inheritor Michael Koss explains in the company’s press release, “Given that certain unauthorized transactions were concealed in the Company’s sales and cost of sales accounts, our sales were higher and our cost of sales was lower than previously reported in both 2009 and 2008. This correction has revealed an increase in gross margins for our Company. From this perspective, the Company’s performance was actually stronger than originally reported.”
Tracy continues:
What you see is that 65%-75% of the theft on an annual basis was concealed on the P&L, and the remainder was dumped into the balance sheet, via inflated A/R, Inventory, and fixed assets, and understated liabilities. The adjustments on the balance sheet are large by 2009 because those irregularities were cumulative.
So the bottom line is that the company is very profitable, if shareholders could actually count on them to watch over the money and see to it that the profits aren’t all being stolen. My original theory was that Sachdeva was expensing her theft, and that’s true to some extent, but failure to record sales was presented to me later as part of her her scheme, and she also involved the balance sheet which created a cumulative (and messy) problem.
Oh right! Watching the money. Should probably write that one down. Hopefully we’ve all learned a valuable lesson.