$8.5 million lawsuit against audit firm ends with settlement

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, intensified in the final years of the scheme.

Sacheva, 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 U.S. 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.

“Bringing this time-consuming matter to a practical conclusion is in the best interest of both parties,” Grant Thornton said in a statement Friday. A spokeswoman for the company said the firm would offer no further comment.

In a separate statement, Michael Koss, chief executive officer of the firm founded by his father, said “the matter has been resolved to the mutual satisfaction of the parties.”

He did not return calls for additional comment.

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