Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, October 24, 2011

Koss CEO Agrees to Return Incentive Compensation Because of Faulty Controls

The SEC announced a proposed settlement with Koss Corporation (“Koss”) and Michael J. Koss, its CEO and former CFO, based on Koss Corporation’s preparation of materially inaccurate financial statements, book and records, and lack of adequate internal controls from fiscal years 2005 through 2009. During this period, Sujata Sachdeva (“Sachdeva”), Koss’s former Principal Accounting Officer, Secretary, and Vice-President of Finance, and Julie Mulvaney (“Mulvaney”), Koss’s former Senior Accountant, engaged in a wide-ranging accounting fraud to cover up Sachdeva’s embezzlement of over $30 million from Koss.

Koss and Michael J. Koss have consented to the entry of an injunctive order without admitting or denying the allegations in the Commission’s complaint. The proposed order would order Michael J. Koss to reimburse Koss $242,419 in cash and 160,000 of options pursuant to Section 304 of the Sarbanes-Oxley Act. This bonus reimbursement, together with his previous voluntary reimbursement of $208,895 in bonuses to Koss Corporation represents his entire fiscal year 2008, 2009 and 2010 incentive bonuses.

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Isn't the order of injunctive relief just a bit silly? The corporation was victimized by a thief. It obviously didn't intend to be robbed. How are shareholders better off now that an injunction has been entered?

Posted by: Keith Paul Bishop | Nov 25, 2011 8:32:54 AM

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