Ralph Esmerian, the former owner of rare-jewelry seller Fred Leighton, was arrested Monday on charges on fraud and embezzlement. The New York district U.S. Attorney's Office claims his illegal activities caused the company to file for bankruptcy protection in 2008.
While we're hearing more about fraud, that doesn't necessarily mean more workers are stealing from their employers or more money managers are swindling investors. The probable reason? Tighter corporate finances are making it more likely that existing frauds will be uncovered.
In the company's most recent 10-Q filed with the Securities and Exchange Commission, Koss Corp. stated the obvious: Now that their fraud troubles are over, they expect better financial results. Surprisingly, the company states that its internal controls will not be upgraded.
How does the alleged $31 million fraud at Koss Corp., a company with sales of no more than $45 million, go undetected for years? Blame management. It gave the employee charged with misappropriating funds far too much autonomy. And it never told auditors to do more than just the required audit.
Ponzi schemes were big news in 2009, but one of the most interesting white-collar crimes of the year appears to be good, old-fashioned embezzlement: $20 million allegedly siphoned from Milwaukee-based stereo headphone maker Koss Corp. Why did it take so long before anyone noticed?
