The U.S. Securities and Exchange Commission submitted a revised settlement of a lawsuit against stereo headphone maker Koss Corp. and its chief executive officer after a judge rejected an earlier one as too vague.
The SEC sued Milwaukee-based Koss in October, claiming it had filed “materially inaccurate” financial statements from 2005 to 2009. The agency said the failure of Michael J. Koss, who was CEO and chief financial officer, to supervise his accounting staff enabled another executive to embezzle $30 million.
The SEC yesterday submitted a new settlement to U.S. District Judge Rudolph T. Randa in Milwaukee after his rejection of a prior one in December. As in the earlier one, the new agreement requires the CEO to forfeit $450,000 and 160,000 options and to cooperate with the SEC. Neither the company nor the Koss will admit or deny the SEC’s claims.
“There was no substantive difference” between the two settlements, SEC lawyer Andrea Wood said today in a telephone interview.
After rejecting the earlier proposal, Randa in December asked the SEC to explain how it calculated the amount that Koss would pay. SEC lawyers said the sum was equal to bonuses and incentive pay that he received for the fiscal years 2008 and 2009 and part of 2010.
Randa said on Feb. 1 that the SEC’s response “largely” satisfied his concerns.
Randa’s rejection of the December accord followed the Nov. 28 refusal by U.S. District Judge Jed Rakoff in New York to approve the SEC’s $285 million settlement with Citigroup Inc. over a mortgage-backed securities fund. Rakoff said the agency hadn’t provided him with enough facts.
Alan Berkeley, a partner in Pittsburgh-based K&L Gates LLP who is representing the company and the CEO, didn’t immediately respond to a voice-mail message seeking comment on the revised settlement.
Sujata Sachdeva, a former Koss finance executive, pleaded guilty in 2010 to embezzling more than $30 million. She was sentenced to 11 years in prison.
The case is U.S. Securities and Exchange Commission v. Koss Corp., 11-cv-00991, U.S. District Court, Eastern District of Wisconsin (Milwaukee). The criminal case is U.S. v. Sachdeva, 10-cr-00006, U.S. District Court, Eastern District of Wisconsin (Milwaukee).