Koss names a new chief financial officer

Koss names a new chief financial officer By Doris Hajewski and Rick Romell of the Journal Sentinel…

Georgia (Jan 19, 2010)

Koss names a new chief financial officer
By Doris Hajewski and Rick Romell of the Journal Sentinel
 
Koss Corp. has named a new chief financial officer, David D. Smith, 55, who comes to Koss from Milwaukee-based Milsco Manufacturing, a division of Jason Inc.
 
Chief Executive Officer Michael Koss has given up the CFO title after the discovery that the company's former vice president of finance, Sujata Sachdeva, may have made unauthorized transactions totaling $31 million.
 
Sachdeva has been charged in federal court with embezzling $4.5 million. An indictment in the case is expected on Wednesday.
Smith, who holds a master's degree in business administration from the University of Pittsburgh, is a certified public accountant. He joins Koss as executive vice president and CFO. He served as vice president-finance and CFO at Milsco, a seating manufacturer, since 2006. Smith served in the same capacity at Alkar-Rapidpak Inc., a subsidiary of Middleby Corp., from 2002 to 2006.
 
Very few public companies, even among small ones such as Koss, have the same person holding the CEO and CFO positions, as the Milwaukee headphone manufacturer did from 1991 until Smith's appointment.
 
Some corporate governance specialists criticized the practice when asked about Koss. Nell Minow, co-founder of The Corporate Library research firm, called it "a nightmare."
 
Minow and University of Wisconsin-Madison accounting professor Terry Warfield both said the jobs together are more than one person can handle.
 
Paul Lapides, director of the Corporate Governance Center at Kennesaw State University in Georgia, agreed. He called the joint CEO-CFO "a really bad practice."
 
Larry Rittenberg, like Warfield an accounting professor at UW-Madison, said it is highly unusual for public companies have the CEO also function as CFO, but added, "It would appear to an outsider that Ms. Sachdeva may have been acting as the CFO, but without the title."
 
Koss Corp. had referred to Sachdeva as the company's "principal accounting officer" in some of its filings with the U.S. Securities and Exchange Commission.
 
Michael Koss, meanwhile, has provided the required certifications for the firm's financial statements as its "principal executive officer" and its "principal financial officer."
 
In a related development, two law firms, Glancy Binkow & Goldberg in Los Angeles and Federman & Sherwood in Oklahoma City, announced late Friday that they had filed shareholder lawsuits against Koss Corp. The firms said their lawsuits were filed in federal court in the Eastern District of Wisconsin, but the filings could not be confirmed because the court was closed Monday.
The Glancy Binkow suit, which also names Micheal Koss and Sachdeva, says shareholders were misled between July 12, 2005, and Dec. 21, 2009, because the defendants made false statements regarding Koss' financial statements. The suit says the company's financial results were overstated and that shareholders have suffered.
 
The company has continued to decline to comment since the criminal charges were issued in December.

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