Koss settles suit against American Express for $3M

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Koss Corp. has settled a lawsuit against American Express Co., resolving allegations that the credit-card company should have known that Koss’s money was being embezzled to pay for a former Koss executive’s shopping sprees.

Koss, a Milwaukee-based maker of high-fidelity headphones, announced Friday that it will receive a gross amount of $3 million from the settlement. Part of the money will go to offset attorneys’ fees and related costs.

“The matter has been resolved to the mutual satisfaction of the parties,” said Michael J. Koss, CEO of Koss Corporation.

Koss’s suit against American Express was filed in Maricopa County, Arizona, in early 2010. The case had its origin in the embezzlement of about $31 million of the corporation’s money by Sujata Sachdeva, a former Koss vice president of finance, secretary and principal accounting officer.

Koss officials and their attorneys alleged that American Express employees had not fulfilled their responsibilities under the Bank Secrecy Act, which requires financial institutions to have policies in place to detect and report possible fraud. Had American Express employees performed their duty, the original suit contended, Koss officials would have learned of Sachdeva’s embezzlement earlier.