This story occured while I was taking a little Christmas hiatus, but it's spectacular enough to rehash here.
The merchandising VP of Fry’s Electronics was arrested on charges of embezzling more than $65 million from the chain in an elaborate kickback scheme he used to pay off gambling debts and support a lavish lifestyle.
According to media reports, the Internal Revenue Service has accused Umar Siddiqui of demanding kickbacks from at least five vendors in exchange for placing inflated orders. The payments, which were as much as 31 percent of the cost price of goods, were allegedly hidden in a shell company that paid nearly $18 million to the Venetian Resort Hotel Casino and subsidized a lush lifestyle that included a Ferrari, a penthouse apartment and private flights charted by casinos.
A criminal complaint says Siddiqui convinced Fry’s senior management to allow him to deal directly with vendors in order to save the company commission fees paid to sales reps.
Going into further detail is forensic accountant and fraud expert, Tracy Coenan:
In this case however, the shell company scheme was a little different. The shell company purchased goods at inflated prices from the suppliers, and purchased more goods than needed. The suppliers then split the excess profits with Siddiqui. The kickbacks to Siddiqui allegedly went as high as 31% of the sales price.
Siddiqui was allegedly able to pull off this shell company scheme because he supervised a staff of 120 people who bought merchandise for Fry’s 34 stores in the U.S.
And how did this scheme come to light? Apparently carelessness on the part of Siddiqui. Another executive saw a spreadsheet on his desk which detailed the kickbacks. The evidence was given to the IRS, who looked at Siddiqui’s bank records and found $167.8 million in deposits to the shell company. $65.6 came from 5 suppliers alone.
At the time that the story broke, I got an email from an industry contact who referenced the CE Pro story I had just done, entitled
6 Ways To Profit In 2009:
Hey Lee,
Guess there's a seventh way..
http://www.twice.com/flashVideo/element_id/2140308739/taxid/30414.html
I don't know how common that sort of stuff is now, but used to be a bit ofit on our side of the border.... 31%, Jeez, that's over the top... Storiesfor the book that we can write when we've retired and run away to someuntraceable part of the world...
And the beat goes on.
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