How could one corporate executive make more than $30 million in unauthorized transactions over four years without anyone else on the company’s leadership team or its third-party accounting firm being aware of the embezzlements?

That is among the questions law enforcement investigators are asking as they sort through the criminal allegations facing Sujata Sachdeva, former vice president of finance and secretary of Milwaukee-based Koss Corp. Sachdeva’s employment was terminated by the firm in December, and investigators have confiscated more than 22,000 items as evidence, including high-end women’s clothes and bags.

Investigators are determining how the purchases eluded the company’s corporate leadership team and Grant Thornton LLP, its former independent accountant.

Several Milwaukee-area certified public accountants and financial examiners interviewed by BizTimes Milwaukee said Koss Corp. did not appear to have the proper check-and-balance system needed to prevent the alleged embezzlements.

Tracy Coenen, fraud examiner, forensic accountant and founder of Milwaukee-based Sequence Inc.

“It’s clear that she had too much autonomy and that the other members of the executive team were not watching over her and her work,” she said. “She’s the top financial person in the company. They needed to have the other executives on a peripheral level so that she’s not operating completely on her own.”

It is easy to blame Grant Thornton LLP for missing the graft, Coenen said. However, the auditing process is limited in scope and can easily miss sophisticated theft schemes, she said.

“Audits are of limited usefulness – the scope of work is so small and is done in such a compressed time, usually at the end of the year,” Coenen said. “And the work that auditors do is predictable.”

In Coenen’s opinion, Sachdeva was probably able to conceal much of her fraudulent activity in Koss Corp.’s cost in goods sold accounts – areas that typically have large numbers of transactions and a high degree of cost fluctuation.

“If there are variations in those numbers, you can say they are material costs or other things. It’s something that’s very easy to explain away,” she said. “The auditors aren’t close enough to the business to question that. That’s just not something auditors will look at in that line item. That’s where management needs to be involved.”

Anita Ford, chief practice officer at Wauwatosa-based Clifton Gunderson LLP

Sachdeva’s long tenure and high position within Koss Corp.’s management team were what likely allowed her to allegedly spend so much money for such a long period of time, Ford said.

“I’ve been in this profession for a number of years and have seen frauds both large and small,” Ford said. “Typically, the higher up the perpetrator is in the organization, the bigger in terms of dollars and the longer the period of time it can be concealed because they have such power to control things. One of the areas where it is difficult to uncover fraud is where you have top level management concealing it and lying to auditors.”

Liz Kaiser, shareholder and CPA at the Brookfield-based Winter, Kloman, Moter & Repp S.C.

A lack of proper checks and balances to prevent embezzlement and related financial crimes is relatively common in companies that have less than $100 million in annual revenues, Kaiser said.

“If all of the abilities (to write checks and transfer money) is given to one person and no else looks at the transaction, that’s a significant risk for fraud,” Kaiser said. “We like to see a separation of duties where more people are doing different functions.”

For example, owners of smaller companies should look at as many checks and financial statements as possible, if they have someone else who writes checks. Business owners also need to be skeptical, even of their closest employees, Kaiser said.

John Lauber, president of Milwaukee-based Lauber CFOs

A proper checks and balances system should involve managers from multiple departments examining each other’s financial statements, Lauber said.

“You should be having somebody responsible for reviewing them who does not have transactional authority,” Lauber said. “It should be someone who doesn’t have the authority to sign checks and approve and reviewing disbursements. You should also have good financial information and budgets in place that would show expected results and comparing them to actual, and you then follow up on differences. It’s having a little of that auditor’s inquisitiveness.”

Marc Courey, director of litigation support, fraud and forensic services with Wauwatosa-based Wipfli LLP.

Both publicly traded and privately held businesses need to have the proper systems of checks and balances in place to prevent and catch fraud, Courey said.

“The reality is that at most businesses, until something like this occurs, they feel like this would never happen at their business,” he said. “The most important thing is that businesses have to realize they need to be ever vigilant. Every business is susceptible.”

Employers should closely examine their employees who could be most likely to begin stealing by simply paying attention to some of their personal circumstances, Courey said.

“Financial pressures on individuals have gone up, and the ability to rationalize has gone up also,” he said. “If you have got individuals where their house payment has reset up or they’ve got a spouse who is laid off, their need has gone up. And if you are with an organization where there have been layoffs or pay cuts, the ability or opportunity may be there.”

PyraMax Bank creates new music-themed checking accounts for young adults

Milwaukee-based PyraMax Bank recently launched its meChecking accounts, aimed at attracting young adults between 18 and 34 years old to open new checking accounts at the bank.

New meChecking accounts offer mobile banking, free ATM transactions, no monthly service fees and the added bonus of free music. New accounts receive either $100 gift cards redeemable for tickets to the Riverside Theater, Pabst Theater or Turner Hall Ballroom or $75 in iTunes downloads.

Every time an account holder accumulates $200 worth of purchases using the meChecking debit card, they receive a free iTunes music download. Each month, they receive an e-mail detailing how much has been credited to their account and can redeem the money for iTunes purchases at any time.

Kolb sells medical billing business

Brookfield-based Kolb+Co. SC has sold its ownership interest in Kolb+Co. Medical Billing LLC (KMB) to New England Medical Practice Management Inc. (NEMPM).

KMB has been renamed Revenex LLC and will serve as NEMPM’s Midwest regional office providing services to medical practices and skilled care facilities throughout Wisconsin, Illinois and Minnesota.

The 16 employees of KMB, including the management team, have been retained and will work for Revenex.

Although Kolb+Co. will have no continuing ownership interest in Revenex, it has entered into a shared services agreement with the new owner.

Tom Luken, president of Kolb+Co., said, “This strategic arrangement will allow Kolb+Co. to focus on our core competencies of providing high quality tax, auditing, accounting and consulting services to our health care clients with a recognition that if they need medical billing or revenue cycle management services, we can refer them to a quality operation that specializes in this type of service.”

Kolb+Co. provides integrated business and financial services and coordinated solutions to privately held businesses and their owners. The group has more than 100 employees and six affiliated advisory firms.

The union of KMB and NEMPM will enhance the services offered to current and prospective clients, expand the breadth of specialty areas served and provide greater resources to medical practices. Jointly, the two entities currently serve such medical specialties as: anesthesiology, dermatology, gastroenterology, general surgery, internal medicine, long-term care, OB GYN, orthopedics, otolaryngology, podiatry, radiology and urology.

“It is our mission to establish Revenex as the leading revenue cycle management company in the Midwest,” said Tom Murphy, president of NEMPM. “I am looking forward to working with the employees of Kolb+Co. Medical Billing to make this a successful endeavor for our clients and for us.”

Financial terms of the transaction were not disclosed.

California company acquires Netconcepts of Madison

Covario Inc., a provider of large-scale search advertising software and services, has acquired Netconcepts LLC of Madison.

Netconcepts specializes in the management of website search engine optimization (SEO) strategies.

The combined firms will do business as Covario Inc. and will be headquartered in San Diego, Calif.

The merged company will have nearly 100 customers in key industries such as high-tech, financial services, ecommerce, retail, consumer electronics, media, life sciences, and consumer packaged goods.

Covario will leverage the acquisition by integrating Netconcepts' GravityStream technology into Covario's SEO consulting practice and Organic Search Insight software.

"With the acquisition of Netconcepts and the GravityStream technology, Covario is bringing a unique solution to advertisers to help them accelerate their ability to present their brands on all the major search engines globally," said Russ Mann, chief executive officer of Covario. "By coupling Covario's Organic Search Insight with NetConcepts' GravityStream technology, advertisers will be able to identify the SEO actions that drive better rankings, and also deploy those strategies quickly, and in a highly scalable way to achieve their ROI goals."

"Advertisers who have constraints on their web development teams, usually do to the underfunding of information technology departments, need to build websites that are well optimized for Google," said Stephan Spencer, founder and president of Netconcepts. "The combined solution offers advertisers a fully automated SEO solution that spans keyword research, link building and web content management, strategy deployment, and ongoing reporting. There is no other solution like this on the market."

Spencer and Brian Klais, executive vice president of Netconcepts, are being retained by Covario. Alan Kipust, interim CEO of Netconcepts, is not being retained. The employees of Netconcepts have been offered positions with Covario, and the Madison office will remain open, Covario spokesman Josh Wozman told BizTimes this morning.

Lynn Paull has been named vice president and senior trust team manager for Milwaukee by Wells Fargo Private Bank.

She oversees the trust team and the management of estate and personal trust accounts, and also works with investment managers to develop and execute investment strategies designed to help meet client needs.

“Lynn’s dedication to meeting client needs and her extensive experience in fiduciary administration and management make her a valued addition to the Wells Fargo Private Bank team,” said James Duranceau, senior regional trust manager for Wisconsin and Michigan. “She will provide terrific leadership to our team, who work closely with clients to set up and administer estate and personal trust accounts.”

Prior to joining Wells Fargo, Paull spent 26 years at JPMorgan Private Wealth Management in a variety of positions.

National City, now a part of Pittsburgh-based PNC Financial Services Group Inc., has appointed A. James Baka senior vice president for corporate banking in Wisconsin.

Baka leads the Wisconsin corporate banking team in offering clients expertise in business financing, personal wealth management, global treasury services, capital markets, institutional asset management and international services.

Baka has 39 years of banking, financial services and corporate leadership experience, with more than 25 years in southeasten Wisconsin. His experience includes serving as senior vice president and managing director for middle market commercial, international and investment banking at Bank of America in Wisconsin and previously as senior vice president and chief financial officer for Ariens Company in Brillion. Most recently, he was the senior vice president of finance, strategic planning and corporate development at Alto Shaam in Menomonee Falls.

"Our customers will benefit from Jim’s wealth of experience in banking and his prior corporate leadership in some of Wisconsin’s top companies,” said Beth Wnuk, president of Wisconsin banking for National City. “We are committed to providing our clients with a deep understanding of their needs and offering the best credit and financial solutions.”

First Business Bank-Milwaukee announced that W. Kent Lorenz has joined its board of directors.

Lorenz is president of the Midwest region of Ellison Technologies, a provider of advanced machining and robotic automation solutions to North American metal-cutting manufacturers and their global affiliates. He also is the owner of of DKR Investors LLC.

“We’re pleased to have Kent join our board. His expertise complements that of our existing First Business Bank board of directors and builds upon the resources we offer our clients and staff.” said Dave Vetta, president and chief executive officer of First Business Bank-Milwaukee, which is part of First Business Financial Services Inc.

The board of directors of North Shore Bank has elected Jay McKenna as executive vice president and chief operating officer and Andrew Wallach III as chief financial officer of the company.

McKenna, who has been with the Brookfield-based bank since 1999, previously served as its senior vice president, chief financial officer and treasurer. Wallach, a 26-year veteran of the bank, was previously senior vice president.

The leadership transition is part of a succession plan adopted more than two years ago when the bank’s then-executive vice president, Richard Brophy, announced his intention to retire at the end of 2009, said Jim McKenna, the bank’s president and chief executive officer.

“Jay and Drew are talented bankers and business leaders who have helped guide North Shore Bank’s strength and success for many years, and they are well-prepared to assume these senior leadership roles,” Jim McKenna said.  “Our goal is a seamless, transparent and efficient transition.  Having highly qualified, committed leaders such as Drew and Jay in these roles will allow the bank to continue to do the work we’ve done so well for more than 85 years – provide the services people need to meet their financial goals; build a strong, principled business; and give back to our communities.”

Jay McKenna, 41, is the son of Jim McKenna.

“We’re glad to have Drew and Jay in these senior leadership positions at North Shore Bank,” Jim McKenna said. “Our bank, and the people and communities we serve, will continue to have an extremely bright future with these two fine bankers in the lead.”

Community Bank & Trust has promoted Toni Reed to office president at its Elkhart Lake office.

Reed has been with Community Bank & Trust for 5 years and has a total of over 18 years in the banking industry. Her most recent role was sssistant vice president of business development at the Plymouth office. 

The Equitable Bank has hired Dave Smith as its vice president - senior relationship manager, and Michelle Ward as loan serving manager.

Smith has been assisting Equitable as an outside lending consultant since October of 2009. He will continue to manage relationships with Equitable’s loan clients. With eight years in the commercial real estate development business and over 20 years of banking experience, Equitable is confident that he will be an asset to the Credit & Commercial Lending team.

Prior to joining Equitable, Ward was the Loan Operations Manager at First Bank Financial Centre and the Loan Fulfillment Team Manager at Washington Mutual Bank.

The Equitable Bank has also promoted:

• Bill Behm to bank officer, portfolio manager;
• Jeff Justin to bank officer, relationship manager;
• Rachel Schwab to bank officer, marketing;
• Tammy Smith to bank officer, processing and closing.

The Milwaukee-based CPA firm Komisar Brady & Co. LLP recently hired Matthew Engelhardt and Allison Radloff as staff accountants, Carl Rappelt in its audit department and Lori Jurgensen as executive assistant.

Northwestern Mutual launches 2010 recruitment for reps

Milwaukee-based Northwestern Mutual Life Insurance Co. plans to recruit more than 2,300 financial representatives and more than 2,500 financial representative interns in 2010 to help the company meet Americans’ growing need for financial guidance.

The projection comes on the heels of a record-setting recruiting year for Northwestern Mutual, which recruited 10 percent more financial professionals in 2009 than it did in 2008.

"There's a high-demand for trained financial professionals and our forecasts show that this demand will continue to climb in the foreseeable future," said Michael Van Grinsven, Northwestern Mutual field recruitment director. "With all the market uncertainty and confusing options, people are seeking guidance and clarity in their long-term planning."

Executives' salaries at large banks continue to soar

Major U.S. banks and securities firms are on pace to pay their executivs about $145 billion for 2009, a record sum that indicates how compensation is climbing despite public outcrites over Wall Street's pay culture, according to a new study by The Wall Street Journal.

An analysis by The Journal shows that executives, traders, investment bankers, money managers and others at 38 top financial companies can expect to earn nearly 18 percent more than they did last year - and slightly more than in the record year of 2007.

The conclusions are based on an examination of securities filings for the first nine months of 2009 and revenue estimates through year-end.

President Barack Obama is seeking to impose a tax on the largest banks to recover the taxpayer dollars that were given to the banks through the Troubled Asset Relief Program (TARP) that was approved by former President George W. Bush.

Associated Bank presents free monthly business knowledge webinars

Associated Bank has launched a “Business Knowledge Series” of webinars for business owners and leaders, featuring experts on best practices in business, financial industry developments, economic updates, and other current topics of interest.

“We created the Business Knowledge Series in response to growing demand for more information about unique issues facing businesses today,” said Alice Stephens, vice president and business marketing director for Associated Bank. “The webinars will provide business owners and decision makers with valuable information they can use every day as they manage their business.”

The complimentary webinars will be held on the second Tuesday of each month. Upcoming programs include “Economic and Investment Update” today and “Trends in Online Fraud” on Feb. 9. For more information about the Business Knowledge Series or to register for an upcoming webinar, visit www.associatedbank.com/businessknowledgeseries.

Economic Trends Breakfast to highlight opportunities of new year

BizTimes Milwaukee invites readers to get a jumpstart on 2010 by attending the annual Northern Trust Economic Trends Breakfast.

The breakfast, which will be presented by BizTimes Milwaukee on Friday, Jan. 22, at the Italian Community Center, will provide forecasts and insights about the year ahead in business.

The featured panelists for 2010 will be:

• Michael Knetter, Ph.D., the dean of the University of Wisconsin School of Business in Madison and a former U.S. presidential economist. Knetter will provide a macro-economic overview.
• U.S. Rep. Paul Ryan (R-Janesville) is invited to return to the breakfast, subject to the schedule of Congress. Ryan will provide the political outlook for 2010.
• Bob Arzbaecher, CEO of Actuant Corp., which is expanding and moving its global headquarters from Butler to a facility in Menomonee Falls. Actuant is a $1.2 billion diversified manufacturing company with facilities in 30 countries. Arzbaecher will discuss the outlook for global competition and manufacturing.
• Aaron Jagdfeld, CEO of Generac Power Systems Inc., which is growing in Waukesha and recently filed to become a publicly traded company. Generac manufactures portable residential power generators. Jagdfeld will provide the outlooks for manufacturing, innovation and energy.
• Andy Nunemaker, president of EMSystems LLC, a Milwaukee-based company that develops software systems for emergency rooms throughout the United States. EMSystems has acquired three other companies in the past 18 months and continues to grow. Nunemaker will discuss the outlooks for technology and health care.

For additional information or to register to attend, visit www.biztimes.com/trends.

Banking

• Wisconsin Department of Financial Institutions 
• Federal Deposit Insurance Corp.
• Wisconsin Bankers Association 
• Community Bankers of Wisconsin
• Wisconsin Mortgage Bankers Association
• American Bankers Association
• Bankers Association for Finance and Trade
• Commercial Finance Association 
• Risk Management Association

Mergers & Acquisitions

• Association for Corporate Growth 
• International Business Brokers Association 
• Mergers.com

Wealth Management/Financial/Retirement Planning

• Financial Planning Association
• Financial Planning Association of Southern Wisconsin
• Investment Management Consultants Association
• National Association of Personal Financial Advisors (NAPFA)

Other 

• Society of Financial Service Providers
• Small Business Administration
• State public awareness campaign
• Wisconsin Credit Union League
• CFA Institute
• CFA Society of Milwaukee
• Wisconsin Angel Network