Corporate Embezzlement Victims Sue American Express Over Fraud Detection Policy

Lenders often boast about fraud prevention for their corporate credit card programs, but a new lawsuit raises questions about whether banks can or should review suspicious bill payment activities. Lawyers for audio equipment manufacturer Koss filed suit against American Express this month, asking for up to $20 million in damages in response to a Koss executive's alleged embezzlement.

The plaintiff's former vice president of finance, Sue Sachdeva, allegedly used company credit cards to pay for millions of dollars in unauthorized personal expenses. Federal investigators claim that Sachdeva avoided detection by the card issuer's fraud department because of consistent spending patterns and because she ensured that each month's bill was paid on time.

Sachdeva used both wire transfers and cashiers' checks to cover over $20 million in bills, a payment pattern American Express' own investigators documented for Koss' senior management in December. However, attorneys for Koss suggest that American Express should have alerted company officials much sooner about Sachdeva's actions. Sachdeva awaits trail after a Milwaukee grand jury indicted her on embezzlement charges.