Fmr. Fry's Electronics VP pleads not guilty

January 15, 2009 8:31:47 PM PST
A former vice president of merchandising and operations for San Jose-based Fry's Electronics pleaded not guilty today to charges of money laundering and wire fraud in an alleged embezzlement scheme carried out over three years, according to the U.S. Attorney's Office.

Palo Alto resident Ausaf Umar Siddiqui entered his plea this morning during an appearance with his attorney Eric Sidebotham in U.S. District Court in San Jose, U.S. Attorney's Office spokesman Jack Gillund said.

Siddiqui is charged with five counts of wire fraud and four counts of money laundering.

His alleged scheme involved convincing Fry's executives to allow him to work directly with electronics suppliers, cutting out the sales representatives in order to save Fry's money, according to the criminal complaint filed the by the U.S. Attorney's Office in December.

However, in arrangements with suppliers, Siddiqui would allegedly accept more commission than a typical sales representative in exchange for purchasing from suppliers at above-market rates to offset the high cost of the commission.

Because the company was purchasing the merchandise at above-market rates, Fry's saw a loss in profits when selling merchandise from the suppliers involved in the kickback scheme, according to the criminal complaint.

Siddiqui allegedly created a fraudulent company, PC International LLC, to receive the kickbacks.

Siddiqui was indicted on charges that he embezzled about $5.7 million in a kickback scheme with two vendors, said Arlette Lee, spokeswoman for the IRS criminal investigations division.

A collection of Siddiqui's belongings have been seized in the case, including thousands of dollars from various bank accounts, thousands of British pounds and a few hundred euros. His seized briefcase contained 11 debit cards, and his 2006 Mercedes Benz has also been seized, according to the US Attorney's Office.

The case was brought to the attention of the IRS by a confidential source who works for Fry's electronics and obtained evidence of the kickback scheme, according to the criminal complaint.

The indictment clearly shows the millions of dollars wire transferred from the PC International checking account to Venetian Marketing Inc. in Las Vegas, Lee said.

The wire transfers were made to companies associated with Las Vegas casinos, but exactly how Siddiqui used the embezzled money has not been released.

Siddiqui's regular job as vice president of marketing and operations for Fry's earned him an annual salary of about $225,000, the criminal complaint states. He had been hired as a computer salesman for the company in 1988 and worked his way into the position, which entailed managing a staff of about 120 and purchasing merchandise sold in 34 Fry's retail stores, the complaint states.

Siddiqui is out of custody on $300,000 bond and is scheduled to return to court Feb. 4 at 9 a.m. before District Court Judge Jeremy Fogel, Gillund said.