UPDATE! San Jose, Calif. — 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.
In a statement, Fry’s said the kickback scheme operated outside of the company and was uncovered by its executives, who linked it to Siddiqui. Fry’s is cooperating with the United States Treasury Department to “expose any others involved in this illegal activity,” and is demanding prosecution to the fullest extent of the law.
Fry’s noted that the fraud did not affect the chain’s “low pricing” or “financial position.”
Siddiqui, who supervised a buying staff of 120, was arrested at Fry’s headquarters here on Friday and was ordered held on $300,000 bond. He has since been fired.
None of the vendors were named as defendents.
Privately held Fry’s sells discounted electronics, computers, major appliances and furniture from 34 megastores around the country. The closely-held company was founded 23 years ago as a CE store for Silicon Valley professionals by brothers John, Randy and Dave Fry, along with Kathy Kolder, who remain actively involved in day-to-day operations.