Fry’s executive held on embezzlement charges
A Ferrari-driving vice president of Fry’s Electronics Inc. who was allegedly such a heavyweight gambler that casinos chartered private planes to fly him to Las Vegas has been arrested on charges that he embezzled more than $65 million from the retailer to fuel his lavish lifestyle and pay off debts.
Ausaf Umar Siddiqui is accused by the Internal Revenue Service of concocting a hugely profitable scheme in which he cut side deals with some of Fry’s suppliers, buying their goods at higher prices than they would normally get and buying more of them than he normally would in exchange for kickbacks of as much as 31% of the total sales price.
The IRS alleges in a criminal complaint filed against Siddiqui that he set up a shell company that hid $65.6 million in kickback payments from five Fry’s vendors from January 2005 to November 2008. Of that amount, $17.9 million was paid to subsidiaries of Las Vegas Sands Corp., which operates the Venetian Resort Hotel Casino, according to the criminal complaint and regulatory filings. Authorities confirmed that the payments went to the casino.
Siddiqui, who lives in Palo Alto, was ordered held on $300,000 bond Monday at a hearing in U.S. District Court in San Jose. He has been in custody since Friday, when agents arrested him at Fry’s headquarters in San Jose in front of stunned co-workers. The details about his Ferrari and the private jets came out during the hearing.
His home phone number is unlisted, and it wasn’t immediately clear whether Siddiqui had a defense lawyer. A criminal complaint is one of the preliminary investigative steps for arresting someone and securing an indictment.
A Fry’s spokesman did not return a phone call left after hours.
Siddiqui has not been formally charged with the wire-fraud allegations laid out in the criminal complaint. Arlette Lee, spokeswoman for the IRS’ criminal investigation division, said the judge in the case had given the government 20 days to file formal charges, which she said prosecutors intended to do.
As Fry’s vice president of merchandising and operations, Siddiqui had an annual salary of $225,000 and supervised a staff of 120. His team was responsible for buying all the merchandise sold in Fry’s 34 stores around the U.S., according to the criminal complaint. The stores are mostly in California and Texas.
The IRS alleges that Siddiqui was able to amass so much illegal money by convincing Fry’s executives that he alone should be responsible for a job that is typically handled by independent contractors -- the job of the sales representative that brokers deals with the suppliers and the stores for a cut of the total sales price.
The reps are kept independent so they’re not seen as favoring one side or the other in sales negotiations, and their job can be lucrative if they’re good at it, with commissions ranging from 3% to 8% of the total sales they bring in, according to the complaint.
The IRS claims Siddiqui started striking side deals with some of the suppliers, in which he would guarantee he’d keep their products stocked on Fry’s shelves in exchange for kickbacks.
