Tuesday, December 23, 2008

Better prices soon at Fry's

I always wondered why Fry’s didn’t have more aggressive prices, given its buying power, high volumes (roughly $70m/store/year) and low-overhead operations. Maybe this is why.

A one-time computer salesman who rose through the ranks to help build Fry's Electronics into a robust national retailer is facing allegations that he defrauded the San Jose-based company out of $65 million, much of which he used to pay off enormous gambling debts in Las Vegas.

Ausaf Umar Siddiqui, 42,who goes by "Omar" and has been Fry's vice president of merchandising and operations, appeared in federal court today, where prosecutors filed a complaint that alleges he was involved in a "secret kickback scheme to defraud Fry's Electronics of millions of dollars.''
According to the complaint, which was unsealed [Monday], Siddiqui convinced Fry's that the company should eliminate sales representatives on his accounts, and instead, he'd act as a middleman between vendors and Fry's. He promised that he'd save Fry's a lot of money that way. But instead, the complaint alleges, he ended up charging exorbitant commissions — up to 31 percent, or ten times the normal amount — to the vendors, which he funneled to his own "straw'' company PC International.

Vendors were guaranteed steady business, so Siddiqui would have a steady cash flow to pay off casinos. Siddiqui spent $162 million in three years at just two of his favorites, the MGM Grand Casino and Las Vegas Sands Casino, according to his bank statements detailed in the complaint.
Why wasn’t it detected earlier?
Siddiqui was a "longtime friend" of John Fry, said Fry's spokesman Manuel Valerio. The reaction of employees and management to Siddiqui's arrest, he said, "is one of surprise and shock — and that's an understatement."
Now that it’s discovered — and in the light of the declining economy with increasing customer price sensitivity — perhaps we’ll see better prices soon at Silicon Valley’s favorite electronics retailer.

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