Photonic Products Group Inc. (PPGI) received $300,000 from its insurance company in reimbursement after its chief financial officer embezzled $860,000, President and CEO Daniel Lehrfeld reported in his annual letter to shareholders earlier this month, while the former employee has only repaid $5000 after promising restitution.

Last summer PPGI discovered that CFO William Miraglia had stolen more than $833,000 over a six-year period (See "Photonic Products Group: Former CFO Stole $833,000"). He was suspended and later fired. An investigation undertaken by an independent forensic accountant for the board of director's audit committee revealed the total to be $860,000, including $711,000 in unauthorized charges on the company's debit card and checks totalling $94,500 written to the IRS to pay Miraglia's personal taxes. The audit also found that Miraglia acted alone, Lehrfeld said.

Miraglia was fired on June 14 and the company received the policy limit from its insurer, which totalled $300,000. Although Miraglia agreed to make restitution to the company, he has repaid only $5000, the company said in an SEC filing on September 29. Lehrfeld told shareholders it was unlikely Miraglia would be able to repay any more and the company is "considering pursuing other remedies."

Lehrfeld told shareholders the company has taken measures to improve its internal controls over money, including canceling its company debit card.

Lehrfeld also reported on the company's financial status. PPGI manufactures products through its three businesses: Inrad, a maker of crystal-based optical components and devices, laser accessories and instruments; Laser Optics, a provider of precision custom optical components, assemblies and optical coatings; and MRC Optics, a maker of precision diamond-turned optics, metal optics and optomechanical and electro-optical assemblies. PPGI has incurred operating losses for two of the past three years and net losses for each of the past three years, although the net loss for fiscal 2005 was "near break-even" Lehrfeld said, at $11,000. The net loss for 2004 was $673,000.

The company set a new revenue record for 2005, with a total of $13.8 million, up 49 percent from 2004, Lehrfeld said. Orders also set a record, with the $15.3 million total up 36 percent over 2004.

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