 "Photo:")
"I was a white-collar criminal," admits Sam E. Antar, the former CFO and an intricate component of the "Crazy Eddie" securities fraud of the 1970s and 1980s. In this historic paradigm, creditors,and investors lost hundreds of millions of dollars; countless jobs were lost and the saga ended with several criminal indictments for numerous members of the Antar family.
Unlike the many perpetrators of corporate and securities fraud, Antar is not bashful about calling himself, or at least his previous self, a morally questionable and highly deplorable criminal. Though he could have disappeared after his involvement in such a remarkable scam, he chooses instead to speak about his mentality and behavior as a way of deterring future business students and accountants from engaging in practices that could defraud and debilitate such large sects of the unknowing population. He spoke at Baruch last week in part to chronicle how a scandal such as 'Crazy Eddie' could be perpetrated for so long without the appropriate checks and balances functioning to recognize fraud and to alert the proper authorities.
At the height of 'Crazy Eddie's' reign atop the tri-state electronics retail business, the market capitalization of the company was a staggering $600 million, with prices soaring to over $20 per share. Astoundingly from its inception, the founders of the company had systematically looted the company every year of hundreds of thousands and eventually millions of dollars. According to Antar, there were no significant attempts to uncover the fraud as long as the company continuously, year after year, churned out balance sheets indicating that there was the potential for growth and ever increasing profits. He also adamantly believes that this is the issue in many of the other instances of corporate fraud.
'Crazy Eddie' can trace its foundations to Kings Highway in Brooklyn where the first store was opened in 1969. Originally called Sights and Sounds, the company was only marginally profitable in the beginning as "fair trade" electronics laws prevented Eddie Antar, part founder and owner, from selling merchandise at prices that would produce exceptional profits. As a way of generating increased revenue and earnings, Eddie decided to sell merchandise at largely discounted prices that benefited customers, but broke numerous laws in the process. Along with performing the ever-famous "bait and switch", the company also engaged in a practice referred to as "lunch" which consisted of repackaging used merchandise and selling it as if it were brand new.
In an age where most purchases were cash purchases, internal theft proliferated at 'Crazy Eddie's.' The company opened several stores in the tri-state area and with each new store came a new source for the plundering hands of the now majority owner Eddie Antar. Most of the company's employees were paid off the books and a majority of the sales taxes from electronics were never reported to the Internal Revenue Service. As the company succeeded in the 1970s, "Crazy Eddie" Antar began having aspirations of taking the company public, increasing both his fame as well as the possibility for extraordinary profits.
As Sam E. Antar recalls, from 1969-1980 the company engaged in simple fraudulent procedures such as not reporting taxes, deceiving auditors, skimming from cash sales and repackaging used materials. In the interest of going public, the family had to employ a different kind of fraud: falsifying financial documents. In order to postulate the appearance of a more appealing investment as well as to give the impression of a company on the verge of great growth and prosperity, the Antar's gradually began to decrease the amount of money they were taking from the company. An example of this was that if the company made $10 million in 1980, the members of the family might have taken $5 million for themselves and reported the other $5 million as the generated revenue from the company stores. In 1981, the family would take $4 million, the next year $3 million and so on.
Upon going public, the company debuted with an impressive IPO, which went to fund the opening of 26 additional stores. Soon, recognition of fraudulent acts committed began their assent into the public. The previously rolling Antar fortunes suddenly came to a crashing halt. The shares of the company became practically worthless and in 1989 the company was forced to file for bankruptcy. In the aftermath, several members of the family were indicted and Eddie Antar fled to Israel. After Eddie's capture and extradition, he later pled guilty to federal fraud charges and after several years of court proceedings the Antar family was forced to return much of their profits in the form of restitution and several lawsuits were brought against Eddie Antar to recoup loses.
Several years have passed since the 'Crazy Eddie' scandal and numerous modern scandals have become more recognized and prolific in its place. An important question continues to linger long after the sentences, public apologies and historic bankruptcies have faded out of public consciousness however: how do we prevent the perpetration of fraud of this magnitude from ever recurring? According to Sam E. Antar there is already a reasonable and effective measure in place to prevent such a corporate travesty from taking place. Mr. Antar believes that the Sarbanes-Oxley act is a good measure and deterrent to the falsification of financial documents and the illegal business procedures that have been the crux of so many prominent companies. Though he believes the legislation could go further to protect investors and consumers, Mr. Antar sees it at as in important and effective way of addressing corporate fraud and believes it would have limited and perhaps prevented the 'Crazy Eddie' scandal from becoming the business cautionary tale it is today. Though it seems that in a capitalistic system corporate fraud is an unavoidable consequence of the structure of business, for the sake of our futures, our financial well-being and the security of our friends and families, I certainly hope Antar is right.
Be the first to comment on this article!