1. Crazy Eddie AntarCrazy Eddies inc.
Fraud Case
Senior Seminar
Rebecca Easton

2. Eddie Antar became an icon after creative advertising tactics of his prices being insane which created enormous market awareness and has made him be forever known as Crazy Eddie. Not only was Eddie Antar crazy in creating and upholding a commercial electronic business, Antar was insane when practicing various types of fraud.
Crazy Eddie Antar is mainly known for his many schemes of falsifying records to inflate profits and increase stock prices that caused a bankruptcy of his own company and left many investors still in debt today.
Thesis Statement:
3. Born in Brooklyn, NY in 1947
Fit personality profile of a white collar criminal
Opened Sight and Sound in 1968
Crazy Eddies
Cutting edge prices
Aggressive sales techniques
Earned the nick name Crazy Eddie
Eddie Antar
4. Whole family involved in fraud for many years, mostly inventory fraud
Getting more difficult to hide fraud
1984 Crazy Eddies goes public selling for $8 a share
1986 stock sold for $75 a share
Sam E. Antarbecame accountant for company
Needed to hide $3 million deficit and wanted to increase by 10% in sales
The Story
5. Sam schemed the money
Known as Panama Pump
Israeli banks
Transferred to Panama banks
The story
6. 1986 Electronics boom ended causing a drop in stock
December 1986 Eddie resigned as President and CEO
Eddie cashed out his share of the stock, $25 million - $30 million
Stock was back down below $10 a share
Hostile takeover starting lawsuits
against the whole family
The story
7. Zinn & Palmieris financial analysts audited Crazy Eddies finding inventory short $40 million - $50 million
1987 federal grand jury investigation
SEC subpoena whole family
Liquidation and closing of store
Eddie failed to appear at court, freezing his assets
Eddie fled country to Israeli while Sammy testified guilt in exchange for immunity
The story
8. 1992 arrested near Tel Aviv
Found guilty on 17 counts of fraud, sentenced to 12 years
Appealed, overturned
1996 pled guilty, sentenced to 8 years
$150 million in fines, $1 billion in judgments
The story
9. 1998 online store, crazyeddieonline.com, closing in 1999
Eddie returned, re-launched website to crazyeddie.com
2004 website disappeared
2006 Trident Growth Fund bought trademark, auctioned off brand for $800,000 and domain name with failure
2009 Jack Gemal bought rights, pricesareinsane.com
Recovery?
10. Eddie works for an electronic superstore
Sammy advisor for government agencies and businesses investigating fraud
Efforts to recover the lost money are still continued today
Where they are now?
11. Whole family engaged in fraud from get-go
For every $5 reported as income, $1 was taken by Antars
Deposited illegal funds into Israeli banks under fictitious names
$3 - $4 million a year skimmed
Fraud scheme overview
12. Practice of engaging in financial transactions to conceal the identity, source, and / or destination of illegally gained money by which the proceeds of crime are converted into assets that appear to have a legitimate origin
Money laundering
13. 3 main phases:
Placement - physically distributing cash
Series of separate deposits in Israel bank
Layering camouflage illegal sources by fixing transactions
Off shore bank accounts, before officials had a chance, Eddie wired money from Israel to Panama banks
Integration money gets mixed in with legitimate dollars and documented as revenue
Eddie wired money from Panama bank accounts to Crazy Eddies
Money Laundering
14. Fictitious Revenues boots both assets and income by crediting accounting transaction to sales with an offset debit to accounts receivable
Created fake invoices showing merchandise sales
Suppliers cooperated
Fraudulent Asset Valuations overvaluing inventory
$80 million overvalued
borrowed merchandise from suppliers to boost ending inventory count
Altered inventory count sheets to increase inventory
Methods of financial statement fraud schemes
15. Timing Differences taking advantage of accounting cut off period
Books were open past the end of the period to falsely inflate sales revenue
Liabilities not recorded until next period
Concealed Liabilities and Expenses
Placed unpaid bills in desks
Improper Disclosures
Altering footnotes to state that certain income was recognized when received, cash basis
Next year, removed received and substituted earned, accrual basis
Methods of financial statement fraud schemes
16. Eddie 21 years old, aggressiveness, reputation, sales tactics
Inventory observations auditors let company employees help with counting
Suppliers dependent on only 3 suppliers, too small of a relationship
Personal Relationships all members with positions were family members, lacking appropriate qualifications for those positions
Red flags
17. Increased Finances growing way too well compared to industry
Financial statements inventory account dominated balance sheets increasing from $23 million to almost $110 million
Age of inventory leaped from 80 days to 111 days
Inventory increase, but accounts payable decreased
Year end accrued expenses were lower than previous three years, even though assets increased by 800%
Red flags
18. Investigate Customer Before Accepting could have stopped conducting business with Eddie after finding out he was a risky business salesman
Inexperienced Field Officers lacked judgment and maturity, should have been audited by senior auditors, fraud examiners, and / or antifraud specialists
Carefulness asked crooked employees to help count without verifying the count
Trust auditors need to be less trusting, Trust, but verify.
Could have made copies of inventory sheets or crossed out unused sections
Dont have a desk in company
Dont leave keys on top of desk
What should have been done
19. Investigate Supplier Relationships too dependent on 3, should have investigated this
Analyzed Personal Relationships dealing strictly with family is an extra risk, known to be easier to conspire with family
Assess Economic Status of Related Businesses doing too well compared to industry
Randomness -auditors should have randomly picked an account and requested supporting documentation
What should have been done
20. No Independent Auditing two audits should have been done to compare and contrast findings
Critical Thinking and Interviewing Skills auditors lacked these
Internal Controls having internal controls can help prevent and detect fraud
What should have been done
21. Fraud Prevention cumulative effect of both preventative and detection systems incorporated by management
CIA Triangle
Confidentiality limit unauthorized access, limit access to authorized users
Integrity trustworthiness of information resources
Availability ensures data is available
Code of Ethics
Employee Screening
Future frauds
22. Education
Training
Awareness
Future frauds
23. Fraud Strategy / Plan
Prevention
Fraud Policy
Detection
Internal Controls
Internal Audit
External Audit
Reporting Structures
Response
Response Policy
Investigation
Internal
External
Future frauds
24. The end