Crazy Eddie: Fraud New YoCrazy Eddie: Fraud New York Family Style rk Family Style

Presented Presented By: By: Greg DrakulichGreg Drakulich

Denise DiazDenise DiazMaria FontMaria FontAngela SelimiAngela SelimiAdrienne SommerfeldtAdrienne Sommerfeldt

Crazy Eddie: Fraud New YoCrazy Eddie: Fraud New York Family Style rk Family Style

Introduction to Crazy Eddie Introduction to Crazy Eddie and The Antar Familyand The Antar Family

The Joey Butaffuoco of The Joey Butaffuoco of Corporate CriminalsCorporate Criminals

Eddie was not your typical corporate executiveEddie was not your typical corporate executive As president of Crazy Eddie he committed scams that As president of Crazy Eddie he committed scams that

reverberated throughout New York Cityreverberated throughout New York City The fraud did not start when Eddie was president of Crazy The fraud did not start when Eddie was president of Crazy

Eddie, from all accounts the seeds of fraud were planted Eddie, from all accounts the seeds of fraud were planted earlierearlier

Eddie Antar followed in the footsteps of his father entering Eddie Antar followed in the footsteps of his father entering the world of salesthe world of sales

He was a high School drop out from Abraham Lincoln High He was a high School drop out from Abraham Lincoln High at age 15at age 15

Eddie earned his nickname Crazy Eddie for his “unorthodox” Eddie earned his nickname Crazy Eddie for his “unorthodox” sales techniques from a couple of girls from his high schoolsales techniques from a couple of girls from his high school

During the 1960’s his sales methods earned him $600 to During the 1960’s his sales methods earned him $600 to $700 a week$700 a week

He resolved to own his business before his twentieth He resolved to own his business before his twentieth birthdaybirthday

Crazy Eddie’s StoresCrazy Eddie’s Stores

The history of Crazy Eddie’s stores begins in 1969The history of Crazy Eddie’s stores begins in 1969 Eddie first became a one-third owner in Sights & Sounds Eddie first became a one-third owner in Sights & Sounds

ERSERS The store lost money due to its locationThe store lost money due to its location

Eddie found a new location and gives his store a Eddie found a new location and gives his store a new namenew name

Crazy Eddie’s Ultra Light and Linear Sound Experience was Crazy Eddie’s Ultra Light and Linear Sound Experience was the name the name

Eddie’s frenetic pace and outrageous sales methods proved Eddie’s frenetic pace and outrageous sales methods proved successful in the new locationsuccessful in the new location

He would stand guard at the door demanding to know why He would stand guard at the door demanding to know why departing customers hadn’t bought anythingdeparting customers hadn’t bought anything

Soon after he had opened new stores and expanded to a Soon after he had opened new stores and expanded to a corporate officecorporate office

Crazy Eddie’s Family Life Crazy Eddie’s Family Life Clashes With BusinessClashes With Business

Crazy Eddie was sullen and lived in an alcoholic hazeCrazy Eddie was sullen and lived in an alcoholic haze He “became a sharp-tongued drunkard and braggart”He “became a sharp-tongued drunkard and braggart” He would do anything to get peoples cash and he was not niceHe would do anything to get peoples cash and he was not nice

The drunkenness and fast-paced lifestyle took a toll on The drunkenness and fast-paced lifestyle took a toll on his marriage to Deborah Rosen, later known as Debbie his marriage to Deborah Rosen, later known as Debbie #1#1

Eddie’s marital problems caused rifts within the family Eddie’s marital problems caused rifts within the family Despite their differences the family kept doing businessDespite their differences the family kept doing business The family cultivated an “us” versus “them” mentality which helped The family cultivated an “us” versus “them” mentality which helped

them accept fraud as part of their normal course of businessthem accept fraud as part of their normal course of business Consequently the tremendous turmoil clearly spilled over into the Consequently the tremendous turmoil clearly spilled over into the

businessbusiness

The Family Business GrowsThe Family Business Grows OpportunityOpportunity

While the business remained in family hands, they While the business remained in family hands, they were able to commit fraud undetectedwere able to commit fraud undetected

They cheated customers, the government and They cheated customers, the government and investorsinvestors

They even cultivated in-house talent when Eddie paid They even cultivated in-house talent when Eddie paid for Sam E.’s education at Baruch College, he later for Sam E.’s education at Baruch College, he later became a CPA and the company’s CFObecame a CPA and the company’s CFO

PressurePressure They had the pressure to live better, and show others They had the pressure to live better, and show others

in the community that the Antars were successfulin the community that the Antars were successful

Crazy Eddie: Fraud New YoCrazy Eddie: Fraud New York Family Style rk Family Style

The Rationalization Behind The Rationalization Behind The Crazy Eddie FraudThe Crazy Eddie Fraud

What is RationalizationWhat is Rationalization

Definition of rationalization within the Definition of rationalization within the fraud triangle theoryfraud triangle theory

““We had no rationalization…” said We had no rationalization…” said Sam E. Antar (Former CFO of Crazy Sam E. Antar (Former CFO of Crazy Eddie)Eddie)

Was there really no rationalization in Was there really no rationalization in a crime that lasted almost 20 years?a crime that lasted almost 20 years?

Rationalization During the Rationalization During the Skimming StageSkimming Stage

““I skimmed millions and millions of dollars. I skimmed millions and millions of dollars. But I never lied, I never cheated anybody” But I never lied, I never cheated anybody” Sam Antar (Eddie’s father)Sam Antar (Eddie’s father)

Sam rationalizes his hard work is enough to justify Sam rationalizes his hard work is enough to justify the skimmingthe skimming

The government is not anybody The government is not anybody The Antar family does not recognize the government The Antar family does not recognize the government

as a ruling bodyas a ruling body ““Off the books” everybody does itOff the books” everybody does it

Thru skimming and paying employees “off the books” Thru skimming and paying employees “off the books” The Antar family evaded taxes and made their The Antar family evaded taxes and made their businesses profitablebusinesses profitable

Fulfilling the Antar Fulfilling the Antar Family TraditionFamily Tradition

Eddie’s rationalization that a Eddie’s rationalization that a successful business equals making the successful business equals making the sale (no matter what)sale (no matter what)

Eddie pressured customers into sales, even Eddie pressured customers into sales, even locked customers in the store until they locked customers in the store until they bought something bought something

First free standing electronics storeFirst free standing electronics store A good idea managed poorly A good idea managed poorly ““There was everything wrong with how the There was everything wrong with how the

family ran the business” Bob Marmonfamily ran the business” Bob Marmon

Going PublicGoing Public

Let’s go public and make this “BIGGER”Let’s go public and make this “BIGGER” Eddie’s rationalization behind making the company publicEddie’s rationalization behind making the company public

He was the biggest and the best AntarHe was the biggest and the best Antar

Reduction in skimmingReduction in skimming A false increase in sales, made this company an attractive A false increase in sales, made this company an attractive

investmentinvestment

““We could have stopped when we went We could have stopped when we went public”public”

Sam E. Antar here describes what he calls “greed” and a Sam E. Antar here describes what he calls “greed” and a quest for power. He still claimed that there was “No quest for power. He still claimed that there was “No rationalization” rationalization”

Crazy Eddie Can Not Keep Up Crazy Eddie Can Not Keep Up With the FraudWith the Fraud

The Stock is falling The Stock is falling The decrease in the stock price arouses suspicions in The decrease in the stock price arouses suspicions in

investors and analystsinvestors and analysts

The Antar’s needed to commit more fraud The Antar’s needed to commit more fraud to cover the fraud from beforeto cover the fraud from before

The debit memo is just one of the many frauds to The debit memo is just one of the many frauds to cover up the others cover up the others

Eddie sells out his ownEddie sells out his own During his final year as president of Crazy Eddie, Eddie During his final year as president of Crazy Eddie, Eddie

Antar sold his stock to get out before the price fell too Antar sold his stock to get out before the price fell too lowlow

The End of the Antar LegacyThe End of the Antar Legacy

There was rationalization, they just There was rationalization, they just could not see itcould not see it

The Antar family way of thinking went on for The Antar family way of thinking went on for so long it clouded proper judgmentso long it clouded proper judgment

Their disregard for ethics was their Their disregard for ethics was their rationalizationrationalization

Thinking that there is nothing wrong does Thinking that there is nothing wrong does not mean that it is rightnot mean that it is right