Learning Fraud from a Fraudster
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The prices at the one-time consumer electronics retailer Crazy Eddie may have been “insaaaaane!” but the get-rich scheme concocted by owner “Crazy” Eddie Antar and his family associates was actually a surprisingly sophisticated plan to defraud the government and investors out of millions of dollars.
Sam E. “Sammy” Antar, a former certified public accountant and chief financial officer of the Brooklyn-based chain, as well as the cousin of Eddie Antar, shared Crazy Eddie’s story with Rider Accounting students during a candid talk titled Who Knows Fraud Better than a Fraudster? on Tuesday, October 27, in the Mercer Room. Antar’s appearance was sponsored by Rider’s Center for Business Forensics.
“Most fraud is conducted right in plain sight,” said Antar, a convicted felon who helped mastermind the Crazy Eddie’s 20-year run of deceit. “In our case, we went from cheating the government to cheating Wall Street.”
The purpose of Antar’s talk was to provide straight talk and facts about the dangers of fraud, lack of internal controls, lack of careful auditing, and the ways white-collar criminals prey on human nature and the weaknesses of others.
“What did Ronald Reagan used to say? ‘Trust, then verify?” Antar asked. “Well, let me tell you, trust is a professional hazard that will destroy your career.”
Trust was exploited over and over by the Antars from the time they opened ERS Electronics in Brooklyn in 1969. After Eddie Antar bought out the one-third share owned by his cousin, Ronnie Gindi, and assumed operations from his father, Sam M. Antar, the business was renamed Crazy Eddie in 1971. As a purveyor of discounted home electronics, Crazy Eddie pledged to consumers that it would beat the lowest prices they could find – a practice that did not sit well with the electronics industry.
“At that time, in the early 1970s, manufacturers set prices, and all retailers made the same gross profit,” said Antar, who explained that this fixed pricing drove many smaller, lower-volume retailers out of business. “Vendors, one after another, brought us to court and we beat everyone.”
Crazy Eddie profited by its practice of “baiting and switching” customers, bringing them into stores for one product before convincing them to purchase higher-margin items. But, at the same time, the retailer was also reaping millions of dollars illegally by skimming money off of its cash sales, money it would never have to report in sales to the government.
“Essentially, we were stealing sales tax. Back then, three-quarters of our sales were in cash. It wasn’t like it is today, where everything is bought with credit cards,” explained Antar, adding that this skimmed cash allowed Crazy Eddie to subsidize itself and offer consumers a better price when necessary. “By 1978, we were skimming one out of every five dollars we brought in.”
Antar said the company also regularly defrauded its insurers. “We had more fires and floods than the Bible,” he recalled. “We were out-and-out crooks.”
Eddie Antar had plans for his younger cousin almost from the company’s earliest days. “He paid for me to go to college and become an accountant,” said Antar, who immediately began work for Penn and Horowitz, Crazy Eddie’s auditing firm, after graduating. “It was all part of the business. I was already on the payroll when I was in school, doing our books.”
Seemingly representing the outside, Antar was actually working inside the Crazy Eddie operation, covering up deficits, concealing inventory fraud and, once the company went public in 1984, inflating sales figures to fool investors. “We went from tax evaders to tax avoiders,” he said.
By 1987, the Antars had sold most of their stock in the company. With a family schism growing and Securities and Exchange Commission investigators hot on his trail, Eddie Antar fled to Israel and Sammy Antar was left to protect himself from prosecution. Without a plea bargain in hand, he testified for the federal government and was sentenced to six months of house arrest and fined $30,000.
Antar explained that as an accountant, he installed and arranged for many barriers that would fool investigators, but said that Crazy Eddie’s scam – like most – was destined to implode. “You don’t plan to get caught,” he explained. “When you cross the street, you look both ways to protect yourself, but you never plan on being hit by a car.”
In the years since the demise of Crazy Eddie, Antar has spend the bulk of his time speaking to various student, corporate and government groups about fraud and white-collar crime from the perspective of a convicted felon. He often charges as much as $5,000 per appearance, but speaks at universities, such as Rider, for free.
“I still have a criminal mind,” Antar said. “But just as many drug addicts become drug counselors, you can call me a recovering criminal.”
Learn more about Sam E. Antar at his Web site, http://whitecollarfraud.com/.
