Crazy Eddie

Topics: Financial ratios, Balance sheet, Financial ratio Pages: 7 (2435 words) Published: March 5, 2013

In 1969, Eddie Antar, a 21-year-old high school dropout from Brooklyn, opened a consumer electronics store with 150 square feet of floor space in New York City. In spite of this modest beginning, Antar would eventually dominate the retail consumer electronics market in the New York City metropolitan area. Crazy Eddie Inc. was a retail consumer electronics store in New York City, by 1987; Crazy Eddie Inc. had 43 retail outlets, sales exceeding $350million, and outstanding stock with a collective market value of $600 million. Doubling in the four-year period from 1981 to 1984, sales in the consumer electronics industry exploded. Eddie Antar, the owner of the Crazy Eddie, Inc. converted his stores into consumer electronics supermarkets. Antar stocked the shelves of Crazy Eddie's retail outlets with every electronic gadget he could find and with as many different brands of those products as possible. The Inventory turnover rate steadily declines from 1984-87, which could indicate, lost sales. Misstatements of inventory or cost of goods sold could be possible. It also indicates employee strikes or, in Crazy Eddies' case, employees leaving their jobs. In 1986 the A/R turnover rate was extremely high which is unusual because in that year the consumer electronics industry boom days had ended. Competition in the New York area was high. Inventory turnover rates had been decreasing. How was Crazy Eddie receiving all this money if sales were down? It turned out that he was committing Fraud; he was stealing thousands of dollars. He started by changing the books so the company looked better than it really was to garner market share. Once he knew how to commit the fraud really well and cover his tracks, “he took the company public “and that is where he and his family really started to make some serious money. There was only one major problem: they had set a pattern, he had to commit a larger fraud every year in order to maintain the frauds he had already committed prior year. Since he was in business with many of his family members, there were few outsiders in the inner circle. The type of fraud committed by crazy Eddie In. included fraudulent financial statements, smuggling money out of the country, applying stolen money into the business as receivables, Manipulating the stock price through doctored financial documents, Breaking into auditor’s records to change inventory numbers, Moving inventory around after hours so it was counted multiple times, Destroying financial records, Falsifying discounts and debit memos, Money laundering, Using false identities to hide stolen cash and He and his family sold inflated stock to reap huge profits. The scam that this company had been committing was finally revealed by accident, when Eddie and his family sold the majority of their stock and lost controlling interest. An investor, Elias Zinn, throughout a proxy battle, gained control over the company. What he discovered was a fraud of epidemic magnitude! They tried in vain to save it, but within a year Crazy Eddie’s was done. Everything Eddie Antar and his family did was with the intention to steal, mislead, and deceive. Eddie Antar was the most awful type of fraudster and cheat; he was conscious, systematic and logical. He understood how the organization worked and exploited its weakness; he was a law breaker who was not concerned how his actions caused so much financial loss to investors who relied on Crazy Eddie’s reported financial statements to base their investing decisions. After the fraud was exposed; the SEC, FBI, Postal Inspection Service, and the U.S. Attorney got anxious to examine and look into how bad this fraud was and also try to locate Eddie who easily vanished. They at last caught up with him when he was living in Switzerland and had walked into a police station demanding help in understanding why bank officials would not give him permission to a $32 million dollar account. The principal concern for...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Crazy Eddie Fraud Case Research Paper
  • crazy Eddie fraud case Essay
  • crazy eddie Essay
  • Crazy Eddie, Inc Essay
  • Crazy Eddie Essay
  • Crazy Eddie Case Analysis Essay
  • Crazy Eddie Case Write Up Essay
  • Eddie Mabo Essay

Become a StudyMode Member

Sign Up - It's Free