crazy Eddie fraud case
Crazy Eddie, Inc. financial fraud case
Crazy Eddie was an American retail store chain run by the Antar family, which was established as a private company in 1969 in Brooklyn, New York by businessmen Eddie and Sam M. Antar. The fraud at Crazy Eddie was one of the longest running in modern times, lasting from 1969 to 1987. Crazy Eddie became a known symbol for corporate fraud in its time, but has since been eclipsed by the Enron, Worldcom and Bernie Madoff accounting scandals.
Commencement of fraud
The fraud began almost immediately, with the management of Crazy Eddie underreporting taxable income through skimming cash sales, paying employees in cash to avoid payroll taxes and reporting fake insurance claims to the company's carriers. Eddie Antar, the CEO of the company who was the mastermind in the fraud, was skimming money from sales taxes that he only partially remitted to the government, while using part of the money to give steep discounts to customers. Much of the rest of the money he used to fund a partying lifestyle, while secreting a fortune at home and abroad. He also repackaged used and damaged electronics and resold them to customers as new. When electronics companies refused to supply him because he was selling the products to his customers below list price, he instead sourced the products from suppliers in other countries on the gray market. He used massive sales promotion strategy to promote his company's name and products. The television ad of the company was very much popular that time. The company began to grow rapidly and had several branches across the country. As the chain grew in size, the Antar family started planning for an initial public offering (IPO) of Crazy Eddie and scaled back the fraud so that the company would be more profitable and get a higher valuation from the public market. This strategy was a success and Crazy Eddie went public in 1984 at $8 per share. The final phase of the Crazy Eddie fraud began after the IPO and was
Crazy Eddie was an American retail store chain run by the Antar family, which was established as a private company in 1969 in Brooklyn, New York by businessmen Eddie and Sam M. Antar. The fraud at Crazy Eddie was one of the longest running in modern times, lasting from 1969 to 1987. Crazy Eddie became a known symbol for corporate fraud in its time, but has since been eclipsed by the Enron, Worldcom and Bernie Madoff accounting scandals.
Commencement of fraud
The fraud began almost immediately, with the management of Crazy Eddie underreporting taxable income through skimming cash sales, paying employees in cash to avoid payroll taxes and reporting fake insurance claims to the company's carriers. Eddie Antar, the CEO of the company who was the mastermind in the fraud, was skimming money from sales taxes that he only partially remitted to the government, while using part of the money to give steep discounts to customers. Much of the rest of the money he used to fund a partying lifestyle, while secreting a fortune at home and abroad. He also repackaged used and damaged electronics and resold them to customers as new. When electronics companies refused to supply him because he was selling the products to his customers below list price, he instead sourced the products from suppliers in other countries on the gray market. He used massive sales promotion strategy to promote his company's name and products. The television ad of the company was very much popular that time. The company began to grow rapidly and had several branches across the country. As the chain grew in size, the Antar family started planning for an initial public offering (IPO) of Crazy Eddie and scaled back the fraud so that the company would be more profitable and get a higher valuation from the public market. This strategy was a success and Crazy Eddie went public in 1984 at $8 per share. The final phase of the Crazy Eddie fraud began after the IPO and was
References: 4 Massive Frauds You 've Probably Never Heard Of. (n.d.). Retrieved from http://www.investopedia.com/articles/economics/12/four-unknown-massive-frauds.asp A Convicted Felon Speaks Out about White Collar Crime. (n.d.). Retrieved from http://www.whitecollarfraud.com/947660.html Crazy Eddie - Wikipedia, the free encyclopedia. (n.d.). Retrieved May 6, 2014, from http://en.wikipedia.org/wiki/Crazy_Eddie Crazy Eddie Masterminds [Video file]. (2012, January 7). Retrieved from http://www.youtube.com/watch?v=CP8iO5lvCoU Weirich, T. R., Pearson, T. C., & Churyk, N. T. (2010). Accounting & auditing research: Tools & strategies. Hoboken, NJ: Wiley.