Crazy Eddie announces the grand opening of a brand new store! That's right Crazy Eddie is coming to RT. 22 West Union New Jersey, this Saturday March 17th. It's going to be the most earth shattering grand opening ever. Thousands of free gifts, free tee-shirts, free flyers, Yo-Yo's! You know that Crazy Eddie has the lowest prices on home entertainment equipment. Well! Now Crazy Eddie is coming to RT. 22 West Union New Jersey with the lowest prices ever! Crazy Eddie great new Union store on RT. 22 grand opening this Saturday March 17th. Be there! When I was 14 years old I started working for Crazy Eddie. That's the same Crazy Eddie who committed one of the most outrageous financial statement frauds in history. Eddie Antar, the president, CEO and major shareholder of the company. Was convicted of 17 counts of fraud. What happened was the case was turned over on a technicality. Eventually he pled guilty and served about eight years in prison. There is a saying that you can do more with a pencil than with a gun, in some aspects it's true. And I think in this aspect it's true. Over 400-500 million worth of investors’ money, and God knows how many lives have been shattered by this? So there is a lot of bad things that were done. And the consequences of what I was doing, and, and I knew that I was hurting people, and a lot of people got hurt by it. We were a bait and switch company. That is why is is called Crazy Eddie in the advertisements, it's all in the name. Get your best price, come into Crazy Eddie and we'll beat it. What does that tell you? You got to come in and haggle to get the price. We're not honest, we can't get you the right price, right away! I mean uh, Eddie was the tough guy that everybody looked to when there was a problem. If there was a problem he was there. He was a muscular guy, a good looking guy, very charismatic kind of a guy. Uh, I was very friendly with Eddie and Eddie’s brother Mitchell, he was very friendly. Eddie was a god like figure to me even before I went to Crazy Eddies. What was born as a family conspiracy to skim money and evade taxes, grew to a financial fraud of huge proportions. And it ended with victims everywhere. What happened was, the stores would tally up their sales, there's no real internal controls. They just add up all their cash, add up all their checks, and add up all their charges. They'd have a hundred thousand dollars in cash, fifty thousand in checks, twenty thousand in deposits - a hundred and seventy thousand dollars - they bring it to my father’s house. My father say's ok, how much do you want to skim? We want to skim fifty thousand dollars - fine. He takes fifty thousand from the one hundred thousand dollars and takes it to the office the next day. We did fifty thousand in cash we did fifty thousand in checks, twenty thousand in charges, a hundred and twenty thousand gets deposited. It never shows up on the books, it just doesn't exist. There is only a certain amount of money that gets skimmed and what's the use of it. Um, what was made in 1971 was a conscious decision. We're skimming three million maybe four million dollars a year. Was skimming most of the profits from Crazy Eddies. It's not good to skim most of the profits from Crazy Eddies because if there no profit being showed, how are you going to go public? There is no profit! So, so the thought process is like this: We can't just stop skimming at all 'cause that ain't going to help neither. But what was done was... a plan was made which was to skim less money each year, starting around... And that means it's time for Crazy Eddie's Christmas Sale! I think it was around Christmas of '78...what was done was with 1.5 million dollars which was previously skimmed money was taken out of Israel, wired to a bank in Panama, to ten, twelve to fourteen drafts from twenty to a hundred and twenty thousand dollars was brought to Crazy Eddie through Panama from the Antar's accounts in Israel. They're only counting the inventory at the end of the year, your accounts payable at the end of the year. They're checking the depreciation schedules, they're making sure there is proper cut off testing. From the day the auditors leave, which is about sixty days at the end of the year, from sixty days from the end of the fiscal year, which is sixty days into the new fiscal year, you can do almost anything you want and there is nothing they can ever detect. We found a vendor that was willing to cooperate with us. And what he had done was, he would buy merchandise, give us the checks in small amounts, and what we were able to do is take those checks in small amounts...he would buy, say half a million dollars’ worth of merchandise and give us ten to fifty thousand dollar checks and we would just add it to the deposits for the various stores increasing the sales for various stores for various quarters. We wanted the numbers to go down, but we wanted them to go down as slowly as possible without there being any problems. So, and then your idea would be that in four or five years you've worked your way out of the fraud and everything is cool? Yeah but what happened was... that wasn't able to happen...because the numbers went down so fast, taking such a free fall, that basically all of this four or five years was going to be compacted into a three month period. And what happened was is that the company was starting to become very vulnerable. What I mean by that was that the company was legitimately losing money. And we had previous frauds and we had cover these previous frauds and also start reporting losses but we didn't want to report losses in such a way that would alert that these previous frauds had been committed. There was two buyers in cahoots with us. There was my cousin Mitchell who was in charge of the buyers, there was Cathy, she was in accounts payable, she was in cahoots also, and she was, I was her boss. And we would generate these phony debit memos of the pricing of the inventories. They should have taken into account, these excessive debit memos and reduced pricing of these inventories accordingly. As it was explained to me was fairly simple. Umm... you have to picture a warehouse with boxes all over the place, tons of boxes of merchandise all in rows, sometimes neatly stacked and sometimes not neatly stacked. And the merchandise is not always visible to the naked eye, it's stacked in front of merchandise, stacked in front of merchandise, stacked on top. The inventories were inflated by adding digits and or quantities on the count sheets. They concentrated on high priced slow moving items. Some auditors would go in there and take test accounts. What would happen was, they would not ascertain what the real numbers were behind the boxes, they would rely upon those two Crazy Eddie employees for their counts in areas where they couldn't climb up and see what merchandise was behind. They would say, ya' know, how much televisions do you have of this brand? There would really be fifty, but they would say no, it's one hundred and twenty five. And the auditor would take the number, and write down one hundred and twenty five and so on and so on and so on. If one of the staff caught it, he would report it to his manager the manager would report it to the partner, the partner would report it to my cousin Eddie and top management. And look what happened, it looks like something happened in these three stores". And what did Eddie do? Play dumb? He played dumb. He said ya' know there is something I can't dispute, there's something that must have happened here...but why would we do it? Who would be so stupid as to cross a ten out and make a twenty? If you're going to do it wouldn't there be an easier way of doing it? I mean who would, ya' know, it must be someone just trying to cause trouble for us. And they bought it. There was no note in the audit board papers, there was no report to the outside director, there was no nothing. They just adjusted the numbers and that was it. They were vary careless they left their work papers out when they went for lunch. They sometimes left it in their work papers box and they left it unlocked. Sometimes they locked the work papers box, but left their papers out. But worse than that, and it's not a joke but it might seem funny. I have a box of paper clips maybe this small right? And you know what they did? The audit work papers were locked in a trunk. The key was left in a box of paper clips on one of the desks that we provided them with. And all that we did was go into the box of paper clips, open the trunk, see what they were doing, and do whatever we had to do. Change inventories, change accounts payable, look into what areas they were doing, look into any of their concerns on the audit. And that is how we were able to accomplish a 45 million dollar, maybe 50 million dollar inventory fraud in 1987. The family started quarreling with each other. There was a, Eddie not had a very good marriage with his first wife. And the family kinda took sides. One side of the family was for Eddie and the other side was for his wife. And what happened was his wife, his ex-wife challenged the divorce, and after that kind of... while everybody is in the midst of this fraud, all of these conspirators are having a civil war with one another. We lost control, another management group, taking advantage seeing that Crazy Eddie was a big jewel, and its only problem was family turmoil. Not knowing early on that there was a fraud going on. But again being assisted by various members of the Antar family that were now aligned against Eddie took over the company in November of 1987. About nine days after they took, the first thing they did the first day, they took over the company at three o'clock, I got my pink slip at six o'clock. I was out... on my backside. After sixteen years, my whole life, was was, I was devastated. My whole entire life was working for that one company from the age of, from the age of fourteen to the age of thirty, that was my entire life, I was thirty years old at the time. They took an inventory nine days later, they came up with the financials. They found about a forty to fifty million dollar gap between what the balance sheet was, and where it should be. And then the investigation really took steam. Knowing his fraud had been discovered, Eddie Antar fled the country. He eluded the authorities for nearly two years under a variety of assumed identities, living off the funds he had stashed in international accounts. Eddie moved from country to country with fake passports, always one step ahead of the authorities. But in Switzerland, twenty eight months after his company crashed, he made the mistake which ended the chase. When bank officials in Bern refused to let him at the thirty-two million he had in an account there, Antar angrily sought help from the local police. What Antar didn't know was that the U.S. Justice department had frozen his account. Upon learning from bank officials that the irate man in the police station demanding access to his funds was actually a fugitive, the Police promptly arrested Eddie Antar. He was then returned to the U.S and sentenced to eighty-two months in prison. I never spent a day in jail, ok. And you know I've been lucky not to have spent a day in jail. And you know something, I should have spent a day in jail. Not even a day, I should have spent years in jail for what I did. Chief Financial Officers that have done much less than me have spent much longer time in jail, have spent tens of years in jail. I was lucky.
