Who were the major people involved in investigating and prosecuting the Crazy Eddie frauds?
In alphabetical order below:
Samuel A. Alito (United States Attorney and predecessor to Michael Chertoff) - His office initiated the Crazy Eddie criminal investigation and was replaced by Michael Chertoff.
Jayne K. Blumberg (Assistant United States Attorney) - Assisted Paul Weissman who replaced Dan Gibbons.
Michael Chertoff (United States Attorney) - He replaced Samuel A. Alito and was the chief criminal trial counsel. Oversaw Justice Department efforts to prosecute Crazy Eddie fraud case.
Patrick Cicchetti (Justice Department Investigator) - Department liaison to the Internal Revenue Service for the Crazy Eddie investigation.
Dan Gibbons (Assistant United States Attorney) - Handled the initial Crazy Eddie investigation for the Justice Department and was replaced by Paul Weissman and Jayne K. Blumberg.
Max Folkenflik (Attorney from Folkenflik & McGerity) -Represented Elias Zinn & Entertainment Marketing, one of the major shareholders who took over Crazy Eddie in a hostile takeover.
Howard Hawkins (Attorney from Cadwalader, Wickersham, & Taft) - Law firm was Trustee in Bankruptcy for Crazy Eddie.
Paul Hayes (Special Agent, Federal Bureau of Investigation) - Led the criminal investigation of the Crazy Eddie fraud for the FBI.
Stephen Howard (Attorney from Milbank, Tweed, Hadley, & McCloy) - Attorney for the Oppenheimer-Palmieri Fund, L.P. one of the major shareholders who took over Crazy Eddie in a hostile takeover.
Barbara Katron (Attorney for Securities and Exchange Commission) - Began the Crazy Eddie investigation for the SEC. She was replaced by Richard Simpson.
Robert A. Marmon (replaced me as the CFO of Crazy Eddie on behalf of the Oppenheimer-Palmieri Fund, L.P./Entertainment Marketing & Elias Zinn Group after Antar family lost control of company) - led internal company investigation into Crazy Eddie fraud by Antar family.
Richard Ross (Attorney from Carella, Byrne et al) - Court Appointed Receiver for Antar assets.
Richard Simpson (Attorney for Securities and Exchange Commission) - Chief trial and litigation counsel for the SEC in its civil cases and investigation against the Antar family and other defendants. After replacing Barbara Katron, he led SEC investigation into Crazy Eddie fraud.
Howard Sirota (Attorney from Sirota & Sirota and Chairman of the Shareholder’s Class Action Committee) - Oversaw civil litigation plaintiff's efforts to prosecute Crazy Eddie case.
Richard Wallace (Attorney for Securities and Exchange Commission) - Assisted Richard Simpson in SEC investigation of the Crazy Eddie fraud.
Paul Weissman (Assistant United States Attorney) - Co-trial counsel with Michael Chertoffin criminal trial. After replacing Dan Gibbons, he led the US Attorney's office investigation of the Crazy Eddie fraud.
Please note that white collar criminal and civil investigations can be very complex and take years to complete. The SEC began investigating Crazy Eddie in July 1987. The criminal trial (tried by the US Attorney) began in June 1993. The SEC civil trial was in July 1998.
The effort to find Eddie Antar while a fugitive involved the Securities and Exchange Commission, The US Marshals Service, the FBI, Interpol, the Israel National Police, other government agencies (domestic and foreign), civil litigants, and the work of many other individuals.
Who were my attorneys?
Criminal Attorney: Anthony Mautone in East Orange, NJ and now also a part time Federal Magistrate in Newark, NJ
Civil Attorney for SEC and Class Action Litigation: Jonathan D. Warner from Warner & Scheuerman in New York, NY.
Note: After my employment was terminated from Crazy Eddie by new management in November 1987, I hired Bruce Kaplan to defend me. However, Iied to Kaplan while I was lying to government investigators. Both Anthony Mautone and Jonathan D. Warner started representing me in March 1989 after I decided to cooperate with the various government and civil lawsuit investigations into Crazy Eddie's frauds.
Other Attorney: J. Michael Nolan, now retired, formerly of Pitney, Hardin, Kipp, and Szuch gave me crucial advice to cooperate with the various investigations after Kaplan stopped representing me and referred me to Anthony Mautone.
Did you destroy documents to obstruct the criminal and civil investigations?
Yes.
Crazy Eddie's document retention policy was to destroy all evidence of wrongdoing as soon as possible. When the government began its investigation of Crazy Eddie in 1987, we were asked for copies of our year end inventory count records for the fiscal years ended March 3, 1985 through March 1, 1987. The auditors never made copies of the inventory counts that supported their audit.
I later testified that Crazy Eddie had a "scorched earth" policy in the criminal and civil trials as a government witness. We would destroy copies of all falsified documents (to the extent possible) to cover up our crimes.
When I was initially asked by the S.E.C. under oath (at such time I was not a cooperating witness) about obtaining copies of the suspected falsified inventory counts, I simply answered that Crazy Eddie had no formal document retention policy. With regards to the inventory documents, they were thrown away after the audits since they served us no useful purposes.
My rationale at the time was that I could not be criminally prosecuted for stupidity. Since there were no subpoenas issued against Crazy Eddie at the "supposed time" that we destroyed such documents the worst thing I could be accused of was that I was negligent.
Can any amount of audit procedures make up for a lack of internal controls?
No!
For example, (as noted in the 1986 fraud above) we inflated our sales and cash balance by $2,000,000 by depositing previously skimmed funds into the Crazy Eddie bank balances. The bank accounts were reconciled.
However, there were no controls over sales invoices, inventory, and cash by Crazy Eddie. The auditors did not perform sales and cut-off testing and they did not review deposits in transit.
Crazy Eddie's comparable store sales, earnings, and cash were overstated in 1986.
The money was in the bank and the auditors assumed that it came from legitimate sales. However, the auditors never considered that even if the company had such money in its accounts, there was a possibility that such funds could come from sources used to manipulate earnings.
A credible audit cannot be made in the absence good internal controls. A so called strong audit and strong internal controls are not mutually exclusive.
What other techniques did you use to prevent the auditors from performing an effective audit?
We committed "obstruction by distraction." We always appeared cooperative with the auditors. However, from the day our auditors set forth on Crazy Eddie premises until the day the audit was completed, we did our best to distract them from their field work. For example, we constantly engaged in "small talk" while our auditors were doing their field work. We knew that audits were boring and our auditors did not mind minor distractions. We constantly invited them out for coffee and lunch.
Our goal was to make our auditors fall behind in their scheduled field work, in order for them the cram their work towards the end of the scheduled audit in a rush to make up for lost time.
How did the government find Eddie Antar?
When Eddie Antar fled the United States he carried at least a dozen phony passports and all of his money had been shifted to bank accounts in what is known as "foreign bank secrecy jurisdictions." His secret foreign accounts were mainly accessible through secret passwords and code names. In order to conceal those accounts, Eddie routinely transferred moneys from one account to a new account.
It was during the course of those transfers that the SEC and the Court appointed receiver picked up his trail. The SEC froze an account in Switzerland containing over $30 million. Eddie attempted to get the money unfrozen by appearing at the bank under one of his false identities. The government tracked Eddie to Israel.
What were some of the documents the government found when they arrested him in Israel that enabled them to recover his ill gotten gains?
Documents seized from Eddie Antar's apartment revealed that he controlled over 30 offshore bank accounts in 10 different companies. Nearly all of those accounts were in the names of Eddie Antar's nominees; one or another of Eddie Antar's false identities; or Liberian and Gibraltarian shell entities controlled by Eddie Antar under one or another of his assumed names. Deborah Ehrlich Antar (Eddie's second wife) was identified as the signatory or as having power of attorney of at least three overseas accounts Eddie Antar controlled. (Source: US Government Documents)
How was the Crazy Eddie fraud uncovered?
The Securities and Exchange Commission seriously began investigating financial statement fraud at Crazy Eddie when Arnold Spindler (a former employee) tipped them off about the fraud in July 1987 four months before the hostile takeover of the company by a group led by Victor H. Palmieri and Elias Zinn.
The collapse of the Antar family's control over Crazy Eddie was due to infighting, rivalries, and jealousy among Eddie Antar and his family.
Did you ever make money on your Crazy Eddie stock?
I actually lost about $8,000 after having a one-time "paper" gain of over $1.6 million including my stock options. The SEC determined that I wrongfully cut my losses by $20,000 when I sold my stock. They assessed me treble damages of an additional $60,000 in disgorgement. Therefore, the SEC assessed me for a total of $80,000 in fines, penalties, etc.
Do you keep in contact with Eddie Antar?
No. The last time I spoke with him after leaving Crazy Eddie and before he ran way to Israel was around 1989. The next time I saw him was at the criminal trial in 1993. After the criminal trial, the only time I met Eddie Antar was during a joint interview by Herb Greenberg that was broadcast on CBNC's Business Nation in June 1987. I have run into other members of his family but they do not speak to me.
Did any of the Antar family members involved in the fraud including your ever a discussion about the morality of the frauds?
No. We never cared. In the early days when we were skimming the attitude was that the government was not entitled to tax our earnings. The government was considered an adversary. Customers were considered adversaries. Anyone outside the interests of the Antar clan ruling Crazy Eddie was an adversary. We always knew what we were doing was wrong. There were no debates in terms of morality. However, there were debates in terms of risk.
One secret bank account in Israel with over $8 million in deposits from skimmed funds from Crazy Eddie listed Eddie Antar, Debbie Rosen Antar (Eddie's first wife), Sam M. Antar (Eddie's father), Rose Antar (Eddie's mother), Mitchell Antar (Eddie's brother), and Ben Kuszer (Eddie's brother in law, husband of his sister Ellen) as owners.
Why was Allen Antar excluded from the foreign secret bank accounts?
In the mid 1970's, Allen divorced his wife Jill and married a person who was not Jewish. He was excluded from all family interests during most of that period. He eventually left his second wife and remarried Jill again. Since he was in the family's good graces, he came back to work for Crazy Eddie. However, they never put his name on the secret Israel bank accounts. The family did not trust Allen's judgment on certain money matters.
Perhaps the lack of Allen's signature on the secret Israel bank accounts, was the reason for the jury acquitting him in the criminal trial in 1993. However, he was later convicted of fraud in the later S.E.C. civil trial in 1998.
What was the main defense argument of Eddie Antar, Sam M. Antar, Allen Antar, Mitchell Antar, Ben Kuszer, and others in the criminal and civil cases?
They argued in general that there was too much family infighting for them to be able to cooperate in committing such a massive fraud.
Judge Ackerman, ruling in favor of the SEC in the civil fraud case wrote in part:
This court agrees with defendants that a family feud did exist, with Eddie and Sam M. as the main protagonists. This court does not agree, however, that the feud made it impossible for members of the Antar family, including the defendants herein, to cooperate in conducting the frauds at Crazy Eddie. The evidence reveals that the intensity of the family dispute waxed and waned over time, and it was not until late 1987 that it had any significant effects on the Crazy Eddie business. Prior to that time, the family feud did not prevent the Antars from operating Crazy Eddie, engaging in other business ventures, or indeed, perpetrating the extensive frauds at the company.
With respect to the relationship between Sam M. and Eddie, it does not appear to have been as fractured as the defendants would now have this court believe.
Why did you cooperate with the government and civil plaintiffs after stonewalling the investigation for almost two years?
First and foremost, I did not cooperate with the government and civil plaintiffs for altruistic reasons. Fear of a very long prison sentence prison was my primary motivator. No sense of morality played a role in my decision to cooperate. It was purely a selfish decision motivated by fear.
I had found out that Sam M. Antar (Eddie Antar's father) and the faction of the Antar family allied with him were setting Eddie and I up to take the fall. Upon relaying the information to Eddie, he distanced himself from me, too. I knew that Eddie had shifted his assets overseas (including proceeds from the sales of inflated stock) and he had millions of dollars of his skimmed cash from Crazy Eddie was already overseas. I learned that Eddie had obtained many phony passports prior to his flight from justice. Therefore, I was worried that I would be left "holding the bag."
When I began cooperating, I warned the government about Eddie Antar's possible flight from justice. However, they were legally powerless to prevent him from fleeing at the time.
How was your relationship with the government and civil plaintiffs after you decided to cooperate?
The government employees and civil plaintiff's attorneys I encountered were both professional and ethical. Even though the government did recommend a jail sentence for me, (I was never sentenced to prison by Judge Politan), I respected their recommendation and did not take it personally. They treated me with respect, even though I did not deserve it. They used a "do not trust, just verify" approach with me which was completely justified. The government, civil plaintiff's attorneys, and others (excluding conspirators or so-called "cooperating witnesses") who assisted them are the true heroes of the Crazy Eddie saga.
With poor internal controls, how did you keep your employees honest?
We relied on polygraph tests (lie detector tests). New employees had to take a polygraph examination and such polygraph examinations were administered randomly. In later years, random drug testing was administered. In addition, in the last couple of years we tried using handwriting analysis to screen new employees.
Did you ever fear getting caught and going to prison while committing your crimes?
No.
The only time I feared about going to prison was after the SEC notified us of its "informal inquiry" into Crazy Eddie's financial statements around August 1987 (after Arnie Spindler came forward to them and disclosed some the frauds).
What was your biggest threat to you while you were committing your crimes?
The biggest threat to me as a criminal was that someone (whether the external auditors, Wall Street analysts, journalists, etc.) would ask good questions and seriously seek truthful answers from us.
What is your opinion of ethics courses?
I believe that an ethics course do not turn a criminal into a law abiding citizen. Ethics courses help people who are not criminals make more ethical choices. I believe that most people have a true sense of what is right and wrong and what behavior gives rise to criminality.
Ethics courses help people (who are not criminals) make the proper choices in decisions which may not be criminal but are legal and unethical. In other words, an action may be legal but not ethical and such courses help people decide their ethical dilemmas.
Do you blame the auditors for your crimes?
No one is to blame for my crimes except me. I hope the accounting profession learns from my input on white collar crime about how to prevent such crimes in the future.
If you never got caught would you still be a criminal today?
Probably yes, since my only reason for cooperating with the government and victims was to avoid a long prison sentence.
