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Crazy Eddie, Inc. Fraud on Financial Reporting. CRAZY EDDIE, INC. A successful small business founded and managed by the ANTAR family in the 1970’s. The business progress of Crazy Eddie, Inc. Eddie Antar took the company public with $8 per share (IPO). 1970s.

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Crazy Eddie, Inc

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Crazy Eddie, Inc

Fraud on Financial Reporting


CRAZY EDDIE, INC

A successful small business founded and managed by the ANTAR family in the 1970’s.


The business progress of Crazy Eddie, Inc

Eddie Antar took the company public with $8 per share (IPO)

1970s

  • Began as a small consumer electronics retail operation.

1984

1986

  • Crazy Eddie was trading at over $75

  • per share.


Crazy EddieCommercial

Right Click Here & SelectOpen Hyperlink


Crazy Eddie, Inc Cash Skimming

  • Crazy Eddie, Inc practiced “Cash Skimming" – unlawfully keep certain cash receipts off the books and put to tax-free personal use before the IPO.

Income Statement

Balance Sheet

Revenue

Cash


Fraud of factious profit

  • Curtailing the cash-skimming prior IPO

  • Increased in profits on the books

  • Caused potential investors to believe that the company experienced an exponential

    growth in earnings.

Income Statement

Balance Sheet

Revenue

Cash


Inflating Year-End Inventory Figures

In the years after the IPO, Eddie directed employees to inflate year-end inventory figures, and to falsify the company's books to improve the financial information it would report to the SEC


Fraud disclosed

  • Elias Zinn of Entertainment Marketing took control of Crazy Eddie, Inc in November, 1987 and found:

    Physical Inventory Value < Inventory book Value

  • This sparked a subsequent fraud investigation by the SEC in August 1987.


CRAZY EDDIE INC.

The judgment rendered in 1994 by the court of New

Jersey.


District Court Decision

  • On April 29, 1994, the district court sentenced:

    Eddie = 12 years & 7 months in prison + $121 M in restitution.

    Mitchell = 51 months in prison + $3 M in restitution.

  • Eddie and Mitchell filed notices of appeal.

  • On April 1995, the Third Circuit reversed his conviction on the ground that the trial judge's remarks during sentencing created an appearance of bias.


Court Final Decision

  • In February, 1997, Eddie pled guilty in subsequent litigation and was finally sentenced to a federal prison term of 6 years and 10 months pursuant to his guilty plea to racketeering conspiracy in connections with his actions at Crazy Eddie, Inc


End of Crazy Eddie Empire


Our opinion

  • Incentive, opportunity and attitude are three drives to cause Crazy Eddie Fraud case.

  • Financial Fraud creates profit for enterprise in short term, but it destroys company in long run.

  • Independent auditor should use skeptical mind to identify fraud.


Do you want to work hard to make wealth?

Do you want to deprive the freedom?

Lessons From Crazy Eddie, Inc


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