The Crazy Eddie Criminal Trial: Summer 1993
In June 1993, almost six years after the last remaining members of the Antar family were removed from Crazy Eddie, the criminal trial commenced in Newark, New Jersey. The court room was packed with reporters and supporters of Eddie Antar, Mitchell Antar, and Allen Antar. It was a family reunion of sorts, since Eddie and his previously feuding brothers were forced to join forces and in a bold effort to proclaim innocence.
The atmosphere was tense as defense lawyers desperately tried to discredit my testimony and the testimony of other cooperating witnesses. At times, the courtroom burst into laughter as defense lawyers and I exchanged sarcasms.
Eddie, Mitchell, and Allen tried to lay the entire blame for the Crazy Eddie fraud on me, despite them and other immediate family members pocketing over $90 million of ill-gotten proceeds from selling Crazy Eddie stock at inflated values to defrauded investors and millions of dollars uncovered in secret foreign bank accounts.
For about a month, US Marshals guarded my safety. They even escorted me into the court house rest rooms. It was a “pisser.” The US Marshals called it “babysitting the witness,” just in case….
The trial is best described through the press accounts below:
June 26, 1993: The Associated Press – Antar Doctored Books, Jury Told Cousin Tells of Profit Skimming (excerpts below):
Crazy Eddie founder Eddie Antar and his brothers slowly stopped skimming profits and doctored inventory values to dupe investors into buying the discount electronics chain’s stocks, their cousin and former comptroller told a federal jury Friday.
The testimony of Sam E. Antar, which is to continue next week, has bolstered the government’s contention that Eddie Antar, along with his brothers Mitchell and Allen, bilked stockholders of $80 million before the chain collapsed in the late 1980s.
Sam E. Antar, 36, also spoke of how he grew up in Brooklyn a few blocks from the Antar brothers. The defendants’ father, Sam M. Antar, was the patriarch of the extended clan, Sam E. Antar said.
“In a lot of ways, they were closer to me than my own family,” Sam E. Antar said.
Sam E. Antar began working for his cousin as a 14-year-old stock boy at his electronics store in Brooklyn called Sights and Sound. It later became Crazy Eddie; Eddie Antar and his father built a 43-store chain in the New York metropolitan area.
Sales reached $350 million, driven by loud commercials. Unopposed dissident stockholders took over Crazy Eddie Inc. in November 1987, and discovered evidence of fraud. Two years later, Crazy Eddie Inc. filed for Chapter 11 bankruptcy.
Sam E. Antar learned quickly how his uncle and cousins operated their then-private company. He testified that all workers were paid in cash – “off the books” – and each night they divided tens of thousands of dollars taken from the cash registers.
The “skim” reached a peak of $3 million in 1979 and was gradually reduced until, by 1983, the only cash being taken was for “off-the-books payroll” that augmented the recently-instituted concept of paychecks, Sam E. Antar testified. The reason: The Antars were getting ready to sell stock.
“To go public, you have to show profits. And because of the skim, it wasn’t showing any profits,” Sam E. Antar said. But the financial information shown to stock analysts and potential investors was flawed, he noted.
“It showed the company was growing a lot faster than it was in terms of profits,” Sam E. Antar said.
Crazy Eddie stock was issued in September 1984. In early 1986, Sam E. Antar said Sam M. Antar and his sons told him how they had inflated the inventory by $2 million the year before. To meet Wall Street expectations, even more numbers had to be fabricated, Sam E. Antar said.
This was done “to deliberately manipulate financial information” so that Sam M. Antar and Eddie Antar could “sell stock at the highest price,” Sam E. Antar said.
June 29, 1993: The Bergen Record – Cousin: Antar had a ‘Scorched Earth Policy’ on Documents (excerpts below):
The government’s star witness in the Crazy Eddie stock fraud trial told a federal jury Monday how the weight of inflated sales figures and inventory eventually caused the schemes devised by himself and his cousins to collapse upon itself.
Former chief financial officer Sam E. Antar also related how Eddie Antar, founder of the discount electronics chain, had him lie to federal investigators as the company foundered in the late 1980s.
Eddie Antar, who is on trial with his brothers Mitchell and Allen, also instructed his younger cousin to destroy all incriminating documents in a “scorched earth” policy when it became apparent the Antar family would lose control of Crazy Eddie to dissident stockholders in late 1987, Sam E. Antar said.
His second day in the witness box also brought emotional testimony of how he finally decided in 1989 to plead guilty and cooperate in the civil and criminal proceedings against his cousins, who he grew up with in Brooklyn.
“I just turned 30 years old and felt the weight of the world on my shoulders,” Sam E. Antar said. “I decided I had a wife and children and they were more important than all this garbage I’d been doing for 16 years.”
Sam E. Antar faces 10 years in prison for admitting to obstructing justice and conspiring to commit mail and stock fraud. He has settled a $160,000 fine with the U.S. Securities and Exchange Commission for $20,000. His income has shrunk from $200,000 a year to $15,000 and he testified he is deeply in debt.
Sam E. Antar started as a 14-year-old stock boy at an electronics store in Brooklyn in 1971 that later became the first of 43 Crazy Eddie stores covering the New York metropolitan area.
Sales reached $350 million, driven by loud commercials in which a pitchman touted “INSAAAAAAAANE” prices. Nearly all members of the extended Antar clan worked for the company, dominated by Eddie Antar and his father, Sam M. Antar, according to witnesses in the trial, now in its third week.
But the familial ties began to unravel toward the end of 1986 as more and more deceptions were used to present bogus profit figures to Wall Street, Sam E. Antar said. At the same time, Eddie Antar withdrew from hands-on management, communicating by phone to Sam E. Antar at the new headquarters in Edison.
Complicating matters were the splits that deepened after family members learned of Eddie Antar’s infidelity, setting his brothers and father against him, Sam E. Antar said.
Eddie Antar fired his former mother-in-law, accusing her of taking a bonus she wasn’t due.
“It was getting harder to get them to work together,” he said. “I became a Henry Kissinger, going from one faction to another, making sure things got done.”
The thing that Eddie Antar wanted done, above all, was to keep profits pumped up, Sam E. Antar said. Since 1985, that was done through a growing web of deceit: inventory figures bloated through borrowed goods and doctored figures; invoices for goods dated a month after the shipment was received; “debit memos” fabricated to show that manufacturers owed Crazy Eddie tens of millions of dollars for rebates and promotions; and cash infused that the family had skimmed before taking the company public in 1984.
An added element that made Sam E. Antar feel he was in a “pressure cooker” was a $20 million stock sale by Eddie Antar. Sam E. Antar said he feared stockholder and SEC litigation if profits fell following an insider stock sale.
Eventually “the gap” between the company’s actual performance and what it told the public reached $45 million, according to records Sam E. Antar made in March 1987, following the end of fiscal year 1987: Crazy Eddie reported a profit of $20.7 million; it actually had a loss of about $25 million.
Several groups of investors began making inquiries about taking over Crazy Eddie. Eddie Antar directed his cousin to deal with them, while they explored the possibility of taking the company private. Those plans were abandoned amid the realization that worsening sales wouldn’t merit financing.
Instead, Eddie Antar instructed his cousin to destroy documents, lie to SEC investigators, and have everybody else do the same.
“The scorched earth policy was to make the company as unmanageable as possible for the new management,” Sam E. Antar said. He and others on the Board of Directors approved lucrative “golden parachute” employment contracts for themselves.
June 30, 1993: The Associated Press – Money Was Antar Family’s ‘Glue’ Thrived Even After Blowup, Cousin Testifies, describes how I explained in Sam M and Eddie Antar’s family that money ruled (excerpts below):
The founder of Crazy Eddie still did business with his relatives after they exposed his marital infidelity in the “New Year’s Eve Massacre”, his cousin told a federal jury Tuesday in the stock fraud case.
The cousin, Sam E. Antar – the government’s key witness – spent his third day in the witness box. It was the first session under cross-examination and produced several sharp exchanges.
No direct challenges to his testimony were scored, but the defense questioning is likely to continue for days.
In his first two days in court, Sam E. Antar has laid out much of the government’s case against three brothers: Crazy Eddie founder Eddie Antar, and Mitchell and Allen Antar.
They are accused of pocketing $80 million by selling inflated stock in their discount electronics chain. Sam E. Antar, who was the company’s chief financial officer, has described a web of deceit that included pumping up inventory numbers, deferring accounts payable, and falsely billing vendors.
It had the effect of making the company look as if it was growing faster, with bigger profits, than it really was.
Sam E. Antar acknowledged Tuesday that the booming company did not have formal budgets or monetary controls: “The financial plan was to make more money every year and commit more fraud,” he said.
The chain started in Brooklyn in 1971 and grew to 43 Crazy Eddie stores covering the New York metropolitan area. Sales reached $350 million, driven by loud commercials in which a pitchman touted “insane” prices.
It collapsed in the late 1980s when the extended Antar clan could no longer support the weight of the fraud amid government inquiries, Sam E. Antar has said.
On Tuesday, he described what he knew of the 1983 “New Year’s Eve Massacre” events. Eddie Antar was getting into a limousine in Manhattan with his girlfriend, whom he since has married, Deborah Ehrlich. He was confronted by his wife, Deborah Rosen Antar, his sister, Ellen Kuszer, and a sister-in-law, “and a fight ensued,” Sam E. Antar said.
Eddie Antar believed his father, Sam M. Antar, told the women where to find him, Sam E. Antar testified. The father, who founded the chain with Eddie, had already been at odds with his eldest son over his lifestyle, Sam E. Antar said.
Mitchell and Allen Antar blamed Eddie Antar for a heart attack suffered by their father several months later, he said.
In court Tuesday, the father and Deborah Ehrlich Antar sat next to each other, as they have since the trial started June 15. Eddie Antar, 45, remained impassive as one of his lawyers had his arm around his back.
The father also remains close to the first wife, who still lives across the street from him in Brooklyn, Sam E. Antar said.
The rift apparently did not prevent the father and brothers from working together.
“Money was the glue that held these people together. When it came to money, they knew how to cooperate,” Sam E. Antar said.
Eddie Antar’s defense lawyer, Jack Arseneault, opened his questioning with a stern question: “You’re an admitted liar, aren’t you?”
Sam E. Antar, 36, agreed, and reiterated he is testifying under a bargain after pleading guilty to obstructing justice and conspiracy to commit stock and mail fraud. He faces up to 10 years in prison.
Throughout the day the pair sparred about whether Arseneault was speaking loudly enough and whether the lawyer was interrupting Sam E. Antar’s responses.
After finishing a response, Sam E. Antar would say, “Go ahead.” Arseneault would sarcastically reply, “Oh, thank you.”
At one point the lawyer was discussing a promotion Sam E. Antar got, and asked, “You stepped in a bigger size set of shoes and kept walking?”
“I’ve always worn the same size shoes,” Sam E. Antar said. The defense is contending that Eddie Antar didn’t participate in company activities toward the end, unsettled by drink and the reopening of his divorce.
But when Arseneault asked if Sam E. Antar was aware his cousin’s first wife had hired prominent divorce lawyer Raoul Lionel Felder, the witness responded, “Eddie always thought he was a moron.”
July 1, 1993: The Associated Press – Antars’ Lawyers Attack Credibility of Key Witness but are Unable to Shake Cousin’s Testimony by Jeffrey Gold (excerpts below):
Lawyers for the founder of Crazy Eddie and his brothers on Wednesday challenged the credibility of the government’s key witness in the stock fraud case. However, they were unable to topple the basic assertions of the witness, Sam E. Antar, a cousin of the defendants who also was an executive in the failed discount electronics chain.
During his four days in the witness box, Sam E. Antar has laid out much of the government’s case against Crazy Eddie founder Eddie Antar and his brothers, Mitchell and Allen.
They are accused of bilking stockholders in the chain of $80 million by inflating the value of Crazy Eddie stock through a series of schemes, including exaggerating inventory and deferring invoices.
…. during two days of cross-examination, they have sparred with Sam E. Antar, who succeeded his father in the mid-1980s as chief financial officer of the booming company.
The witness has complained that the lawyers wouldn’t let him finish his answers. The witness has often finished his responses by telling the lawyers, “Go ahead.”
“Don’t give me instructions,” shot back Jack Ford, lawyer for Mitchell Antar. “Judge Politan gives me instructions.” Sam E. Antar continued the practice anyway.
When Gerald Krovatin, lawyer for Allen Antar, suggested that Sam E. Antar was being evasive, the witness replied that the question wasn’t specific: “Ask a proper question and you’ll get the answer you want.”
Sam E. Antar reiterated how he has already made a deal with the U.S. attorney, pleading guilty to obstruction of justice and conspiracy to commit stock and mail fraud. He could be sentenced to 10 years in prison, as opposed to hundreds if he had been convicted on all charges.
He also has settled suits with the U.S. Securities and Exchange Commission, and Howard Sirota, lawyer for 10,000 Crazy Eddie stockholders.
Ford asked Sam E. Antar whether he hopes the Antar brothers are convicted so he might get a lighter sentence.
“I wouldn’t care either way,” Sam E. Antar said. “Right now, it’s the truth that’s important.”
Ford pressed the issue. He noted that Sam E. Antar has testified to about 100 meetings and more than 1,600 phone calls with government lawyers and other investigators opposing the Antar brothers.
Ford reported that Sam E. Antar has cheerfully greeted Sirota and Richard Simpson, lawyer for the SEC, outside the courtroom. Aren’t you on their team? Ford said. “I’m not part of any team against anyone,” Sam E. Antar replied. “This is not a game, sir. This is real life.” The witness also denied his motive for testifying was revenge because his attempt to gain control of Crazy Eddie with an outside investor failed in late 1987.
July 4, 1993: The Philadelphia Inquirer – Sex, Stock, Fraud Star in Brothers’ Trial ‘Dallas’ – Crazy Eddie Style – Captivates a Courtroom Crowd in Newark N.J. (excerpts below):
Cousin Sam E. Antar was on the witness stand, talking about the greed and treachery he claims were behind the multimillion-dollar fraud that turned the Crazy Eddie discount electronics chain into a cash cow for the Antar family.
Fifty feet away, his uncle – also named Sam – sat in the second row of the crowded courtroom, listening stone-faced to the allegations.
Sam M. Antar, the family patriarch, his wavy white hair coifed against a deep tan, clearly was not pleased with what his nephew was telling the jury.
Next to Sam M. was Deborah Ehrlich Antar – the second Mrs. Eddie Antar, repeatedly referred to during the trial as “Debbie Two.”
Occasionally rolling her eyes and murmuring in disbelief, she, too, seemed less than impressed with some of Cousin Sam’s testimony.
Her husband sat at the defense table….He whispered in his lawyer’s ear and scribbled notes on a yellow legal pad as his cousin, former business associate and onetime friend laid the blame for the massive fraud at his feet.
Skims and scams. Lies and deceit. Money stashed in suitcases and hidden in ceilings. Secret foreign bank accounts. Phony passports and fake identities. Family feuds and marital infidelities. They are all a part of the story that has been spilling out through the mouths of a half-dozen government witnesses.
Three weeks into the trial that often attracts capacity crowds to the fifth- floor courtroom in U.S. District Court, this much is clear: The Ewings of Dallas had nothing on the Antars of Brooklyn.
“You couldn’t make this stuff up,” one observer said during a break in the testimony last week.
Mitchell and Allen don’t talk to Eddie, even though they are all in this together and could end up doing serious jail time. Sam M. Antar, the father of the three defendants, has been estranged from Eddie for several years – although his position next to Eddie’s second wife in the courtroom has some wags speculating about reconciliation.
But all of this is subject to change, say several sources who have followed the saga of the close-knit clan over the years.
“Uncle Eddy” Antar – Sam M.’s brother and Sam E.’s father – has testified for the government under a grant of immunity. He detailed one insider scheme in which he said hundreds of thousands of dollars in cash was taken “off the top” by family members.
Another cousin and employee, Eddie Gindi, was indicted with the Antar brothers but now is a government witness. Gindi, in poor health, has been living in Florida. His testimony was videotaped, and prosecutors began playing the tape for jurors on Friday.
Then there is Deborah Rosen Antar, the first Mrs. Eddie Antar – “Debbie One.”
While not necessarily the most important government witness – Sam E. Antar clearly provided the most-detailed account of the fraud – Debbie One brings the sizzle.
If and when she takes the stand, the courtroom is expected to be packed.
She has already told much of her story to the Securities and Exchange Commission and in depositions taken in a messy divorce dispute. She has described the lavish lifestyle her former husband provided in the mid-1980s, before and shortly after taking the company public. She has talked of bundles of cash her husband used to bring home from work, of money stuffed in attaché cases and hidden under the bed, of funds secretly taken out of the country and stashed in bank accounts in Israel. And she has described her husband’s infidelity.
According to earlier trial testimony, it was on New Year’s Eve 1983 that Deborah Rosen Antar and several other family members found her husband with another woman. At the time, court records indicate, Sam M. and most other members of the family sided with Debbie One in what became a protracted divorce battle. Eventually, Eddie Antar married that other woman, Debbie Two.
The ebb and flow of events over the last nine years – government investigations, civil suits, grand-jury indictments – have resulted in ever-shifting familial alliances, a real-life soap opera.
There were the two years that Eddie Antar spent on the run, hopscotching across three continents with phony passports, fake identities and, the government alleges, bank accounts loaded with millions of dollars.
Last week, Sam E. Antar provided the most-detailed account of the fraud, as well as a personal view of what he called the “family friction.”
Most observers described Sam E.’s testimony as devastating.
Neither the defense attorneys nor prosecutors have been permitted to comment because of a gag order imposed by Judge Nicholas Politan. This came after Jack Arseneault, Eddie Antar’s defense attorney, told two reporters before the trial that the case would be a tale of “jealousy, infidelity and greed.”
Meanwhile, Debbie Two sits with Sam M., while Debbie One waits in the wings to testify for Uncle Sam.
July 6, 1993: Newsday – A Family’s Deceit and Drama Laid Bare by Edward R. Silverman (excerpts below):
Nastiness set in when their cousin, Sam E. Antar, 36, took the stand and revealed the intricate and intimate details of how the Antars schemed, cajoled, lied and warred with one another while making millions that were counted at kitchen tables.
His recollection of feuds and frauds was dizzying. Eddie’s father ostracized Eddie for having an affair. Eddie was angry at his father and brothers for siding with his first wife. The brothers were mad for not receiving more stock and blamed Eddie for their father’s subsequent heart attack.
“It’s like the Addams family went public and ended up in court,” said one spectator at the trial.
“Money was the glue that held these people together,” said Sam Antar, a short, intense man who frequently interrupted his testimony to visit the bathroom and, during breaks, munched on ka’ak, a Middle Eastern cookie. Despite bickering, “when it came to money, they knew how to cooperate.”
He went on to relate meetings, phone calls and family trivia. To laughter, he told how Eddie thought that Raoul Felder, his first wife’s divorce lawyer, is a “moron,” and how Eddie once warned him not to tell lawyers the truth, “because they’ll just plead for you and not fight hard enough.”
Defense attorneys attacked his credibility by charging that he cut a deal, because he faces 10 years in jail for his role in the fraud. And the fraud, they said, was all his doing.
But they were often frustrated. Prompting indignant grunts from relatives, Sam Antar insisted Eddie orchestrated everything. Twice he chastised his cousin for fleeing the country in 1990.
“He skipped town. He had to run away, with his phony passports. I stayed here and faced these responsibilities,” he said angrily. Moments later, sounding contrite, he said, “I don’t care what happens to Eddie Antar.”
July 15, 1993: Newark Star Ledger – Both sides point finger of culpability as Antar summations conclude by Robert Rudolf
U.S. authorities and defense attorneys traded charges yesterday over who was responsible for the massive fraud that brought about the collapse of the ”Crazy Eddie” retail electronics empire – company founder Eddie Antar or the government’s own key witness against him. As federal prosecutors accused Antar and his two brothers, Mitchell and Allen Antar, of orchestrating the plot that led to one of the most sensational stock scandals in modern history, defense attorneys charged that the Antar brothers were being framed by the government’s main informant, Sam E. Antar, Eddie Antar’s cousin and lifelong friend. ”Sam E. wanted to be the next Eddie Antar … ” said defense attorney Jack Arseneault.
The dual charges were leveled during summations in the federal racketeering trial of Eddie Antar and his brothers, being conducted before U.S. District Judge Nicholas H. Politan in Newark. The case is scheduled to go to the jury today.
Assistant U.S. Attorney Paul Weissman, however, painted Eddie Antar as a criminal mastermind with a virtual ”mania for secrecy” who looted his own company of tens of millions of dollars and bilked investors into purchasing shares of the firm through bogus financial reports. Weissman charged that Antar then fled the country with the aid of a gallery of phony passports and left investors holding the bag when the company collapsed in bankruptcy. ”This case is about a plan by members of the Antar family … to cheat, to defraud members of the public … ”
Weissman told jurors that Eddie Antar played with bank accounts ”the way Heifetz plays the violin.” Weissman said Eddie Antar amassed a collection of six different passports, including Brazilian and Israeli documents, as part of a plan to ”run and hide where he can’t be touched by the law.” The prosecutor said government investigators found money hidden in 20 separate accounts scattered around the world, most held in the names of Liberian or Gibraltar corporations.
July 16, 1993: Newark Star Ledger – Antar Sheds Tears and Prosecutor Pounds Podium as Jury Gets Case by Robert Rudolf (excerpts below):
Chertoff told jurors, “They say that blood is thicker than water. In this family money is thicker than blood.”
See Part 6 – Crazy Eddie Civil Litigation Cases
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