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 of Justice 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 two major shareholders who gained control of 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 two 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) – led internal company investigation by new management into the 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 class action lawsuits.
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 Chertoff in 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 started investigating Crazy Eddie in July 1987. The criminal trial (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: Jonathon 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, I Iied to Kaplan about my involvement in any crimes. In March 1989, I retained Anthony Mautone to represent me on criminal matters and Jonathan D. Warner on civil litigation matters after I made a decision to cooperate with government investigators.
Other Attorney: J. Michael Nolan, now retired, formerly of Pitney, Hardin, Kipp, and Szuch gave me crucial advice to cooperate with the various investigations and referred me to Anthony Mautone.
Did you destroy documents to obstruct the criminal and civil investigations?
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 destroyed 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 (before I was a cooperating witness) about obtaining copies of the suspected falsified inventory counts, I simply answered that Crazy Eddie had no formal document retention policy. I explained that inventory documents were thrown away or shredded 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?
For example, in fiscal year 1986 we inflated our sales, earnings, 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.
The money was in the bank and the auditors assumed that it came from legitimate sales. However, the auditors never considered the 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 to be cooperative with the auditors. However, from the day the 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 to 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 his account 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 initial investigation of Crazy Eddie focused on our May 1987 bid to take the company private with the Belzberg family. Initially, the SEC thought that management had deliberately understated earnings to buyout the company “on the cheap.” However, in July 1987, Arnold Spindler (a former Crazy Eddie employee) tipped off the SEC that we had inflated earnings, rather than understate it.
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?
Did any of the Antar family members involved in the fraud including your ever a discussion about the morality of the frauds?
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 fired from Sound Machine, a retailer owned by his father. He eventually left his second wife and remarried Jill again. Afterwards, Allen went to work for Crazy Eddie. However, his family never put his name on the secret Israel bank accounts. The family did not trust Allen’s judgment on certain money matters.
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?
Their main argument was that family feuding made it impossible for them to cooperate in conducting such a massive fraud.
Judge Ackerman, ruling in favor of the SEC in the civil fraud case, wrote:
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?
I did not cooperate with the government and civil plaintiffs for altruistic reasons. I was motivated by the fear of a very long prison prison sentence. It was purely a selfish decision motivated by fear.
I had learned that Eddie’s father and two brothers were trying to set us up to take the fall. After I relayed the information to Eddie, he distanced himself from me. I had known that Eddie shifted most of his assets overseas and obtained many phony passports. 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. Their approach with me can be summarized as: “Do not trust, only verify.” The government and lawyers representing the victims of our crimes 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?
What was your biggest threat to you while you were committing your crimes?
The biggest threat was that a whistleblower from within the company would inform the government of our crimes. Lying to auditors, Wall Street analysts, and journalists was easy.
What is your opinion of ethics courses?
Ethics courses do not turn a criminal into a law abiding citizen. I believe that most people have a true sense of what is right and wrong and what behavior gives rise to criminality.
Do you blame anyone for your crimes?
If you never got caught would you still be a criminal today?
Sam E. Antar
© Copyright by Sam E. Antar. All rights reserved.