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Crazy Eddie, Inc

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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  1. Crazy Eddie, Inc Fraud on Financial Reporting

  2. CRAZY EDDIE, INC A successful small business founded and managed by the ANTAR family in the 1970’s.

  3. 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.

  4. Crazy EddieCommercial Right Click Here & SelectOpen Hyperlink

  5. 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

  6. 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

  7. 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

  8. 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.

  9. CRAZY EDDIE INC. The judgment rendered in 1994 by the court of New Jersey.

  10. 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.

  11. 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

  12. End of Crazy Eddie Empire

  13. 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.

  14. 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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