SEC Charges Crazy Eddie Founder With Fraud : Agency Says He Conducted Insider Trades, Altered Books to Inflate Profits
Crazy Eddie Inc. founder Eddie Antar and former top management of the electronics chain that advertised “insane” prices were charged Wednesday with insider trading and systematically altering financial books to inflate earnings.
Antar directed a “massive financial fraud” that artificially boosted pretax income by $29 million from 1985 to 1987, the Securities and Exchange Commission said in a complaint filed in federal court here. The alleged scheme included exaggerating inventory and falsely reducing bills to suppliers, the agency said.
Antar, a high-school dropout who built the chain to 43 outlets from a single store in Brooklyn, N.Y., sold 5.6 million shares of company stock for $80 million while knowing that the stock price was based on exaggerated information, the SEC said.
The agency seeks the return of ill-gotten trading profits, penalties and injunctions against further violations.
Six other ex-officials were named, including Antar’s brother Mitchell Antar, and cousins Sam E. Antar and Eddie Gindi. Mitchell and Sam E. Antar and defendant David Panoff were also charged with insider trading for selling stock and falsifying financial records. SEC attorney Richard Simpson said the proceeds from their stock sales totaled less than $1 million.
Gindi and former employees Isaac Kairey and Kathleen Morin settled the falsifying records charge without denying or admitting it. They were not accused of insider trading, and the company was not charged.
Justin Feldman, a lawyer for Eddie Antar in a shareholder lawsuit against the former executive, said he had not seen the SEC’s papers and could not comment. In the shareholder case, Antar denied artificially inflating the company’s figures.
Antar, 41, dropped from sight in 1987, refusing to speak to reporters or analysts.
“We’re trying to track him down,” said SEC attorney Richard Simpson. Antar’s last known address was on Manhattan’s East Side, the complaint said. Mitchell Antar’s attorney, Marvin Gersten, called the charges “totally false.”
“We intend to vigorously defend this,” said Gersten, who noted that his client left the company in May, 1987, and supported dissident shareholders in a fight to oust Eddie Antar. Attorneys for Sam E. Antar and Panoff declined comment.
The U.S. Attorney’s Office here is conducting a parallel criminal probe.
The first major indication of Edison, N.J.-based Crazy Eddie’s present troubles came shortly after the dissident stockholders assumed control in late 1987. New management announced that it had discovered “phantom” inventory of $65 million.
The company allegedly used a variety of methods, from adding zeros on numbers in product lists to inflating prices on the books to fabricating product returns to manufacturers.
Rather than a “substantial loss” in 1987, Crazy Eddie reported pretax income of $20.6 million; in 1985, its reported income of $12.6 million was inflated by $2 million, and in 1986, reported income of $26.5 million was overstated by $6.7 million, the complaint said.
The SEC complaint is the latest blow to the company known for its raucous commercials featuring actor Jerry Carroll waving his arms and shouting about insanely low prices.
The ad campaign and a boom in consumer demand for videocassette recorders, answering machines and other electronics helped make Crazy Eddie one of the leading electronics retail chains in the Northeast. At its peak, Crazy Eddie had 43 stores in New York, New Jersey, Connecticut and Pennsylvania, 1,500 employees and sales of $260 million.
