Eddie Antar — the discounter who skimmed cash, then faked the profits

In New Jersey, across the late 1980s and 1990s, the federal courts dismantled one of the era’s defining retail-stock frauds: the rise and rigged accounts of Crazy Eddie, the New York consumer-electronics chain built by Eddie Antar. The scheme had two phases that ran in opposite directions. For years before the company went public, Antar and his family skimmed cash to evade taxes and pad their own pockets. Then, to prepare a stock for sale and inflate its price, they reversed course, reducing the skim and laundering previously hidden money back into the books as phantom sales, while overstating inventory to fabricate profits.

The outcome was a conviction that survived a detour. After fleeing the United States, Antar was located in Israel and arrested on June 24, 1992, and extradited the following January. A jury convicted him of securities fraud in July 1993, but in 1995 the U.S. Court of Appeals for the Third Circuit vacated the conviction, finding that the trial judge’s conduct had created an appearance of bias. Rather than face a second trial, Antar pleaded guilty in May 1996 to racketeering conspiracy and, in 1997, was sentenced to 82 months in federal prison.

The financial measures of the fraud were large for a mid-sized retailer. In a related civil action the SEC obtained a judgment of $73,496,432, plus interest, against Antar in July 1990, and the criminal case treated the scheme as having defrauded shareholders of well over $100 million. The chain itself, which once carried a stock-market value in the hundreds of millions, collapsed into bankruptcy and liquidation in 1989 after new owners discovered that tens of millions of dollars of reported inventory did not exist.

What makes the case a fixture of accounting and audit teaching is the elegance of the deception rather than its size. The same family that had spent years proving it could hide income then proved it could invent income, and auditors who counted inventory were defeated by employees who moved stock between stores, faked count sheets, and papered the gaps with fraudulent documents. The fraud closed because an insider, Antar’s own cousin and former chief financial officer, eventually turned and explained exactly how it had been done.