2) Crazy Eddie financial frauds
Crazy Eddie was an electronics and appliances retail store chain run by the Antar family. It was famed for its bargains: “Crazy Eddie—his prices are insane!” the once-ubiquitous ads proclaimed. But Eddie wasn’t crazy so much as calculating, perpetuating a fraud that was one of the longest-running in modern times, lasting from 1969 to 1987.
The fraud began almost immediately, with the management of Crazy Eddie underreporting the firm’s taxable income via skimming cash sales, paying employees in cash to avoid payroll taxes, and reporting fake insurance claims to the company’s carriers.
As the chain grew in size, the Antar family started planning for an initial public offering (IPO) of Crazy Eddie and scaled back the fraud so that the company would look more profitable and get a higher valuation from the public market. This strategy was a success and Crazy Eddie went public in 1984 at $8 per share.
The final phase of the Crazy Eddie saga began after the IPO and was motivated by a desire to increase profits so the stock price could move higher and the Antar family could sell its holdings over time. The scheme also involved inflating and creating phony inventory on the books and reducing accounts payable to boost profits.
The fraud was uncovered in 1987 after the Antar family was ousted from Crazy Eddie after a successful hostile takeover by an investment group. Crazy Eddie limped along for another year before being liquidated to pay creditors.
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