We committed crime simply because we could. Criminologists like to analyze white collar crime in terms of the 'fraud triangle' -- incentive, opportunity, and rationalization. We had no rationalization. Simply put, the incentive and opportunity was there, but the morality and excuses were lacking. We never had one conversation about morality during the 18 years that the fraud was going on.
Why is the world safer for criminals?
Unfortunately, our policy makers in Washington and even Crazy Eddie's former auditors still apparently have not learned any lessons from the past and continue to make white-collar crime easy for the criminals. For example, the Dodd-Frank Act watered down Sarbanes-Oxely by exempting small companies from internal control audits. Crazy Eddie would have been exempted under those provisions, too. KPMG (Crazy Eddie's former auditors) was recently cited by the United Kingdom’s Financial Reporting Council for singing off on audits too early, the same mistake they made at Crazy Eddie.
In this blog, I exposed GAAP violations by Overstock.com (NASDAQ: OSTK) which caused the company to restate its financial reports for the third time in three years. Why did Overstock.com's former auditors at PricewaterhouseCoopers miss those accounting violations and certify the company's financial reports? The SEC is looking for those answers as it investigates the company.
Likewise, the SEC is investigating Bidz.com (NASDAQ: BIDZ) I alerted them about the company's inventory accounting practices.
More recently, I identified seven public companies that did not follow SEC guidelines for computing a non-GAAP financial measure known as EBITDA (earnings before interest, taxes, depreciation, and amortization): Overstock.com (OSTK), Comtech Telecommunications (NASDAQ: CMTL), Penson Worldwide (NASDAQ: PNSN), A. H. Belo Corporation (NYSE: AHC), FirstService Corporation (NASDAQ: FSRV), Animal Health International, Inc. (NASDAQ: AHII), Schawk Inc. (NYSE: SGK), and Penn National Gaming Inc. (NASDAQ: PENN). Don't their CFOs know how to read SEC rules?
In all of the above cases, I simply read company disclosures and compared them to applicable accounting rules. What were those companies cited above, their CFOs, their audit committees, and their auditors doing?
Sam E. Antar
While I am glad that business schools have pushed to increase ethics education as part of the standard curriculum, I think that Sam has a great point--we can't rely on character alone (i.e. lack of rationalization) to prevent fraud, especially in an environment where opportunities and incentives for fraud tend to be incredibly high.
I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped my cousin Eddie Antar and other members of our family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes in cold-blood for fun and profit, and simply because I could.
If it weren't for the valiant efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.
There is a saying, "It takes one to know one." Today, I work very closely with the FBI, IRS, SEC, Justice Department, and other federal and state law enforcement agencies in training them to identify and catch white-collar criminals. As an independent whistleblower, I often refer cases to them.
I do not seek or want forgiveness for my vicious crimes from my victims. I plan on frying in hell with other white-collar criminals for a very long time.
Hopefully, by teaching people about the nature of white-collar crime I may get into heaven. However, I doubt that I will ever get there because my sins are unforgivable.