Friday, September 09, 2011

Why White-Collar Criminals Should Thank President Obama and Congressional Republicans

Last night, in his address before Congress, President Barack Obama said, "We're also planning to cut away the red tape that prevents too many rapidly growing start-up companies from raising capital and going public." Perhaps, President Obama does not understand that it is already easy for private companies to cut "red tape" and go public through what is known as a reverse-merger. Fraudulent companies have routinely used reverse-mergers to avoid regulatory scrutiny and defraud investors. If Obama wants to cut more "red tape" it will be even easier for white-collar criminals to defraud investors.

Meanwhile, congressional Republicans have already succeeded in cutting funding for the Securities and Exchange Commission despite increased responsibilities under the Dodd-Frank Act. According to the New York Times, an S.E.C. memo warned: “We may be forced to decline to prosecute certain persons who violate the law; settle cases on terms we might otherwise not prefer; name fewer defendants in a given action; restrict the types of investigative techniques employed; or conclude investigations earlier than we otherwise would.” Therefore, white-collar criminals may have less reason to worry about an underfunded and overburdened S.E.C. investigating and prosecuting them.

In a reverse-merger, a private company acquires control of an S.E.C. registered public shell company. The public shell company is called a "shell" because it exists mainly on paper. It has an organizational structure, but has no assets or liabilities. A reverse-merger allows a private company to bypass the lengthy and complex process of going public and intense scrutiny by federal and state regulators, because the process was completed beforehand with the shell public company.

On June 9, 2011, the Securities and Exchange Commission issued the following advisory:

Given the potential risks, investors should be especially careful when considering investing in the stock of reverse merger companies,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “As with any investment, investors should thoroughly research the company – including ensuring there is accurate and up-to-date information – before making a decision to invest.”
Reverse mergers permit private companies, including those located outside the U.S., to access U.S. investors and markets by merging with an existing public shell company. The SEC and U.S. exchanges recently suspended trading in a more than a dozen reverse merger companies, citing a lack of current, accurate information about these firms and their finances. [Emphasis added.]

We must eliminate reverse-mergers which are exploited by fraudulent companies to raise capital from gullible investors. If anything, the government needs to strengthen regulatory scrutiny of private companies seeking to raise capital from the public to prevent future frauds.

Further, the S.E.C. needs more resources to investigate suspected wrongdoing and prosecute criminals. Cuts to the S.E.C.'s budget by congressional Republicans had no effect on the budget deficit. The S.E.C. is financed by fees levied on companies it regulates, not taxpayer revenue. New York City has ten times more cops than the S.E.C. has employees and twice as many cops than Special Agents employed by the F.B.I.

Last May, the Washington Times reported that the Obama administration is allowing the Justice Department and the S.E.C. to rely on internal investigations by companies suspected of wrongdoing as a means to save money. Does the Obama administration really believe that white-collar criminals can do a credible job investigating themselves?

Cutting "red tape" and the S.E.C.'s budget will result in more fraud on investors and less criminals being investigated and prosecuted for their crimes. The Obama Administration and congressional Republicans are making life easier for white-collar criminals. When the door is open, white-collar criminals will walk right through it.

Written by,

Sam E. Antar

Recommended reading - Obama Signals Green Light for Stock Fraud by Gary Weiss - The Footnoted Jobs Program... by Michelle Leder

Business Insider - "The Feds Are Drinking The Same Kool-Aid As Crazy Eddie's Former Auditors" by Sam E. Antar

Dag Blog -"Crazy Eddie" Fraudster Sam Antar To Return To Crime - Thanks to Darrell Issa & Anti-Regulation Republicans by William K. Wolfrum


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 his 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 heroic 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. Often, I refer cases to them as an independent whistleblower. In addition, I teach about white-collar crime for government entities, professional organizations, businesses, and colleges and universities.

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. My past sins are unforgivable.

1 comment:

prague202020 said...

Crazy Eddie I read your blog and am usually with you 100%. However to make it appear that they are stopping serious fraudsters the SEC is now tearing apart normal companies, finding misreps, and arguing it makes the company a fraud. They are out of control. What we want are to stop big high profile frauds not kill off all of our businesses. I have three friends who all had SEC and DOJ investigations recently in three different small businesses. The accusations ranged from misrepresenting the involvement levels of managers to encouraging straw buyers to buy real estate. The SEC cases were settled but the DOJ lost the first two cases and the third is still in the court. Come on something is wrong here. You can go to far in the other direction.

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