Will KPMG Ever Wake Up and Finally Learn Its Lesson after Being Duped into Completing Crazy Eddie’s Audits Too Early Twenty Three Years Ago?

Sometimes I wonder what it will take for major accounting firms like KPMG to finally wake up and learn the lesson of how criminal management teams dupe them into signing off on clean audit opinions before completing the field work, just as I did as the criminal CFO of Crazy Eddie back in the day.

KPMG cited by British authorities for prematurely signing off on audits

Recently, Adam Jones of the Financial Times reported that KPMG was “rapped for signing off on audits” before the completion of field work by the United Kingdom’s Financial Reporting Council:

KMPG has been rapped over the knuckles by the accounting watchdog for signing off on audits before all necessary work had been completed.

The criticism was made by the Financial Reporting Council as it told Deloitte, Ernst & Young, KMPG and PwC, the four biggest auditors, to do more to avoid conflicts of interest and be more sceptical of management claims.

The annual evaluations of the Big Four auditors comes amid increased regulatory scrutiny of the profession and its role in the financial crisis.

In the case of KPMG, the FRC’s Audit Inspection Unit looked at 15 audits and found that in three cases the auditor’s report had been signed too soon. Significant changes were subsequently made to the accounts in one case.

Paul George, director of auditing at the FRC’s Professional Oversight Board, which includes the AIU, said the early sign-off problem was not limited to KPMG: “It is a profession-wide challenge to some degree.”

KPMG said it accepted the AIU’s comments. “We are pleased to note that in no case did they think that the audit opinion we issued was incorrect,” said Oliver Tant, head of its UK audit arm.

The next day, popular Going Concern blogger Caleb Newquist was cynical of Oliver Tant’s remarks attempting to minimize the gravity of his firm’s negligence:

Okay, sure signing off early on 20% of the audits sampled sorta looks bad but at least the numbers weren’t wrong. It would be really awkward to explain that. 

KPMG was plain lucky that no audit opinions had to be changed as a result of their negligence. Back in my criminal days as main architect of the Crazy Eddie fraud, KPMG was not so lucky. If KPMG had taken the time to properly complete its filed work, they would have uncovered Crazy Eddie’s massive fraud.

How I duped KPMG back in my criminal days

In the hope of providing a wake up lesson to accounting firms like KPMG, below is my story about how I was able to dupe them into certifying Crazy Eddie’s financial reports before the completion of field work and giving Crazy Eddie a clean audit opinion in fiscal year 1987.

1987 was a year of desperation at Crazy Eddie

From the early 1970’s to 1984, Crazy Eddie was a profitable private company. Our frauds were focused primarily on understating our profits by skimming cash to commit income tax evasion and steal sales taxes.

In 1984, Crazy Eddie hired Main Hurdman as its auditors because we needed a large accounting firm to add a false sense of credibility to our financial reporting. In 1987, Main Hurdman merged with another large accounting firm Peat Marwick and was called Peat Marwick Main (PMM). Today, Main Hurdman and Peat Marwick are the US audit partners of large international accounting firm KPMG They are the “P” and “M” in KPMG.
 

As a public company from 1984 to 1986, our frauds concentrated on inflating profits or overstating income to help certain members of the Antar family ultimately sell about $100 million in stock at inflated prices.

However, in 1987, Crazy Eddie started losing money for the first time in almost two decades because of increased competition and a steep decline in consumer electronic prices which reduced revenues. We resorted to desperate measures to report profits instead of losses.

Fraudulently increasing the value of assets like inventories and fraudulently decreasing liabilities such as accounts payable or amounts owed to vendors inflates reported income or understates reported losses. We fraudulently inflated our inventories by approximately $30 million, but that feat was still not enough to avoid reporting massive losses. Therefore, we conceived of a plan to generate $20 million in phony debit memos which were supposed to be charge backs or offsets against amounts owed to vendors for such items as advertising rebates, volume discounts, and other reimbursements due the company. Those phony debit memos helped us show smaller accounts payable balances or lower amounts owed to vendors on our books and records.

Our accounts payable was only $70 million. Therefore, reducing our reported accounts payable by almost 30% through the issuance of $20 million in phony debit memos was a huge undertaking and we risked scrutiny of those debit memo from our auditors. However, we were desperately trying to cover up massive losses in 1987.

We needed to keep KPMG on a very short string

The lesser the amount of  time that KPMG (at that time called Peat Marwick Main) had available to audit Crazy Eddie’s books and records, the  easier it was for us to dupe them into issuing clean audit opinions on our falsified financial reports. It was my job to make sure that KPMG did not have enough time to properly complete its audit field work and appropriately examine Crazy Eddie’s books and records.

To accommodate Crazy Eddie’s management, KPMG regularly signed off on its audits about 60 days after our fiscal year ended. For example, in the fiscal year ended March 3, 1985, KPMG signed off on Crazy Eddie’s audit on May 2, 1985. KPMG signed off on Crazy Eddie’s fiscal year ended March 2, 1986 audit on May 1, 1986. Likewise, we hoped that KPMG would sign off on Crazy Eddie’s audit for the fiscal year ended March 1, 1987 on April 30, 1987 in following previous year’s practices.

Ultimately, I was successful in pressuring KPMG to sign off on Crazy Eddie’s 1987 audit on April 28, two days earlier than expected, despite the fact that major audit work was incomplete!

Note: Crazy Eddie’s fiscal year ended on the first Sunday in March which explains the difference in dates for the end of fiscal year’s 1985, 1986, and 1987.

Crazy Eddie’s audit was expected to last about eight weeks and KPMG planned to complete its field work in regular increments during that period. For example, by the sixth week (of eight), KPMG expected to have about 75% of its field work completed and 25% of its work left to do.

My job was to stall KMPG into having only 25% of its field work completed by week six and having 75% of its work left to do during the remaining two weeks of the eight week audit. Thus, KPMG had to do three times the usual amount of field work in the remaining two weeks. To get the work done and satisfy Crazy Eddie’s management, KPMG would skimp on certain key procedures. The plan worked!

Understanding the human frailties of auditors and taking advantage of them

As a general practice, most large accounting firms use relatively inexperienced kids right out of college to do much of the basic audit leg work. They are supervised by slightly more experienced senior auditors who unfortunately depend on feedback from these inexperienced kids in making informed decisions on the conduct of the audit. During the 1980s, both these kids and their supervisors were mostly young single males between the ages of 22 and 29.

As a 28 year old CPA myself, I understood that audits are very boring, tedious, and mundane for these young single male auditors. It was difficult for them to pay close attention to their work. It was relatively easy for me to distract them from performing their jobs without blaming me for stalling them or obstructing their audit work.

Photo from Going Concern blog

Rather than overtly obstructing our auditors’ field work, I engaged in a calculated plan to subtly distract them. I made sure that most of our auditor’s interactions were with cute Crazy Eddie female employees reporting to me, even if some of those females had no knowledge of our cooking the books.

I encouraged my female employees to flirt and get friendly with their young male KPMG counterparts and discuss audit issues with them over lunch and dinner on Crazy Eddie’s tab. Meanwhile, I spent much of my time taking certain higher level KPMG counterparts to pick up bars and other establishments frequented by good-looking women.

My female staffers provided the perfect distraction for KPMG auditors as they engaged in constant small talk and wasted precious time. By April 26, just a few days before the scheduled audit sign off, KPMG had not even started many key procedures and still had many unanswered questions.

Unanswered questions and unfinished audit work

In the previous fiscal year, 1986, we had falsified our store level inventories (not warehouse inventories) by $3 to $4 million. However, in fiscal year 1987, Crazy Eddie's store level inventories were inflated by $15 to $20 million as we desperately tried to cover up staggering losses.

In stores that existed in both 1986 and 1987, where the auditors observed inventory counts, those gross inventory levels increased from $21.95 million to $37.47 million or a staggering 71%, despite a huge drop in consumer electronic prices. On April 26, 1987, I was able to convince a certain audit partner not order a re-count of store inventories despite his questioning the unusual increase in store level inventories during a period of dropping prices.

Better yet, the audit test work on verifying the validity of $20 million of charge backs to vendors, which were actually phony debit memos, did not even start because of the effectiveness female employees in distracting the male auditors from doing their work. Moreover, the audit partner respected me as a responsive client and trusted me - a grave mistake.

In past years, I always gave in to his recommendations on being “conservative” and reducing reported income, even though I was only giving back the excesses of my inflated fraudulent numbers. I effectively played poker with a marked deck, giving back the cards I did not need. Therefore, I was able to convince that audit partner to sit on a board of directors meeting the next day on April 27, where the board approved Crazy Eddie’s numbers after questioning him and me.

On April 28, 1987, KPMG formally signed off on Crazy Eddie’s financial reports and issued a clean audit opinion, despite red flags in store inventory levels and uncompleted field work in verifying $70 million of accounts payable that was fraudulently reduced to $50 million by our issuance of $20 million in phony debit memos.

Taking advantage of the inexperience of our auditors

The audit staff member who was responsible for leg work on accounts payable had no prior experience in auditing accounts payable and only started working for KPMG six months earlier fresh out of college. He first learned about offsetting charge backs to vendors against amounts purportedly owed them or debit memos during the Crazy Eddie audit, much of it from me.

Since the audit was already officially completed, KPMG only examined the accounts payable or amounts owed by Crazy Eddie to three major vendors, out of thousands of possible vendors. Each of those three vendors reported significant discrepancies in amounts they claimed that Crazy Eddie owed them due to our issuance of phony charge backs to vendors or debit memos.

For example, Sony claimed that Crazy Eddie owed them about $5 million more than Crazy Eddie claimed it owed them because Sony never acknowledged receiving any such debit memos. The auditors never did any follow up contact with any of the companies, whose accounts payable balances they examined, concerning any discrepancies in amounts owed by Crazy Eddie.

On April 28, 1987, the inexperienced auditor finally started his test work on Sony (which contained about $5 million of the $20 million in phony debit memos), the very same day our auditors signed off on the audit according to his testimony in a sworn deposition.

The questions below were asked by Stephen Howard, Attorney from Milbank, Tweed, Hadley, & McCloy, who represented the Oppenheimer-Palmieri Fund, L.P., one of the major shareholders who in November 2007 took over Crazy Eddie in a hostile takeover:

Question: There’s a date at the bottom of the page which appears to be 4/28/87. Do you see that?

KPMG staffer: Yes, I do.

Question: Is that your handwriting.

KPMG staffer: Yes, it is.

Question: What does that signify?

KPMG staffer: It was my policy to date my workpapers when I began to perform test work.

Question: So that tells us you started this work on the 28th but it doesn’t tell us when you finished it?

KPMG staffer: That is correct.

In his other sworn testimony, young inexperienced auditor said that he continued his field work for more than one day, but couldn’t recall how many days it took for him to complete his work. In any case, KPMG already had signed off on Crazy Eddie’s audit.  KPMG had no incentive to do any additional significant field work that may cause them to change their audit opinion.
  
Key audit procedures missed

Crazy Eddie Antar mug shot after arrest

In previous years, we generated an accounts payable aging schedule for our auditors to review. That schedule provides detailed information about every invoice owed to vendors, any offsetting charge backs to vendors such as debit memos, and how long those items have remained outstanding.

However, for fiscal year 1987, we did not generate accounts payable aging analysis.  Therefore, our auditors were unable to determine the how long the phony debit memos were on Crazy Eddie's book and records and why, after the passage of time,  they were not used as an offset against payments to vendors.
  
In addition, the sheer volume of phony debit memos caused our books and records to show many vendors owing Crazy Eddie money, rather than the other way around! Those negative accounts payable balances were red flags that were never properly scrutinized by our auditors.

An excerpt from KPMG’s work papers said:

... traced all debit memos into A/P status report as of 03/01/87. No further work necessary.

An “A/P status report” simply lists all invoices owed to vendors and offsetting debit memos. Therefore, the debit memos were traced to a report listing the phony debit memo, in other words known as “garbage in, garbage out.” Our auditors simply traced the phony debit memos to the books and records that reflected them, but did no work to confirm the validity of those debit memos.

Weeks later, a senior staff member finally did conduct an interview of Crazy Eddie's Accounts Payable Manager (a female co-conspirator) and his work paper is dated May 22, 1987 or 24 days after KPMG issued its clean audit opinion of Crazy Eddie’s books and records.

Conclusion

KPMG may have dodged the bullet by not having to change any of its audit reports as a result of its recent failure in “signing off on audits before all necessary work had been completed.” If history is any guide, KPMG demonstratively failed to learn the lesson of their misdeeds during the Crazy Eddie audit. I wonder if they are at least better in covering up their mistakes this time around.

Written by,

Sam E. Antar

Disclosure

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, this blog post can get me into heaven, though I doubt I will ever get there.

The Real Reason Behind Danny DeVito’s Crazy Eddie Movie Project Meltdown from Eddie Antar’s Cousin and Criminal CFO Sam E. Antar

Deadline New York Photo: Danny DeVito

Updated: 05/03/10 at 12:08 AM on Bottom of Post: Added Blog Reactions

In an exclusive interview with Mike Fleming from Deadline New York, Producer and Director Danny DeVito whines about how problems in obtaining Eddie Antar's life rights essentially sunk his Crazy Eddie movie project. However, Danny DeVito does not tell the whole story to Mike Fleming.

Apparently, Danny DeVito wanted to do a story that glamorized Eddie Antar and portray him as some sort of misguided hero. As the other "main character" in our frauds, I will have no part of any production that is sympathetic to any character, including myself, for our heinous cold-blooded crimes.

In addition, DeVito has made a series of troubling comments to the press about how he apparently tried to side step defrauded thousands of investors who are owed hundreds of millions of dollars in civil judgments, while clearly showing his sympathy to Eddie Antar.

We deserve to rot in hell for our unforgivable crimes

Over the last twenty years, I have said publicly that as the criminal CFO of Crazy Eddie my crimes were pure evil and I deserve to fry in hell for my unforgivable sins. I've made no excuses for my criminal conduct. At Crazy Eddie, we committed our crimes for both fun and profit. We arrogantly committed our crimes simply because we could and we had no empathy whatsoever for any of our victims.

Crazy Eddie Antar

Danny Devito's slobbering love affair with Eddie Antar

Meanwhile, Danny DeVito seems to have a slobbering love affair with Eddie Antar, as he has tried to paint of sympathetic picture of my former boss and mentor.

In an April 2009 Variety article published when DeVito was still bullish about his Crazy Eddie movie project, he was quoted by Michael Fleming as saying:

He started as a guy who loved making deals more than money.

[Snip]

He lived an outrageously spectacular life and suffered an outrageously spectacular fall.

However, during the July 1993 Crazy Eddie criminal trial, former US Attorney Michael Chertoff accurately told jurors:

They say that blood is thicker than water. In this family money is thicker than blood.

Eddie Antar Wanted Poster

For Eddie Antar, money was in fact "thicker than blood." As the cover-up of our crimes unraveled, Eddie Antar skipped town with over a dozen phony passports and shipped his stolen loot overseas in multiple secret foreign bank accounts and safe deposit boxes. He cowardly left his family, including five young daughters behind.

When Eddie Antar was captured in Israel, he took the low road by still trying to escape responsibility for his crimes. Eddie tried to avoid extradition by citing Israel's "law of return" which is meant help Jews immigrate to Israel as a result of oppression and anti-Semitism in their native home countries and not to protect criminals like him. Ultimately, Eddie Antar was brought back to justice to face trial in the United States, kicking and scheming, as he was handcuffed and accompanied by US Marshals.

During the ensuing criminal and SEC civil trials, Eddie Antar and other members of his immediate family tried to lay the entire blame for the fraud on me and others who worked for them, despite the fact that they skimmed tens of millions of dollars from Crazy Eddie as private company and later made over $90 million selling stock at inflated prices to unsuspecting investors.

Eddie Antar simply loved money before his children, before his immediate family, before his other family members, and before everyone else. Howard Sirota, the former lead counsel for the victims of our crimes in the class action litigation against the Antar family, correctly told CNBC in July 2007, that Eddie Antar "is a sociopath."

Securities litigator Howard Sirota

It is simply an insult to our victims for Danny DeVito to even use the word "suffered" when it comes to Eddie Antar's self inflicted wounds, since our victims suffered far greater and irreversible losses as a result of our crimes.

In the recent Deadline New York article, Danny Devito continued to paint a sympathetic portrait of Eddie Antar:

DeVito said Antar was “hurt” by that news; he's got little else going on. “He’s gone through tough times, and he’s not the aggressive tough guy they paint him to be,” De Vito said.

[Snip]

...there is a family dynamic that isn't common knowledge and somewhat explains Antar's fall.

Danny Devito is clearly enamored by my con man cousin Eddie Antar. During a joint appearance with me on CNBC that was moderated by Herb Greenberg in July 2007, I confronted Eddie Antar about his flight from justice to escape responsibility to both his family and investors, who were defrauded by our crimes. See the exchange below:

Sam Antar: I fought for you like Crazy. Doing it for myself I fought. I stayed here and took the heat. You ran. You ran like a coward.

Eddie Antar: I am not a coward Sam.

Sam Antar: Yes, you left me out there hanging.

Eddie Antar: I didn't, I didn't leave.

Renee and Allen Antar still in denial

Sam Antar: You know something, you're not even a friend. You're just a thug. Just like me. A two bit thug.

As I detailed above, Eddie Antar is plainly still in denial about his cowardice towards his own family and investors.

There actually is a "family dynamic" that "explains Antar's fall" as DeVito claims. However, Eddie Antar and other members of his immediate family are simply unwilling to give a truthful account of what really happened at Crazy Eddie, while Danny Devito is willing to accept Eddie Antar's bullshit excuses for his vile behavior.

As recently as a couple of days ago, I received certain unsolicited and disparaging Facebook messages from Renee Antar, wife and cousin of Eddie Antar's brother Allen, and a long time friend of Eddie's still blaming me for all the Antar family crimes.

Danny Devito seems more sympathetic to Eddie Antar, rather than defrauded investors

As quoted above, Danny Devito claims that Eddie Antar's "....got little else going on." Perhaps, Eddie Antar should start by giving a full account of all of his stolen loot?

While federal investigators were able to recover over $90 million from Eddie Antar and other family members, several million dollars remain unaccounted for. For example, in November 2006, Eddie Antar claimed that he "donated" $6 million to an Israeli hospital. However, he received a kickback of $5.4 million in cash.

By spending a net sum of $600,000, Eddie Antar was able to save about $2 million in taxes and also place $5.4 million out of the reach of potential creditors, including defrauded investors.

While government investigators recovered a few million dollars cash from Eddie Antar's safe deposit boxes, the hospital kickback money was never fully accounted for. The government does not know whether the money found in those safe deposit boxes originated from skimming before Crazy Eddie's initial public offering in 1984 or money from that hospital kickback scheme.

To make matters far worse, Eddie Antar and other investors of questionable character tried to privately peddle his life rights to a gullible Danny Devito when he has not fully accounted for his stolen loot and owes investors millions of dollar in judgments.

According to Deadline New York:

Pulling together life rights deals to make fact-based feature films can be insaaaaaaaaaaane. In fact, rights problems have essentially killed a feature film about the  ex-consumer electronics king who coined that phrase in manic commercials that fueled the 70s rise of Eddie Antar's Crazy Eddie store chain across the East Coast. Danny DeVito planned to direct and produce Crazy Eddie, but he said the project could not be made because of a life rights deal he made with Antar.

[Snip]

DeVito hopes to pick up the pieces of Crazy Eddie, a drama that was to be written by 21 scribe Peter Steinfeld, with both producing. Right now the project is in shambles, all because they included the subject in a rights deal so he'd tell his story.

[Snip]

“It was all going well until we got a call from some big-time lawyer who represented a lot of people who were hurt by Eddie,” DeVito said. “He painted him as the Bernie Madoff of his generation and said that if Eddie is involved in any way, we’re going to put liens on the movie. I didn’t like the sound of that at all. This put a big, wet blanket over the picture. What it boiled down to is, if Eddie is involved at all, then we’re in trouble.”

That "big-time lawyer" is Howard Sirota, lead counsel in the class action litigation who represented the defrauded victims of our crimes. While Bernie Madoff stole far more money and was more evil than Eddie Antar, at least Madoff thought about his family and did run away to escape justice. And if Devito did indeed paint Eddie in a remotely sympathetic light, it would be like sitting through a movie that glamorizes Bernie Madoff. You’d throw your popcorn at the screen!

DeVito seemed far more concerned with paying Eddie Antar for his life rights, rather than being concerned about recovering money for defrauded investors. In May 2009, Danny Devito told Fox Business Channel in referring to Eddie Antar's life rights:

There was a deal and that deal was terminated. Any script that is written, or movie produced, will be based on public domain events and information.

However, in April 2010, Devito backed away from his comments to Fox Business Channel in is exclusive interview with Deadline New York, saying:

I’m not sure there were papers signed, it was more, we’ll do this together and we won’t burn you.

As quoted above, first Danny Devito tells Fox Business Channel, "There was a deal and that deal was terminated" and now he claims that "I'm not sure there were papers signed...." Are DeVito and his investors still trying to bypass defrauded investors? Shouldn't they have known about Eddie Antar's unpaid judgments to investors? Danny DeVito showed that he is clearly more sympathetic to Eddie Antar, rather than thousands of defrauded investors by telling Eddie that "...we'll do this together and we won't burn you." Nice guy?

Danny DeVito clearly loves my con man cousin and I am a con man, too. However, I know plenty about white-collar crime. At least I have done something to educate others about white-collar crime, and most of my work is pro bono, while Eddie Antar has sat around doing nothing since leaving prison.

From 1998 to the middle of June 2009, I traveled across the entire country taking no fees and I spent several hundred thousand dollars paying all travel expenses out of pocket. I've done several hundred lectures on white-collar crime for the government, law enforcement, educational institutions, businesses, and professional organizations.

For example, I've lectured at the Department of Justice, FBI, IRS, Secret Service, Department of Defense, and other federal and state law enforcement agencies. I've taught at universities such as Stanford Business and Law Schools, major corporations, major accounting firms, and major professional organizations. I still do plenty of pro bono work for the federal government and others (Details here).

Corporate miscreant Patrick Byrne

As an independent whistleblower, I correctly identified GAAP violations and SEC disclosure violations by a scam company called Overstock.com (NASDAQ: OSTK) and lies to investors by its CEO Patrick Byrne (See: October 5, 2009: Crain's New York Business - Crazy Like a Fox by Aaron Elstein (Download). After I alerted the Securities and Exchange Commission, Overstock.com was forced to restate its financial reports to correct those GAAP violations and SEC disclosure violations that I correctly identified and reported on my blog (Details here).

Note: For additional information about my three year battle to make Overstock.com comply with GAAP and SEC disclosure rules, please read "Selling America Short: The SEC and Market Contrarians in the Age of Absurdity" by Richard Sauer (Wiley 2010).

I am working very closely with the FBI, IRS, SEC, Justice Department, and other law enforcement agencies in both training them to identify and catch white-collar criminals and assisting them in various investigations pro bono.

I doubt that I will ever make it out of hell and get into heaven under any circumstances and I do not seek or want forgiveness for my vicious crimes from my victims. Anything that I may do in helping law enforcement and others does not undo any of my heinous crimes.

The consequences of lies versus the consequences of truth

Crain's New York Business article about Sam E. Antar

If I learned any lesson from my criminal days at Crazy Eddie, it is that the consequences of lies are far worse than the consequences of telling the truth, no matter how evil the truth is.

From 1987 to 1989, I lied under oath to protect myself and other Antar family members involved in our crimes. Afterwards, I learned that a bitter Sam M. Antar, Eddie's own father, who was purged from the company due to a family dispute, paid off two witnesses to place the entire blame for the fraud on his son, me, and others allied with him. When I told Eddie Antar, my lifelong mentor and boss, that his own father set us up to take the fall, he distanced himself from me and started making plans to flee the country.

At that point, based on the advice of my criminal attorney Anthony R. Mautone and civil attorney Jonathan D. Warner, I decided to "cooperate" with the US Attorney's office, the FBI, the Securities and Exchange Commission, and lawyers representing each and every victim of our crimes in their respective investigations for two years without the benefit of any plea bargain agreement limiting criminal and civil exposure for my crimes. My civil attorney Jonathan Warner's work helped the US Attorney's office obtain a guilty plea from Abe Grinberg, one of Sam M. Antar cronies who lied to the government.

Despite my previous false testimony, I was the key witness in both the Crazy Eddie criminal trial in 1993 and the Securities and Exchange Commission's civil trial that was prosecuted in 1998. In the criminal trial, Eddie Antar and his brother Mitchell Antar were convicted of numerous crimes, while his brother Allen Antar was acquitted. However, in the 1998 civil trial, Allen Antar, Sam M. Antar, and brother-in-law Ben Kuszer were convicted of civil fraud charges. Other Antar family members settled civil claims against them, rather than risk trials, and gave up most of their ill gotten gains.

Over a fifteen year period, the government and victim's lawyers recovered from the Antars more money than they made by selling Crazy Eddie stock to duped investors at inflated prices. The Antar family engaged in massive skimming before Crazy Eddie's became a public company and a substantial amount of those funds were recovered from secret foreign bank accounts, safe deposit boxes, and even money hidden in Sam M. Antar's ceiling.

As a result of my extensive cooperation with the government and victims of my crimes and taking into account that I "cooperated" with them for almost two years before obtaining a plea bargain agreement, the sentencing Judge rejected US Attorney Michael Chertoff's recommendation for jail time and instead sentenced me to only six-months of house arrest, 1,200 hours of community service, and nominal fines. All attorneys representing the victims of my crimes agreed to give me a complete walk from any civil liabilities.

Unlike Eddie Antar and other members of his immediate family, I make no excuses for my criminal conduct. Nor should I receive any praise for my cooperation with the government and defrauded investors. I cooperated with the government and victims simply to save my own rear end, avoid prison, and avoid civil penalties for my crimes.

Neither morality nor any sense of sympathy for my victims played any role in my decision to cooperate and take responsibility for my crimes. If the government did not investigate and prosecute me, I would still be the criminal CFO of Crazy Eddie today. If Sam M. Antar did not set up me and Eddie to take the fall for everyone's crimes and Eddie did not later abandon me, I would have never cooperated with the government or victims in investigating and prosecuting our crimes.

Will there be a Crazy Eddie movie?

The short answer is yes. Recently, I signed a contract with producer Robert Green and his east coast partner from New York for a planned Crazy Eddie motion picture production. I'm in talks with what is known in the film industry as an A-List screenwriter and will be taking the story out to studios.

They are dealing with me because they know that I have told the truth about my crimes even though it portrays me as a cruel, heartless, and cold-blooded crook, just like Eddie Antar and other family members. They don't want to talk to a scumbag in denial like my cousin and former lifelong mentor Eddie Antar.

In addition, we have documentation about the Crazy Eddie frauds that is not available in the public domain. Simply put, I know where all the bodies are buried. I constructed and ran the scam 24/7 for 18 years. It was in my blood and a major part of my life.

My life rights are essential to any motion picture project because I was deeply involved in the Crazy Eddie fraud, I worked side-by-side with Eddie Antar in committing those frauds, I don't seek to glamorize any of our crimes, and I have already told the entire truth about what really happened at Crazy Eddie in every sordid detail.

Crain's New York Business Photo by Buck Ennis: Sam Antar

I will not sign over my life rights to any movie project that glamorizes any character involved in our crimes, including myself. In addition, Danny DeVito risks litigation from defrauded investors, from me, and other main characters, if he decides move forward with or without Eddie Antar. In other words, Eddie Antar's life rights are worthless and no movie can be made without my life rights, too.

A message for Danny DeVito

I have a message for Danny DeVito about his love affair with my sociopath cousin Eddie Antar. To borrow a line from Groucho Marx, "I love my cigars, too, but I take them out of my mouth once in a while." Don't get conned by Eddie's charm like others including his own family who have learned the hard way.

If I can give any compliment to my cousin Eddie Antar, his embittered father Sam M. Antar was much worse than he is, for setting both of us up to take the fall for everyone's crimes. At least, I do not pretend to be anything other than a cold-blooded criminal who enjoyed committing his crimes and had no empathy whatsoever for his victims. As I said, "The consequences of lies are far worse than the consequences of telling the truth, no matter how evil that truth is."

I will have much more to say about the new Crazy Eddie movie, soon.

Written by:

Sam E. Antar

For additional information on Crazy Eddie, please visit my White Collar Fraud website and watch video clip of Howard Sirota and me on Fox Business Channel.

Other blog reaction:

Jewish Week: A KO for Kelso by Adam Dickter

Pragmatism Refreshed: The Crazy Eddie's Movie by Chistopher Faille

Going Concern: The Crazy Eddie Movie Hits a Snag by Caleb Newquist

Please read my important disclosure below:

I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes, simply because I could.

If it weren't for the 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.

I do not own Overstock.com securities short or long. My research on Overstock.com and in particular its lying CEO Patrick Byrne is a freebie for securities regulators and the public in order to help me get into heaven, though I doubt that I will ever get there anyway. I plan on meeting corporate miscreants, such as fifth rate crooks like Patrick Byrne, in hell. In addition, I plan on meeting Eddie Antar, his father, and his brothers in hell, too.

I plan on frying in hell with all of them for a very long time.

Did a Clever SEC Bait Goldman Sachs into Compounding Its Legal Problems With the "Kiss of Death" Message?

Updated: At 3:48 AM ET 04/20/2010 on bottom

The Kiss of Death

In filing its lawsuit against Goldman Sachs (NYSE: GS) on a Friday, the Securities and Exchange Commission sent what I call the "kiss of death" message to the embattled company. In other words, the SEC wanted to stick it to Goldman Sachs and Fabrice Tourre, the Executive Director of Goldman Sachs International, who is also a defendant in the complaint. While the SEC as a practice does inform target companies and individuals of an impending enforcement action, it does not always tell them exactly when such an action will be filed.

Apparently, the SEC filed its lawsuit without giving Goldman Sachs the heads up that it was planning to file it that day. Business Insider observed that Goldman Sachs was clearly unprepared to respond to the complaint as news of the lawsuit dominated the headlines all day. Goldman issued a short denial around noon and issued an extensive denial late in the afternoon, after most people had gone packing for the weekend.

When a company or individual receives a surprise subpoena on a Friday from the SEC, it is usually designed to ruin their weekend plans. Yes, the SEC can get personal in its own way.

Usually, corporate lawyers are unavailable on short notice to work weekends. When a company or individual receives a subpoena or lawsuit on a Friday, they are left to stew in anxiety over the weekend until Monday, before their lawyers can appropriately advice them on how to respond to the SEC.

Back in the day as the criminal CFO of Crazy Eddie, I received a surprise subpoena from the SEC late Friday afternoon. I had to wait until Monday before my attorneys had time to advise me on a course of action.

The "kiss of death" message is deliberately sent on Fridays to chill the bones of criminals. Some criminals wait in anxiety during the weekend until Monday to consult with their attorneys about what to do next. Other criminals or SEC targets like Goldman Sachs don't want to wait until Monday. So they make rash decisions and major errors in prematurely reacting to the "kiss of death" message to their own peril and find themselves in legal quicksand.

Goldman Sachs chose not to wait until Monday and fully digest the implications of the SEC complaint. After a relatively short consultation with its attorneys, the company hastily issued a detailed press release later Friday afternoon that I believe will land it into deeper potential trouble. Before I discuss that issue, it's worth noting who the SEC selected to be its lead counsel in the lawsuit against Goldman Sachs.

SEC Lead Litigation Counsel: Richard E. Simpson the "Pit bull"

The SEC chose top gun Richard E. Simpson as its lead counsel in its lawsuit against Goldman Sachs and Fabrice Tourre. Coincidently, Richard E. Simpson was the same lead counsel for the SEC in its successful case against Crazy Eddie and the Antar family.

Simpson is a twenty year veteran at the SEC Enforcement Division. He could have easily made much more money in the private sector, but instead stayed at the SEC. As a former adversary who did battle against Simpson and later buckled under his pressure to cooperate with him, I found him to be very focused, knowledgeable about how criminals operate, and he knows how to bring them down.

In the Crazy Eddie days, Richard Simpson developed a reputation for turning pin stripe suits into orange prison jump suits. Simpson's investigation of the Antar family led to the capture of fugitive Eddie Antar in Israel, later imprisonment of Eddie and his brother Mitchell, and the impoverishment of other family members. Simpson won civil cases against against Sam M. Antar, Eddie's father, and other family members who were not indicted in the criminal case.

Simpson's relentless pursuit of the Antars earned him the nickname "Pit bull" from US Attorney Michael Chertoff's office, which prosecuted the Crazy criminal case. Over a fifteen year period Simpson was able to recover from the Antars more money than they made by selling Crazy Eddie stock to duped investors at inflated prices. The Antar family engaged in massive skimming before Crazy Eddie's became a public company and Simpson recovered a substantial amount of those funds from secret foreign bank accounts, safe deposit boxes, and even money hidden in Sam M. Antar's ceiling.

On June 22, 2004 Justin Feldman, former attorney for Eddie Antar, in an interview at the SEC Historical Society commented on SEC attorney Richard Simpson:

Rick Simpson. Tenacity, I'm telling you! When he wanted every dollar back we had to fight with him to get ten cents on the dollar on our fees.

After the SEC filed its complaint against Goldman Sachs and Fabrice Tourre, I was interviewed by Diane Tucker from the Huffington Post and was asked about Simpson. I told her:

Richard Simpson is a relentless litigator who brought the Antar clan to its knees.

Rick is a tough adversary. I swear he works over 90 hours a week. He's focused, aggressive, and understands the way criminals operate. He knows accounting backward and forward, which is rare for an attorney. Richard Simpson is what the SEC should be today, but unfortunately is not.

In addition, former FBI Special Agent Paul Hayes who led the criminal investigation of Crazy Eddie was interviewed by Diane Tucker. See below:

Former banker and retired FBI agent Paul D. Hayes told me on the phone he is impressed with Simpson.

"He has the utmost respect for the procedures of civil and criminal law. He lets the facts tell the story, and yet he's innovative as well. He'll investigate areas where there's no precedent in law, but are fair areas to address. That's what he did in the Crazy Eddie case."

Goldman Sachs and Fabrice Tourre could not have drawn a tougher adversary from the SEC than Richard Simpson who is a pro among pros. Like Simpson chased the Antars and their money to all ends of the earth, he can be expected to be even more relentless in his pursuit of the "high and mighty" Goldman Sachs in any long running legal marathon.

By sending the "kiss of death" message to Goldman Sachs in filing its lawsuit on Friday, the SEC led by Simpson was able to get Goldman Sachs to prematurely react to the SEC complaint and make grave errors.

Before I get to that point, let's review the SEC complaint.

The Lawsuit

On Friday, the SEC filed its lawsuit against Goldman Sachs and Fabrice Tourre alleging that they committed securities fraud by failing to disclose to investors that a certain portfolio of mortgage backed securities was substantially picked by another customer who was betting against the viability of those same securities by taking a short position against it. Goldman Sachs and Tourre are alleged to have concealed short seller Paulson & Co.'s role in selecting the underlying mortgages. Instead, they told investors that all securities in the portfolio were selected by ACA Management, a third party with expertise in analyzing credit risk. See more details from the press release below:

The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.

...Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.

[Snip]

...Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.

...the marketing materials for the CDO known as ABACUS 2007-AC1 (ABACUS) all represented that the RMBS portfolio underlying the CDO was selected by ACA Management LLC (ACA), a third party with expertise in analyzing credit risk in RMBS. The SEC alleges that undisclosed in the marketing materials and unbeknownst to investors, the Paulson & Co. hedge fund, which was poised to benefit if the RMBS defaulted, played a significant role in selecting which RMBS should make up the portfolio.

...after participating in the portfolio selection, Paulson & Co. effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (CDS) with Goldman Sachs to buy protection on specific layers of the ABACUS capital structure. Given that financial short interest, Paulson & Co. had an economic incentive to select RMBS that it expected to experience credit events in the near future. Goldman Sachs did not disclose Paulson & Co.'s short position or its role in the collateral selection process in the term sheet, flip book, offering memorandum, or other marketing materials provided to investors.

...Goldman Sachs Vice President Fabrice Tourre was principally responsible for ABACUS 2007-AC1. Tourre structured the transaction, prepared the marketing materials, and communicated directly with investors. Tourre allegedly knew of Paulson & Co.'s undisclosed short interest and role in the collateral selection process. In addition, he misled ACA into believing that Paulson & Co. invested approximately $200 million in the equity of ABACUS, indicating that Paulson & Co.'s interests in the collateral selection process were closely aligned with ACA's interests. In reality, however, their interests were sharply conflicting.

...the deal closed on April 26, 2007, and Paulson & Co. paid Goldman Sachs approximately $15 million for structuring and marketing ABACUS. By Oct. 24, 2007, 83 percent of the RMBS in the ABACUS portfolio had been downgraded and 17 percent were on negative watch. By Jan. 29, 2008, 99 percent of the portfolio had been downgraded.

Investors in the liabilities of ABACUS are alleged to have lost more than $1 billion.

The SEC's complaint charges Goldman Sachs and Tourre with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. The Commission seeks injunctive relief, disgorgement of profits, prejudgment interest, and financial penalties. [Emphasis added.]

The SEC complaint involves a simple issue of nondisclosure to investors of material financial information governed mainly by Rule 10b-5, which I will describe in more detail later. The SEC alleges that Goldman Sachs and Fabrice Tourre should have informed investors of Paulson's role in the transaction. Download the lawsuit here.

The Cover up is more Dangerous than the Underlying Crime

Back in the day, I learned that the most dangerous time for a criminal is the cover up of a crime and not the execution of a crime. Public statements made by Eddie Antar's father and brothers in defending their actions were later successfully used against them in civil and criminal proceedings. In pursuing the Antar's, Simpson learned that criminals make hasty decisions to defend their actions which later land them into deeper legal trouble.

Many people are upset that the SEC brought civil charges against Goldman Sachs, while the Justice Department has not filed any criminal charges against the company. Back in the Crazy Eddie days, we faced two parallel probes, a civil probe from the SEC and a criminal probe from US Attorney Michael Chertoff in Newark, New Jersey.

Simpson effectively baited certain members of the Antar family into testifying and lying under oath in the civil case, rather than exercising their right against self-incrimination under the 5th Amendment to the US Constitution. Those lies told by the Antars were later used as the foundation for the successful criminal case brought to trial by US Attorney Michael Chertoff.

The Antars had effectively used the art of "bait and switch" against their customers and in a form of poetic justice they fell victim to Simpson's "bait and switch" tactics. I am certain that the Justice Department is watching the SEC investigation and litigation against Goldman Sachs, too.

After the stock market closed on Friday, a startled Goldman Sachs issued a detailed press release responding to the SEC lawsuit and possibly created a new set of legal problems by apparently misleading investors about certain issues being litigated and obscuring other issues. They took the carefully laid out bait provided by the SEC's "kiss of death" message and screwed up royally, as I will describe below.

Goldman Sachs Makes Huge Error in After Market Response to SEC Lawsuit

Rule 10b-5 prohibits public companies, their officers, and employees from making:

...any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person....

The SEC claims that Goldman Sachs and Fabrice Tourre violated Rule 10b-5 by failing to disclose material information about Paulson's role in selecting certain underlying mortgage securities and that Paulson was betting against the viability of those securities by taking a short position against them.

The Goldman Sachs press release starts out by saying:

...We are disappointed that the SEC would bring this action related to a single transaction in the face of an extensive record which establishes that the accusations are unfounded in law and fact. [Emphasis added.]

As I will describe below, at the very least, the SEC's allegations are founded in law under Rule 10b-5, contrary to the company's representation to investors in its press release. In addition, the press release misleads investors about the SEC complaint, too. Therefore, the Goldman Sachs press release may subject the company to additional Rule 10b-5 violations.

Goldman Sachs does not seem to realize that as a public company it cannot have a level playing field for itself in responding to allegations of fraud by the SEC. If Goldman Sachs loses the lawsuit, investors can claim that they were misled by the company's statement that "the accusations are unfounded in law and fact" under Rule 10b-5.

The press release goes on to say that Goldman lost money from the alleged fraud:

• Goldman Sachs Lost Money On The Transaction.  Goldman Sachs, itself, lost more than $90 million.  Our fee was $15 million. We were subject to losses and we did not structure a portfolio that was designed to lose money.

A common diversion technique used by criminals is to claim that they lost money from a questionable transaction to show they have no motive to defraud their victims. I lost almost $10,000 from selling my Crazy Eddie stock and initially claimed that I had no motive to defraud investors.

It is simply irrelevant that Goldman Sachs lost money on the transaction in question. The SEC alleges that Goldman Sachs and Fabrice Tourre omitted key material information from investors (rule 10b-5 violation) when they failed to disclose to them Paulson's role in selecting the underlying mortgage securities.

In addition, Goldman Sachs defended itself by claiming that the allegedly defrauded investors are "sophisticated" and was provided with "extensive information" about the underlying mortgage securities:

• Extensive Disclosure Was Provided. IKB, a large German Bank and sophisticated CDO market participant and ACA Capital Management, the two investors, were provided extensive information about the underlying mortgage securities. The risk associated with the securities was known to these investors, who were among the most sophisticated mortgage investors in the world. These investors also understood that a synthetic CDO transaction necessarily included both a long and short side.

• ACA, the Largest Investor, Selected The Portfolio. The portfolio of mortgage backed securities in this investment was selected by an independent and experienced portfolio selection agent after a series of discussions, including with Paulson & Co., which were entirely typical of these types of transactions.  ACA had the largest exposure to the transaction, investing $951 million. It had an obligation and every incentive to select appropriate securities. 

Sophisticated investors are defrauded all the time. Even if "sophisticated investors" are buried with "extensive information", the omission of one key piece of material information by itself, such as concealing Paulson's role in selecting the underlying mortgage securities and that Paulson was also shorting those same securities, can give rise to a securities law violation.

As I detailed above, under Rule 10b-5, a public company cannot "...omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading...." Therefore, Goldman misled investors in its press release when it stated that, "...the accusations are unfounded in law...." The SEC's allegations are clearly founded on Rule 10b-5.

In its press release, Goldman Sachs tried to obscure a key issue in the SEC complaint claiming that:

• Goldman Sachs Never Represented to ACA That Paulson Was Going To Be A Long Investor. The SEC’s complaint accuses the firm of fraud because it didn’t disclose to one party of the transaction who was on the other side of that transaction.  As normal business practice, market makers do not disclose the identities of a buyer to a seller and vice versa. Goldman Sachs never represented to ACA that Paulson was going to be a long investor. [Emphasis added.]

Here, Goldman Sachs obscures the legal issues involved in the complaint by claiming that the company, "never represented to ACA that Paulson was going to be a long investor." However, SEC complaint alleges that Goldman Sachs:

...misled ACA into believing that Paulson was investing in the equity of ABACUS 2007-AC1 and therefore shared a long interest with CDO investors going to be a long investor. [Emphasis added.]

Starting from paragraph 44, page 13 of the lawsuit the SEC describes in detail how Fabrice Tourre allegedly misled ACA into believing that it was a long investor and not betting against the portfolio of mortgage backed securities by shorting it.

In others words, the SEC alleges that Goldman Sachs knew that ACA was operating under the false belief that  the Paulson was "investing in the equity of ABACUS 2007-ACI" or the underlying mortgage securities, but Goldman Sachs did nothing to alert ACA to the contrary that Paulson was shorting the securities.

The Goldman Sachs press release is materially misleading to investors and it can give rise to additional securities law violations under Rule 10b-5. The SEC complaint has a very sound basis in both fact and the law under Rule 10b-5, contrary to the Goldman Sachs press release which claims that "the accusations are unfounded in law and fact."

Other Potential Disclosure Problems Facing Goldman Sachs

Before the SEC files a lawsuit, it notifies the company or individual that it is conducting an investigation and later sends them a "Wells Notice" that its plans to recommend enforcement action against the recipient. Since an SEC investigation or the receipt of a Wells Notice is considered a material event, companies must promptly disclose them to investors in 8-K filings with the SEC. However, Goldman Sachs made no such disclosure of any such "Wells Notice" in its filings with the SEC and is now open to potential litigation from investors for its failure to disclose those material events. See Business Week article here.

Closing Comments

As a criminal I learned that the cover up is always more dangerous than the crime. Whether or not Goldman Sachs knew the SEC lawsuit would be filed on Friday, the company made key errors in hastily responding to the SEC complaint that may come back to haunt the company. Sometimes it's better to just shut up!

Goldman Sachs simply lost its patience and went forward with emotion instead of logic in responding to the SEC. They should have waited until Monday.

To make matters worse, Goldman Sachs is circling the wagons around Fabrice Tourre which I believe is a big mistake. The company should have simply issued a press release saying:

Goldman Sachs does not comment on any current litigation and will address any issues in court proceedings.

In addition, Goldman Sachs could have said that:

The company takes any allegations of impropriety seriously and is placing Fabrice Tourre on leave pending the outcome of the SEC litigation.

In any company, especially a company that is the size of Goldman Sachs, there are always some employees who bend the rules or break the law and end up getting a company in legal trouble. By circling the wagons around Fabrice Tourre, Goldman Sachs raised the ante from a single employee issue involving a certain corporate transaction to a corporate wide issue involving the entire company. A very dumb move!

The public relations people and attorneys representing Goldman Sachs will get rich as they suck the company dry with fees and lead them down the river. That's what happened to the Antar clan at Crazy Eddie as Richard Simpson rightfully "deep-sixed" them too.

Written by,

Sam E. Antar

Please read  important disclosure about me below!

Note to Richard Simpson (SEC):

You whipped my rear end back in the day. The scars I received from the legal beating you gave me are still there. Not that there is anything wrong with it.

Update:

Wall Street Journal confirms SEC's "kiss of death" message saying that "Firm Contends It Was Blindsided by Lawsuit."

Nancy Miller from True/Slant writes:

Indeed, Goldman appears to have been caught completely off guard by the Friday announcement — even though it had received a Wells notice in July 2009, indicating that it was a target of an active investigation. The WSJ reports tonight that Goldman responded to the Wells notice in September. In March, Goldman contacted the SEC to check on the status of the investigation but no one responded to the request for an update. And apparently, Goldman didn’t mind that the lawyers at the SEC weren’t returning its phone call.

In his blog post, Antar zeroes in on Goldman’s assertion that the suit has no basis in “law and fact.” Big mistake if it turns out the suit really does have a basis in law and fact. After his surprise indictment, Antar says he tried to cover up his tracks and ended up in much worse trouble; indeed, covering his tracks proved to be more troublesome than the original misdeeds. Antar warns that if Goldman’s knee-jerk statements turn out to be untrue or misleading, their troubles would only deepen.

Sample Reaction to my Blog:

Investment News - SEC's 'pit bull' lead lawyer in Goldman case toppled Crazy Eddie by Aaron Elstein

When History Attacks! - What a White-Collar Felon Can Teach You

Seeking Alpha - Goldman Sachs: How Far Will the Abacus Case Spread? by John Lounsbury

Crain's New York Business - The Goldman Sachs-Crazy Eddie connection by Aaron Elstein

The Baltimore Sun - Thoughts on Goldman from a white-collar crook by Jay Hancock

The Stupid Nation - Goldman Sacked

Seeking Alpha - Monday Market Mayhem: Is Goldman's Goose Cooked? by Phillip Davis

Daily Kos - Goldman Sachs: "The Kiss of Death by PrometheusUnbound

Fav Stocks - Did the SEC Bait Goldman Sachs? Sam Antar, Criminal CFO of Crazy Eddie Makes the Case by Mike Shedlock

Alan Colmes Presents Liberaland - SEC Takes On Goldman Sachs – A Sea Change Or A Big Fish To Calm Waters? by William K. Wolfrum

Gary Weiss Blog - Man Bites Dog, or Goldman Sachs Charged by the SEC

The Big Picture - Goldman Sachs Gets the SEC Kiss of Death by Barry Ritholtz

Recommended Book:

Selling America Short: The SEC and Market Contrarians in the Age of Absurdity by Richard Sauer (Wiley 2010)

Important Disclosure:

I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes, simply because I could.

If it weren't for the 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.

I do not own Goldman Sachs securities short or long. However, it did scam Goldman Sachs analyst Richard Balter about Crazy Eddie's financial reports during my criminal days as the CFO of the company.

My research on Goldman Sachs is a freebie for securities regulators and the public in order to help me get into heaven, though I doubt that I will ever get there anyway. I personally believe that some people at Goldman Sachs may end up joining me in hell.

Crazy Eddie Movie: Danny Devito's Slobbering Love Affair With Convicted Stock Swindler Eddie Antar

Securities lawyer Howard Sirota and I discuss Danny Devito's plans to make a movie glamorizing the life of Crazy Eddie Antar with Alexis Glick on Fox Business Channel's "Money for Breakfast."

Written by:

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Other media covering this issue:

The Bizop News: Glamourizing Economic Predators by Michael Webster

Tell It To Al: Sam Antar pans Crazy Eddie flick by Al Lewis

Blogging Stocks: Crazy Eddie movie not cool with fraud's CFO by Zac Bissonnette

New York Post: Eddie's' Victims Seek 'Crazy Money' by Rebecca Rosenberg and Ed Robinson

Variety: Danny Devito crazy for 'Eddie' by Michael Fleming

New Year’s Message from a Convicted Felon: While you hope, criminals prey

My cousin Crazy Eddie Antar taught me that “people live on hope.” As white collar criminals, we preyed on your hopes and dreams by feeding you our spin and lies.

Investors demand confident leadership and strong financial performance from company managements. They want to hear management exuding confidence about their company’s future business prospects. Eddie and I built an image of strong and confident leadership by promising investors a prosperous future backed up by our phony financial reports.

As criminals, we considered the humanity of investors as a weakness to be exploited in the cold-blooded execution of our crimes. We measured our effectiveness by the comfort level of our victims.

My cousin Eddie and I built walls of false integrity around us to gain the trust of our victims. We claimed that Crazy Eddie's accounting policies were "conservative." In addition, we gave huge sums of money to charity and were involved in many popular social causes in an effort to make investors comfortable with us. While we were in effect, “helping old ladies cross the street,” we were heartlessly executing a massive fraud that wiped out the life savings of thousands of investors and ultimately caused a few thousand people to lose their jobs.

Eddie Antar and I never had a single conversation about morality or right and wrong. We simply did not care about the victims of our crimes. Our conversations only focused on the successful execution of our cold-blooded schemes to defraud investors.

At Crazy Eddie, we committed our crimes simply because we thought we could execute them successfully. We took advantage of investor's hopes, dreams, and aspirations for a better future. More importantly, we fully exploited investor's lack of skepticism that resulted from the wall of false integrity we built around ourselves.

Hope is a fine human quality that motivates us to build a better future. Unfortunately, criminals consider your hope as an exploitable weakness to aid them in the successful execution of their crimes.

Do not get mesmerized by neatly packaged story lines and well researched sound bites written by professional high paid media consultants. Criminals know how to “talk the talk and walk the walk” as they inspire you with false promises of a prosperous future.

In the New Year, please do not let criminals exploit your hopes and dreams. In addition, you are cautioned to apply the same advice to our elected officials from all sides of the political spectrum who exploit your hopes with inspiring rhetoric to sell you flawed solutions to major problems facing our nation.

Have a skeptical New Year.

Written by:

Sam E. Antar (former Crazy Eddie CFO and a convicted felon) Other blog posts of interest

Managing Earnings: Playing the Numbers Game

The Art of Spinning: How to Identify Possible White Collar Criminals or at Least Unethical and Deceitful People Who You Should Avoid

Advice about Trust from a Convicted Felon

Advice from a convicted felon: How the government investigates and prosecutes white collar criminal cases

A Warning to Wall Street Analysts from a Convicted Felon

Warning from a Convicted Felon: Don't Be Fooled by People Who Flaunt Their Integrity

Limiting Auditor Liability is Plain Dumb

Why White Collar Criminals Do Not Fear Today's FBI

Advice to President-Elect Barack Obama about Combating White Collar Crime From a Convicted Felon

Is there really more white collar crime today? No.

The Crazy Eddie Movie

Today the New York Post had an article about a possible Crazy Eddie movie. According to a New York Post Page Six article:

THE life and times of home electronics peddler "Crazy Eddie" Antar may soon become a major movie, thanks to Danny DeVito and his Jersey Films.

DeVito and several other producers are hot for Antar's story after recently seeing him on CNBC being confronted by his cousin, Sam Antar, whose testimony sent Eddie to federal prison for 7½ years.

There are rumors that my cousin Eddie Antar has been attempting to cash in and sell his story. What I have to say about Crazy Eddie is not for sale.

I am not involved in any movie project relating to Crazy Eddie. I have lived a shameful life filled with ugly, vile, malicious, and evil criminal acts. I do not have any desire to peddle my story about Crazy Eddie and make money off the backs of my countless victims.

Respectfully,

Sam E. Antar (former Crazy Eddie CFO & convicted felon)

Crazy Eddie Speaks Cousin Sam E. Antar Responds

The darling of Wall Street

In his heyday, Eddie Antar was the darling of Wall Street. Until our frauds imploded, our manufactured financial statements produced a constant fiction of Crazy Eddie's superior financial success and Eddie's Antar's supposed business acumen. We were sought after by Wall Street investment bankers hungry to feed Crazy Eddie with capital to expand its business and let their investors get in on a piece of the action. We had four public offerings. We sold investors on hope as the family cashed out almost $100 million in stock.

A consumer's hero

Eddie Antar was legend in his time as he a became a folk hero to consumers by thumbing his nose at "fair trade" laws that stifled competition. However, it was our intention to bait and switch our customers to more profitable merchandise. In the early days before the company went public, if we could not switch a customer who paid cash, we simply pocketed the sales tax.

Upcoming Eddie Antar and Sam E. Antar interview on CNBC Business Nation by Herb Greenberg on Wednesday, June 27, 2007 at 10:00 PM and 1:00 AM (ET)

Recently,

Herb Greenberg brought Eddie and me together after almost twenty years for a joint interview to be aired on CNBC. It was a brutal confrontation.

When I walked into the interview room, I was stunned by Eddie Antar's appearance. This once vibrant and healthy man and powerful leader looked quite old for his age (he is 59 years old) and looked physically weak and emotionally drained. I had not seen my cousin Eddie since the criminal trial in the summer of 1993 and had not spoken to him since 1989. I had heard from others that he is in weak health.

Howard Sirota, who was the Chairman of the class action litigation on behalf of defrauded shareholders, once said in a Court TV Masterminds episode, that "Eddie was a larger than life Brooklyn 'Fonz.'"

To me and many others, he was our great leader. We drank his Kool-Aid.

Herb Greenberg interviews Eddie Antar for his Wall Street Journal column

On Saturday, Herb Greenberg's column in Wall Street Journal (subscription required) entitled, "Crazy Eddie's Lesson for Alexander: Running From Prosecution Is 'Insane'", (reprinted in MarketWatch), quotes some revealing thoughts and advice from Eddie Antar:

…with a sense of wistful irony, a man who once claims to have been mistaken for DiNiro, Pesche or even Brando, adds, "Nobody wants to have anything to do with me."

Yes, the younger and more vibrant Eddie Antar was at times mistaken for DiNiro and Brando and today he looks weak and seriously ill. I used to drink his Kool-Aid.

The CNBC interview got very heated

During the interview, Eddie Antar would try to order me around just like the old days and attempt to control the topic of discussion. I responded to him:

Don't try to control the topic of conversation. You're not a big (expletive) anymore, Eddie. You're a two bit thug just like I am. So stop playing games.

Eddie brought a crumpled set of scribbled notes to our CNBC interview and I scolded him for writing a rehearsed script.

At times, our exchanges got so heated, that he threatened to walk out the door.

I scolded him again telling him:

Let the cameras roll as you walk out the door.

He stayed.

I was not going to take orders from Eddie Antar. I was not going to drink his Kool-Aid.

Eddie and I went our separate ways many years ago. He chose to leave his family behind and flee American justice. I chose to stay and fight my battles. During a heated exchange with Eddie, as he looked away and I stared right at him, I stated:

I stayed here and took the heat. You ran. You ran like a coward.

He did not want to look at me "eye to eye."

I scolded him again and told him to, "face me."

The adrenaline ran high all around the room. It seemed that the room temperature was close to the boiling point.

Eddie Antar comes out swinging in the CNBC interview and in Herb Greenberg's expanded MarketWatch.com column

Herb Greenberg writes (in the expanded version of his column on MarketWatch.com):

Eddie felt there were things Sam hasn't confessed - things even the government doesn't know. Sam, who denies the allegations, retorts: "Then why didn't he bring it up at trial?

I guess that Eddie Antar still harbors a deep resentment about getting caught. He clearly resents the fact that I testified against him. He has to make up new lies. At the criminal and civil trial trials, Eddie Antar, his father, his brothers, and his brother-in-law attempted to lay the blame for the Crazy Eddie fraud on me. It was as if they were claiming that they made $100 million by accident. I lost about $8,000 selling my Crazy Eddie stock.

Eddie Antar, his father, his brothers, his brother-in-law, and both ex-wives had stashed millions of dollars in secret bank accounts overseas. The government found millions of dollars hidden by Eddie Antar in safe deposit boxes. While, I was paid off the books like many other employees during the early years, I had no secret foreign bank accounts nor funds hidden in safe deposit boxes. I gave the government a full accounting of my monies and they investigated me thoroughly.

However, the government still believes that Eddie Antar and others in his immediate family have not repatriated all of their ill gotten gains. For example, Eddie Antar gave $6 million to a hospital in Israel and they believe that he received a $5 million kickback in cash. I questioned Eddie about his donation during our joint interview on CNBC. He claims to have given back all of his money. However, listen carefully to his evasive answer on CNBC.

For additional information, I recommend that people read Judge Harold A. Ackerman's thorough Opinion in the Securities and Exchange Commission civil case. Also read the Statement by Stephen M. Cutler to the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises of the Committee on Financial Services of the U.S. House of Representatives on February 26, 2003.

I guess that the delusional Eddie Antar still believes that people drink his Kool-Aid.

Eddie Antar reflects on his past in Herb Greenberg's Wall Street Journal column

Reflecting on his plight as a fugitive, Eddie Antar tells Herb Greenberg in his column:

It's so disturbing I don't even like to think about it. I'm just glad I'm back with my family.

Herb Greenberg continues:

Mr. Antar says he left "the people I love" behind when he was using false passports to hopscotch through multiple countries, including the United Kingdom, France, Canada, Switzerland and Israel. The latter, coincidently, is where Mr. Alexander, a permanent resident of the U.S., is a citizen.

What Eddie Antar did not say is that his second wife, Deborah Erlich Antar, now living apart from him, was apparently not left behind and made frequent trips overseas while he was on the run. Deborah Ehrlich Antar (Eddie's second wife) was identified as the signatory or as having power of attorney on at least three overseas accounts Eddie Antar controlled while he was on the run. (Source: US Government Documents).

Eddie divorced his first wife, Debbie (called by many people Debbie # 1) in order to marry his second wife named Deborah (called Debbie # 2). He hated Debbie # 1 for not bearing him any sons. When Eddie Antar ran away, he left behind his daughters and a squabbling family deeply divided over his divorce of Debbie # 1 and other issues.

The Antar family was divided into two camps – those that supported Eddie and those that supported his father who backed Debbie # 1. In April 1987, Debbie # 1 sued Eddie Antar and her attorney for fraud seeking to overturn her divorce settlement. In a fit of rage, while our frauds were still going on, Eddie purged his father, brothers, and others allied with them and his ex-wife.

He used to call his father an "old goat." He frequently used to call his brother-in-law Ben Kuszer (convicted of securities fraud with Eddie's father and his brother Allen in the Securities and Exchange Commission Civil Case) a "mouse." He had harsher words for his brothers, Mitchell and Allen Antar who conspired with us to commit our crimes.

Before I decided to throw in the towel with the United States government, Eddie Antar had told me:

Sammy, you are on you own. It’s every man for himself.

Previously, I had perjured myself in depositions with the Securities and Exchange Commission. He apparently felt that my testimony about him was locked in and he had no further use for me.

In addition, Eddie Antar had found out that his own father and brothers had sent two witnesses to the Securities and Exchange to set us up to take the fall and to cover up their crimes.

Herb Greenberg writes:

Bring up the old days at Crazy Eddie and he cracks a wry smile. "People still stop me and tell me they bought their first stereo from me," he says.

I wonder if any of those people knew how we baited them with our lies and switched them to highly profitable house brand merchandise and sold them needless extended warranties at inflated costs. I wonder if any other those people knew that at times we sold them repackaged merchandise as if such items were brand new.

In his column, Herb Greenberg asked Eddie Antar a question:

Wasn't it a criminal enterprise? "

Eddie Antar's response:

You can't have a company that runs for 22 years that was a fraud. Sales were real. You can't make up deposits in the bank."

At crucial times to Eddie and Antar and his father Sam M. Antar, Crazy Eddie’s sales were made up and not real. In 1986, we channeled about $2 million from funds previously skimmed as a private company (before we went public) and put the money back into the company to increase sales. A few days later, Eddie Antar and his father cashed out over $30 million in stock.

We sold merchandise to trans-shippers at a little bit above cost and at times even below cost to inflate our store level sales performance. Eddie Antar, his brothers, and brother-in-law laughed all the way to the bank as they continued to sell stock at inflated stock prices.

Crazy Eddie was an empire built on deceit. The company was rotten at its core. Eddie Antar, his father, brothers, brother-in-law, me and others formed the nucleus of this massive criminal enterprise.

There are many innocent employees and relatives (who worked for the company) that have defended Eddie Antar. These innocent employees and relatives benefited from Crazy Eddie by having well paid jobs. However, I am quite sure that if Crazy Eddie had never existed, those same people would have found gainful employment at a legitimately run company, elsewhere.

Many people came to work for Crazy Eddie believing that we were a great company as they hoped for a better life. Instead, almost three thousand people lost their jobs.

The carnage of our crimes was paid for by innocent investors, vendors, and many others. Countless victims of our crimes are still suffering today.

Herb Greenberg writes:

Today, Mr. Antar says he misses the "people aspect" of the business. "I had a great time for a long time," he says. "People still use Crazy Eddie as the gold standard of what a real deal is. They say, 'I want a Crazy Eddie type deal.' "

In our day, we considered the humanity of others as weaknesses to be exploited in our efforts to commit our crimes. We simply gave investors, creditors, and many consumers a raw deal.

Herb Greenberg writes:

Mr. Antar's advice to others: "All the money in the world is not worth a day in prison -- ain't worth one day." If he hadn't broken the law, he says, "I'd be a Best Buy today, or I would have been sought to be bought out by many companies. I'd be a billionaire today. I had around $100 million that [the government] took from me. That was cash in the bank. It was everything I had. Can you imagine what that would be worth today? I blew it big time.

We will never know what Crazy Eddie could have achieved had we played by the rules. We can only know about the carnage we left behind by our criminal acts.

Herb Greenberg's writes:

Looking back Mr. Antar says, "I'm not denying I deserved the punishment." He committed the crimes, he says, because of greed and because "I thought I was smarter" than everybody else.

I say that we were not just greedy but that our criminal actions were vile, malicious, and evil. We were never concerned about the harm we were inflicting on others. We were just plain rotten human beings. It was not just greed that was a factor in our crimes. It was our callous disregard for the welfare of other human beings.

I have no excuses and I can offer no rationalization for my criminal conduct. My crimes were cruel, brutal, and ugly. Any apology offered by Eddie Antar or me does not undo our unforgivable crimes.

As I said in a separate interview with Herb Greenberg (to be aired on CNBC Wednesday night):

What I did was pure evil. I am going to probably fry in hell for many years before I get upstairs.

We were nothing but cold hearted and soulless criminals. We were two bit thugs.

Written by:

Sam E. Antar (former Crazy Eddie CFO & convicted felon)

Other blogs and media covering the interview:

Herb Greenberg's Market Blog: Crazy Eddie Interview, Upcoming CNBC Piece

AOL Money and Finance: Former Crazy Eddie fraud CEO and CFO to square off on CNBC by Zac Bissonnette

NY Post: Lost & Found Crazy Eddie: Confronts Dirty 'Thug' in Scandal by Adam Buckman

Gary Weiss Blog: The Fraud was INSANE!

The Fraudfiles Blog: Fascinating look into the mind of a white collar criminal by Tracy Coenen