crazy Eddie fraud case - 1875 Words

Crazy Eddie, Inc. financial fraud case Crazy Eddie was an American retail store chain run by the Antar family, which was established as a private company in 1969 in Brooklyn, New York by businessmen Eddie and Sam M. Antar. The fraud at Crazy Eddie was one of the longest running in modern times, lasting from 1969 to 1987. Crazy Eddie became a known symbol for corporate fraud in its time, but has since been eclipsed by the Enron, Worldcom and Bernie Madoff accounting scandals. Commencement of fraud The fraud began almost immediately, with the management of Crazy Eddie underreporting taxable income through skimming cash sales, paying employees in cash to avoid payroll taxes and reporting fake insurance claims to the companys carriers.†¦show more content†¦Crazy Eddie limped along for another year before being liquidated to pay creditors. Eddie Antar, the CEO of Crazy Eddie, was charged with securities fraud and other crimes, but fled to Israel before his trial. He spent three years in hiding until he was eventually tracked down by authorities in 1992 and extradited back to the U.S. to face criminal charges. Antar and two other family members were also convicted for their role in the fraud. In 1997, Antar was sentenced to eight years in prison and paid large fines. He was later released in 1999. Crazy Eddie Red Flags The red flags in the Crazy Eddie, Inc. financial fraud case which could notify the potential fraud were as follows:- The tight knit Antar family ruling Crazy Eddie had virtual absolute control over all aspects of the business. Very poor audit trails and documentation. Major self-dealing transactions and related party transactions by family members. Substantial increases in wages from below market wages before the company went public. In 1985, an attempt was made to falsify certain store inventories which was uncovered by the auditors. The auditors accepted an excuse that it was not sanctioned by management. Substantial increases in gross margins, profits, inventories, debit memos etc. from prior periods for no logical reason. Significant volume of outstanding deposits in transit at fiscalShow MoreRelatedCrazy Eddie Case Analysis Essay722 Words   |  3 PagesIn Crazy Eddie Case, a former CPA, Sam E. Antar, was a key individual who helped Eddie Antar mastermind one of the largest securities frauds uncovered during the 1980s. Sam admitted that he had no empathy whatsoever for investors because he never concerned about morality or the suffering of those victims. Next I’ll analysis Crazy Eddie Case from ethical perspective and use Ethical Decision Making Model to evaluate Sam’s possible behaviors. 1. Frame the ethical issue: Should Sam join his cousinRead MoreCrazy Eddie Case1147 Words   |  5 PagesKatherine Bokovsky Wai Shan Leung Auditing – Crazy Eddie Case The main critical issue in the Crazy Eddie case is the incompetence and lack of professional skepticism of the company’s audit team and their inability to successfully comply with the standards of GAAS. The auditors failed to exercise the fundamentals of the substantive audit plan which would have uncovered at least some of the fraud. Furthermore, this inability and lack of knowledge on how to properly execute an audit threatenedRead MoreCrazy Eddie Case1455 Words   |  6 Pagescrazy eddiCase 1.8 Crazy Eddie, Inc. Term A2/Spring 2013 March 19, 2013 Table of Contents Issues†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦...3 Facts†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.4 Analysis and Conclusions†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.6 Conclusions†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.9 Issues 1. Compute key ratios and other financial measures for Crazy Eddie during the period 1984-1987. Identify and briefly explain the red flags in Crazy Eddie’s financial statements that suggested the firm possess a higher-than-normalRead MoreCrazy Eddie, Inc1040 Words   |  5 Pages2009 Crazy Eddie, Inc. Crazy Eddie Inc. was a retail consumer electronics store in New York City. By 1987, Crazy Eddie Inc. had 43 retail outlets, sales exceeding $350million, and outstanding stock with a collective market value of $600 million. Doubling in the four-year period from 1981 to 1984, sales in the consumer electronics industry exploded. Eddie Antar, the owner of the Crazy Eddie, Inc. converted his stores into consumer electronics supermarkets. Antar stocked the shelves of Crazy EddiesRead MoreThe Case Study Analyzes Crazy Eddie2010 Words   |  9 PagesThe case study analyzes Crazy Eddie. Crazy Eddie was convicted of white collar crime through fraud triangle. Crazy Eddie involved in fraud through incentives, opportunity and rationalization. Crazy Eddie reported lacking rationalization but confirmed that incentives and opportunity were working. The company also reported lacking morality and excuses. Crazy Eddie executed its business without taking into account moral implications of doing busine ss. Crazy Eddie illegally adjusted returns to avoidRead More1.8 Crazy Eddie, Inc. Essay1381 Words   |  6 Pages1) The following table provides key financial ratios for Crazy Eddie during the period 1984-1987: | |1987 |1986 |1985 |1984 | |Current Ratio |2.41 |1.4 |1.56 |0.93 | |Quick Ratio |1.4 |0.6 |0.77 |0.15 | |Debt Ratio |0.68 |0.66 |0.64 |0.83 | |Debt-to-Equity |2.16 Read MoreKnapp Case 1.8972 Words   |  4 PagesEden Mims Case 1.8 Crazy Eddie, Inc. 1) The following table provides key financial ratios for Crazy Eddie during the period 1984-1987:                                                    1987             1986             1985             1984       Current Ratio                2.41             1.4                1.56             0.93       Quick Ratio                  Ã‚      1.4                0.6                0.77             0.15    Debt Ratio                         0.68             0.66             0.64             0.83   Debt-to-Equity   Ã‚            2.16             1.98   Read MoreThe Public Perception Of A Company1994 Words   |  8 PagesMany cases of fraud begin when there is an image to keep up. The public perception of a company is important, especially when said company is publicly traded. When something within the company goes wrong, and the good image is threatened, that is often when the fraud comes into play. They attempt to cover up the problem by inflating revenues, evading taxes, or showing misleading information on their financial statements. Although Crazy Eddie, an electronic retail business in the 70-80’s, did employRead MoreCrazy Eddie1931 Words   |  8 PagesCrazy Eddie, Inc. Common Size Balance Sheets March 1, 1987 March 1, 1986 March 1, 1985 May 31, 1984 Cash 3.17% 10.47% 33.99% 3.76% Short-term investments 41.36% 21.14% 0.00% 0.00% Receivables 3.68% 1.77% 4.18% 7.12% Merchandise inventories 36.99% 47.16% 40.51% 63.83% Prepaid expenses 3.61% 1.86% 0.98% 1.41% Total current assets 88.81% 82.40% 79.66% 76.12% Restricted cash 0.00% 2.64% 10.77% 0.00% Due from affiliates 0.00% 0.00% 0.00% 15.69% Property, plant and equipmentRead MoreRed Flags Of Crazy Eddie s Financial Statements777 Words   |  4 PagesThere were several red flags in Crazy Eddie’s financial statements, and then more were shown through calculating key ratios. The balance sheet showed that inventory increased from $23 million to $109 million in four years. This could have been a sign to the auditors that inventory was being misstated. Later on we learned that it was, as Crazy Eddie had a huge overstatement of the company’s inventory and personnel destroyed incriminating documents. It also showed accounts payable decreasing from