To avoid paying taxes, the head of Crazy Eddie hid profits, paid "black" wages, and fooled the auditors by introducing them to the store's female employees. Soon he thought of a bigger scheme - to go on the stock exchange at an inflated valuation. But in the end, he failed because of competitors and a split in the family.
In September 1984, the U.S. stock market was going through a bearish phase, but that didn't stop Crazy Eddie's electronics store from launching a major IPO. In 2022, investors are unlikely to be captivated by VCRs and stereos, but the industry was in its infancy at that time.
The year before the IPO, Crazy Eddie had annual revenues of about $134 million - today, that's around $372 million. And the company was also leading profitability among competitors in New York. It was a cultural sensation thanks to ads that were parodied, even on the comedy show SNL.
Investors bought up 1.7 million shares at $8 apiece on the first day of sales, and three years later, they had already increased almost tenfold. But the higher they climbed, the riskier the company's owner, Eddie Antar, and his family, who had little interest in the law, became.
“It was Goodfellas, except they operated with briefcases instead of guns” - the lawyer told the Philadelphia Inquirer
The Crazy Rise of "Crazy Eddie"
Eddie Antar, then 22, opened his first electronics store in 1969 in Brooklyn. In his typical "tough guy" suburban sweatpants, the balding young man knew that stores with speakers, VCRs, and TVs would become a point of attraction for Americans.
Antar opened his second store in 1973, two years later, he opened another, and by 1979 he was running eight stores. Helping him was his family, part of the Syrian-Jewish community: his father, his uncle, and brothers. They took care of the operations, and meanwhile, Eddie did everything he could to make Crazy Eddie's stores known throughout New York.
He hired specialist Larry Weiss, who knew the right people in the radio and music industry. As director of marketing, he made radio DJ Jerry Carroll the face of the brand, though he even considered singer James Brown.
The commercials reflected the spirit and musical trends of that time. Carroll constantly uttered the catchphrase, "The prices at Crazy Eddie are insane." By the early 1980s, Eddie was spending about $5.5 million on advertising (over $15 million as of 2022) and claimed that Crazy Eddie was the biggest advertiser in New York.
Crazy Eddie stores appealed to Americans because they were open even on holidays and Sundays, something many other retailers could not boast. Also, Antar rarely listed prices in advertisements but always guaranteed the best deals in town and offered to lower the price of a product if a competitor sold it at a lower price.
Larry Weiss, the marketer, noted Antar's bravery, but he had no idea where his risk-taking was leading Eddie.
Fraudulent sales, payroll, and insurance
Every day, as soon as Crazy Eddie's managers closed the stores, they gathered at Antar's with bags full of cash, checks, and receipts. Some of the money they made covered expenses, and the rest they hid so they could pay fewer taxes.
At first, in a briefcase. Then, when it stopped closing, under the radiator. After that, they took the money to Antar's father when there was no more room. He kept $3.5 million in the false ceiling - about $11 million in 2022.
According to a family member, Eddie ended up with two-thirds of the hidden cash and his father with the rest. From 1969 to 1979, the company:
- Downplayed sales by hoarding cash to avoid paying tax.
- Paid employees black wages for the same reason.
- Applied for exaggerated or false reasons for insurance benefits.
"Crazy Eddie had this mentality: nothing should go to the government," Sam Antar said explaining the company's actions at that time. The more money Antar accumulated, the more often he went on vacations in Europe and South America and also bought real estate and cars in coastal American cities. And he always had about $200,000 under his bed, just in case.
But, despite his expensive lifestyle as an executive, Antar kept a low profile and did not give interviews to anyone. The face of the stores had long been made famous by Jerry Carroll of commercials. With the press, the employees communicated - most often on condition of anonymity. No one wanted to anger the boss, who valued loyalty, as the New York Daily News wrote in 1984.
Put the stock up for $8 and sell it for $79
The money the family saved from the sales was enough to live comfortably. But why settle for millions when you can get tens of millions at once? And around 1980, Antar came up with a way to pull it off - by listing Crazy Eddie on the stock exchange.
“If a company reports $1 million in profits and trades 1 million shares outstanding, its earnings per share are $1. But it can, after all, artificially inflate its profits, thereby increasing its cash per share as well” - Sam Antar
The family did that, and a long-established fraudulent scheme helped them do it. To create the illusion before the IPO that the company's profits were growing steadily, Antar set aside less cash and made more contributions to the books. They also paid employees "gray" rather than "black" wages.
“It's ironic that we had to work honestly for a while to prepare for a bigger scam” - Sam Antar
From 1980 to 1984, he says, they saved virtually not a dime, though they had previously piled up $3 million per fiscal year.
On September 13, 1984, the company entered the stock market, issuing 1.7 million shares, which investors immediately bought up - at $8 apiece. And to recoup the money the family "lost" while the company was operating honestly, the Antar came up with new schemes:
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They inflated store stock levels by moving merchandise from one location to another. After all, the more merchandise the chain had, the more it could make.
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Previously laundered profits entered back into the company to inflate revenues.
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They fooled the auditors. Sam Antar set them up with Crazy Eddie's most attractive female employees to lull the auditors.
From 1984 to 1987, the company operated 43 stores, and its stock price reached $79. Antar and other family members sold most of their securities at this inflated price - arguably to the tune of $90 million.
A split in the family
Despite the growth of the business empire, there hadn't been an idyll in the family for a long time. Crazy Eddie was preceded by ERS Electronics, publicly known as Sights and Sounds. It was founded in 1969 by Eddie, his father, and another cousin, Ronnie Guindy.
In 1970, the store ran into legal and financial problems that Guindy didn't believe in solving. He sold his share to Eddie, who eventually took a controlling interest, renamed the store, and assumed the unspoken position of "family patriarch," ousting his father.
It was a jealous sentiment arising from this history that began to run in the family. But the turning point came on the eve of 1983, a few months before the IPO. Antar's father had caught wind of his son's affair and warned his wife about his upcoming date with his mistress. Eddie was caught red-handed, and the feud within the family flared up with renewed vigor.
In the meantime, the success of the business was on the decline, but not only because of family discord. The electronics market was growing and so was competition. In 1987, Crazy Eddie began to lose profits, and the stock dropped below IPO levels. In November of that year, Crazy Eddie was bought out by an investment group led by entrepreneur Elias Zinn, removing the Antar from management positions.
Eddie saw the deal as a plus: if anything, the new owners would be accused of fraud later. But Elias Zinn took over the inspections a few weeks after the purchase. He immediately discovered that the stores were overstocked by $40 million. The stores soon closed, and the company went bankrupt in 1989.
Eddie Antar and prison
Soon, however, Eddie had a worse problem. Two former employees and his father teamed up against him, and together they filed a fraud complaint with the SEC. That's when the FBI got involved in the investigation.
In February 1990, Antar fled the country and spent the next two years living with $60 million in cash and fake Brazilian and Israeli passports to get around quickly.
In June 1992, U.S. authorities detected a suspicious transfer between accounts allegedly belonging to Eddie. On the 24th, he was arrested by Israeli police - in the suburbs of Tel Aviv. Police found $60,000 in cash, forged passports and birth certificates, and documents for shell companies in Liberia in the house. A year later, Antar was on trial for defrauding investor shareholders of hundreds of millions of dollars.
However, the prosecutors had little or no evidence of actual fraud, and the inventory scheme was not the easiest to understand. So Eddie might well have gotten away with it if he hadn't abandoned his cousin Sam before he escaped. As CFO, Sam was under a lot of pressure from the authorities and ended up pleading guilty in exchange for testifying and also becoming the chief witness for the prosecution.
Attorney Michael Chertoff called Eddie a "Darth Vader of the capitalist world," but there was nothing sophisticated about his schemes. U.S. Attorney Paul Weisman said they were all "more primitive than ever".
In 1999, Antar got out of prison and, along with former marketing director Larry Weiss, launched the online store. But there was no place for them in the electronics market that had since changed, so the business failed.
Until his death (2016), Eddie gave occasional interviews and blamed everything on his family. And he considered himself more of a trendsetter than a fraud:
“Everybody knows Crazy Eddie. What can I tell you? I changed the business. I changed the whole business.”
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