Crazy Eddie

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Crazy Eddie

Fate	Bankrupt
Founded	Brooklyn, New York, 1971
Defunct	1989
Location	Brooklyn (original headquarters) Edison, NJ (2nd headquarters)
Industry	Discount electronics
Key people	Eddie Antar, Co-founder, President and CEO Sam M. Antar, Co-founder Sam E. Antar, CFO

Crazy Eddie was a consumer electronics chain located primarily in the Northeastern United States. It was started in 1971 in Brooklyn, New York, by businessmen Eddie and Sam M. Antar. The chain rose to prominence throughout the Tri-State Region as much for its prices as for its memorable radio and television commercials, featuring a frenetic, "crazy" character promoting the stores. At its peak, Crazy Eddie had 43 stores in four states, and earned more than $300 million in sales.^[1]

In February 1987, the United States Attorney's Office for the District of New Jersey commenced a federal grand jury investigation into the financial activities of Crazy Eddie. In September of that year, the SEC initiated an investigation into alleged violations of federal securities laws by certain Crazy Eddie officers and employees.

Unable to sustain his fraudulent business practices, co-founder Eddie Antar cashed in millions of dollars worth of stock and resigned from the company in December 1986. Crazy Eddie's board of directors approved the sale of the company in November 1987. The entire Antar family was immediately removed from the business. The new owners quickly discovered the true extent of the Antar family's fraud, but were unable to turn around Crazy Eddie's quickly declining fortunes. In 1989, the company declared bankruptcy and was liquidated.

Eddie Antar became the focus of SEC and Federal investigations, and was eventually charged with a series of crimes. Antar fled to Israel in February 1990, but was returned to the United States in January 1993 to stand trial. His 1993 conviction on fraud charges was overturned, but he eventually pleaded guilty in 1996. In 1997, Antar was sentenced to eight years in prison and received massive fines.

Contents 1 Franchise history 1.1 Beginnings 1.2 Advertising 1.3 Fraud 1.4 Collapse 1.5 Legal battles 1.6 Revival attempt 2 Pop culture references 3 References 4 External link

[edit] Franchise history

[edit] Beginnings

Eddie’s grandparents, Murad and Terah Antar, who were ethnically Syrian Jews, moved to New York from Aleppo, Syria. Murad and Terah worked in their market stalls alongside Arabs, Egyptians, other Syrians, and Turks. Eddie's father Sam Antar was a retailer, and it was no surprise to the family that Eddie followed in his father's and grandparents' footsteps.^[2]

The predecessor to Crazy Eddie was a consumer electronics store called Sight and Sound. It was a property of ERS Electronics, a company owned by Sam M. Antar, his son Eddie Antar, and Eddie's cousin Ronnie Gindi. Sight and Sound, located on Kings Highway in Brooklyn, opened its doors in 1969 and offered electronics at regular prices. Due to his extremely aggressive sales techniques, Eddie quickly became known as "Crazy Eddie." Regardless of his technique, within 18 months the store (as well as Eddie and Ronnie) was nearly bankrupt.^[2]

Sam M. bought out Gindi's one-third ownership stake of Sight and Sound, and essentially turned the store over to Eddie (Sam M. retained his one-third stake but left the day-to-day operations to Eddie). Eddie opened a new store in 1971, just a few blocks from Sight and Sound's old location, and called it Crazy Eddie’s Ultra Linear Sound Experience. Eddie continued his high-pressure sales tactics at the new store, but this time met with success. In 1973, Antar opened the second Crazy Eddie location. A third followed in 1975, located in Manhattan. That year, Antar established a corporate headquarters.^[2]

[edit] Advertising

An essential part of Crazy Eddie's success was its advertising campaign. In 1972, WPIX-FM late-night disc jockey Jerry "Dr. Jerry" Carroll ended a live commercial with the now-famous slogan, "Crazy Eddie, his prices are IN-SA-A-A-A-A-ANE!" Antar called in and told Carroll to say the line the same way every time.^[2]

Beginning in 1975, Carroll starred in a series of humorous television commercials, each ending with the same frenetic slogan. Among the more memorable promotions featured by Crazy Eddie was the annual "Christmas in August" sale.^[2] In the 1980s, more than 7,500 unique radio and television ads were aired in the Tri-State Region. Carroll's acting was so convincing, and he became so identified with the company that many people thought he was actually Crazy Eddie.^[1][3]

[edit] Fraud

Almost from the beginning, Crazy Eddie's management was engaged in various forms of fraud. The Antars paid employees off the books, and regularly skimmed thousands of dollars (in cash) earned at the stores. For every $5 Crazy Eddie reported as income, $1 was taken by the Antars. In 1979, the Antars began depositing much of this money (hundreds of thousands of dollars) in Israeli bank accounts. The Antar family skimmed an estimated $3-$4 million (US) per year at the height of their fraud. In one offshore bank account, the family deposited more than $6 million between 1980 and 1983.^[2]

In preparation for taking Crazy Eddie public, Eddie Antar initiated a scheme in 1979 to skim less each year. Since more income was actually being reported, this had the effect of showing drastically increasing profit margins. While the company's actual profits (taking into account skimmed profits) from 1980 to 1983 increased approximately 13%, reported profits rose nearly 37%.^[4]

Despite the misgivings of people closely associated with Crazy Eddie, the company held its initial public offering on September 13, 1984 (symbol: CRZY). Shares of the company sold initially for $8. By early 1986, Crazy Eddie stock was trading at more than $75 per share (split adjusted).^[1]

Eddie recruited his nephew, Sam E. Antar (known as Sammy), to assist the company with its fraud. Sammy earned a degree in accounting in 1980, and served his apprenticeship with Penn and Horowitz, Crazy Eddie's auditor. In 1986, he was named CFO of the company. Sammy was informed that there was a $3 million deficit from the previous year's inventory fraud that needed to be hidden. Additionally, he was instructed to find ways to show a $10 million growth in sales.^[2]

One of Sammy's major schemes was a money laundering operation later known as the Panama Pump — money that the Antars had deposited in Israeli banks was transferred to bank accounts in Panama. These accounts, opened under false names, then drafted payments to Crazy Eddie. This money was largely used to inflate same-store sales figures for the company.^[2]

As the skimming decreased, Eddie and Sammy engaged in increasing amounts of inventory fraud. For the fiscal year ended March 1, 1986, Crazy Eddie falsified store level inventories by $3 to $4 million. The next fiscal year, that amount increased to between $15 and $20 million. But by 1987, Sammy's goal was no longer to show profitability, but rather to cover up previous frauds.^[2][4]

[edit] Collapse

As the company's fraud became harder to cover up, the public perception of Crazy Eddie as a commercial success began to change. By October 1986, the company's stock value had fallen to $17.50 per share. In December, Eddie Antar announced his resignation as president and CEO. In April 1987, it was announced that Eddie had in fact retained his role as president but had fired, among others, his father Sam M. Antar. But by then Eddie had already cashed out his share of Crazy Eddie stock, worth between $25 and $30 million.^[2]

By the spring of 1987, the company's stock had plummeted below $10 a share. Additionally, earnings fell 20 percent from the previous year. The franchise did show a 34 percent sales increase, but this was mainly the result of 13 new store openings.^[2] In May 1987, Eddie began proceedings to take the company private again.^[5]

Before that could happen, Houston-based businessman Elias Zinn and management consultant Victor Palmieri initiated a hostile takeover. With Palmieri's backing, Zinn purchased $17.5 million worth of Crazy Eddie stock, which represented 7½ percent of the outstanding shares. Once rumors of a takeover started, financial analysts began to more closely examine Crazy Eddie's financial situation. What they discovered was that while most stockholders in the company had lost money since 1984, Eddie Antar had sold 6.5 million shares worth $74 million. A flurry of stockholder lawsuits was filed against the Antar family.^[2]

Eddie and Sammy briefly attempted to counter-offer Zinn's takeover, but Zinn quickly topped their funds. The Antars' bid was dropped, and Zinn became the new owner of Crazy Eddie on November 6, 1987. He immediately removed the rest of the Antar family from any positions of power. When Palmieri's financial analysts completed their preliminary audit, a few weeks after the takeover, they estimated that Crazy Eddie's inventory was short by $40 to $50 million. The final figure was $80 million.^[2][5]

[edit] Legal battles

In the meantime, a longtime Crazy Eddie associate named Arnie Spindler, who was himself under investigation by the SEC, had provided investigators with information concerning Crazy Eddie's fraudulent business practices. Spindler implicated Eddie and Sammy, but stated the rest of the family was clean. Regardless, the SEC served subpoenas to the entire Antar family.^[2]

By June 1988, Crazy Eddie's suppliers were demanding the liquidation of the company, so they could recover $860,000 owed to them.^[2] On June 21, 1989, Crazy Eddie filed for Chapter 11 bankruptcy protection.^[6] Numerous store closings soon followed. Based on information gathered over the course of its investigation, the SEC charged Eddie Antar with securities fraud and illegal insider trading on September 6, 1989.^[7] In January 1990, a Federal district judge ordered Antar to repatriate more than $50 million he had illegally transferred to Israel. He was also ordered to appear in court to explain what had happened with the money. When he failed to appear, an arrest warrant was issued. Antar surrendered to U.S. Marshals a week later, but was released and ordered to appear at a second hearing. When he failed to appear at that hearing, a second arrest warrant was issued and his assets were frozen.^[2]

Antar fled to Israel using a fake passport and the alias David Jacob Levi Cohen, and purchased a townhouse in the city of Yavne. After Eddie left the country, Sammy offered to testify for Federal prosecutors in exchange for immunity. He avoided jail time for his testimony, and was instead sentenced to six months of house arrest, 1,200 hours of community service, three years of probation, and was given more than $10,000 in fines.^[2][8]

Antar was arrested near Tel Aviv in June 1992. While being held in Israel, Antar was charged with Federal racketeering conspiracy. He was extradited to the United States in January 1993, and pled not guilty to the charges brought against him. Antar's fraud trial began in June, and was prosecuted jointly by U.S. Attorneys Paul Weissman and Michael Chertoff. On July 20, 1993, Eddie Antar was found guilty on 17 counts of fraud. His brother, Mitchell, was found guilty on three counts, and acquitted on two.^[2]

In April 1994, Eddie Antar was sentenced to 12½ years in prison for racketeering and stock fraud. Antar's lawyers immediately filed an appeal, citing what they believed was bias on the part of the presiding judge. In April 1995, the verdicts against Eddie and Mitchell were overturned by a Federal appeals panel. Chertoff, calling Eddie "the Darth Vader of capitalism," vowed to begin a new trial.^[2]

Antar eventually pled guilty to Federal fraud charges in May 1996. In February 1997, he was sentenced to eight years in prison. He was ordered to pay more than $150 million in fines, in addition to the more than $1 billion in judgments against him, stemming from various civil suits. Efforts to recover additional money from the Antar family on behalf of defrauded stockholders continue to this day.^[2]

[edit] Revival attempt

In 1998, the grandchildren of Eddie, Allen, and Mitchell Antar revived the Crazy Eddie electronics chain with a store in Wayne, New Jersey, and as an online Internet venue.^[9] However, in 2004 Crazy Eddie went out of business again. The Crazy Eddie trademark and associated intellectual property were then acquired by Texas-based firm Trident Growth Fund.^[3] In July 2006, Trident attempted to auction off the brand and the domain name crazyeddie.com on eBay, to limited success.^[3] The auction ended without the reserve price being met, the highest bid being $30,100 (US). The "Buy It Now" price was $800,000 (US).^[10]

[edit] Pop culture references

A well known brand, the Crazy Eddie trademark has been referred to in various forms of media.

• In the Ron Howard film Splash, Madison, a mermaid, learns about human culture through Crazy Eddie advertisements.^[3]

• A duck-themed parody of the Crazy Eddie commercials can be glimpsed on a television set near the beginning of the 1986 box office bomb Howard the Duck.

• In a sketch on Saturday Night Live where Jim Belushi portrays a character named "Crazy Weinstein" who claims to have nothing to sell, but is simply crazy anyway.

• "Weird Al" Yankovic makes a reference to the chain in his film UHF with a used car salesman who delivers his lines rapid-fire and is called "Crazy Ernie."

• In the animated television series Futurama, the character of Malfunctioning Eddie (the over-excited robot who sells cars and explodes if he gets even slightly over-excited) is a parody of Eddie Antar and the Crazy Eddie Empire.^[3]

• In April 2006, X-Play began featuring a weekly segment entitled Crazy Adam's Import Game of the Week. The segment involves host Adam Sessler as "Crazy Adam," a parody of Crazy Eddie. Adam occasionally will be "still crazy!", and his "assistant" will sing a jingle after the game preview.

• In the animated television series Foster's Home for Imaginary Friends episode "Bus the Two of Us", Eduardo watches an advertisement for "Crazy Larry's Mattresses."

• In an episode of the Nickelodeon TV series Kenan & Kel, Kenan must buy his parents another TV set before they realize that it is missing by visiting an electronics retailer named "Crazy Betty."

• In the animated film The Brave Little Toaster a television set tries to urge a couple to visit a junkyard by airing commercials for a fictional store at its address, in the style of Crazy Eddie's ads.

• In the song "No Jumper Cables" by Aesop Rock. Aesop Rock recites "Cause Cips with a Z bargain Like Crazy Eddie commercials"

[edit] References

[edit] External link

• Crazy Eddie Insane Tribute Page