Crazy Eddie

Crazy Eddie was an American retail business that sold electronic goods. The company did business in several forms. The first, and what would eventually become the most famous/infamous of the three, was a chain of retail stores that did business in stores located New York, New Jersey, Connecticut, and Pennsylvania, as well as by phone. The second was a venture that initially began as a retail store but eventually was reorganized as an Internet and phone business. The third and most recent was an online and buy-by-phone store. As of 2013, none of the three Crazy Eddie ventures is conducting business.

Crazy Eddie was started in 1971 in Brooklyn, New York by businessmen Eddie and Sam M. Antar as ERS Electronics, named after Eddie; his cousin and partner, Ronnie Gindi; and Eddie's father, Sam. 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 played by radio DJ Jerry Carroll (who copied most of his shtick from early TV-commercial pioneer, used car and electronics salesman Earl "Madman" Muntz). At its peak, Crazy Eddie had 43 stores in the chain, and earned more than $300 million in sales.^[1]

In February 1987, the U.S. Attorney for the District of New Jersey commenced a federal grand jury investigation into the warranty billing practices of Crazy Eddie. In September of that year, the United States Securities and Exchange Commission initiated an investigation into alleged violations of federal securities laws by certain Crazy Eddie officers and employees. Eddie Antar was eventually charged with a series of crimes.

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 lost control of the company in November 1987 after a proxy battle with a group led by Elias Zinn and Victor Palmieri, known as the Oppenheimer-Palmieri Group. 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. 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.

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 paid large fines. He was released from prison in 1999.^[2]

Beginnings

Eddie Antar’s grandparents, Murad and Tera Antar, who were Syrian Jews, moved to Brooklyn, New York from Aleppo, Syria. Murad and Tera worked in their market stalls alongside Arabs, including Egyptians, other Syrians, as well as 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.^[3]

Artist Robert Crumb designed the Crazy Eddie logo, seen here on a promotional T-shirt. These shirts, along with various other promotional items, were given away free of charge at the openings of new stores.

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." Despite his technique, or perhaps owing to it, within 18 months the store (as well as Eddie and Ronnie) was nearly bankrupt.^[3]

Eddie Antar bought out Gindi's one-third ownership stake of Sight and Sound, and Sam M. Antar retained his one-third stake but left the day-to-day operations to Eddie. In 1971, the Sight and Sound store on Kings Highway was renamed Crazy Eddie. Eddie continued his high-pressure sales tactics with the renamed Crazy Eddie store, but this time met with success. Eventually, Eddie closed that location and moved to a bigger store, just a few blocks from Sight and Sound's old location. In 1973, Antar opened the second Crazy Eddie location in Syosset, New York. A third followed in 1975, located in Manhattan. That year, Antar established a corporate headquarters in Brooklyn, New York.^[3]

Advertising

Crazy Eddie's television advertisements were a large part of the reason behind the company's success. Former New York disc jockey Jerry Carroll was used in over 7,500 commercials during his years as pitchman.

An essential part of Crazy Eddie's success was its advertising campaign, which started almost by accident.

Antar had bought some commercial time on New York radio station WPIX-FM, and one night in 1972 a live commercial was being done by DJ "Dr. Jerry" Carroll, who ended it by reading the store's slogan, "his prices are insane", in this manner: "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, and thus a working relationship was born.^[3]

Beginning in 1975, Carroll moved to television. For most of the next fifteen years Carroll conducted commercials in the same frenetic manner he had on radio. One of his more memorable promotions was for Crazy Eddie's annual "Christmas in August" sale, where he would dress in a Santa suit and do the commercial while stagehands threw fake snowballs at him. Carroll also had a trademark look in each commercial, wearing a blue suit with a lighter blue turtleneck shirt in almost all of his appearances (even in later years).^[3] Carroll even appeared in a Spanish-language Crazy Eddie advertisement, although he did not have a speaking role; instead, his appearance consisted of him holding a radio to his ear as he walked behind the commercial's spokesman, stopping only to wave at the camera several times.

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] One commercial spoofing Superman implied that Carroll was Crazy Eddie. Warner Communications, the parent company of the distributor of the Superman film series, found the commercial to be problematic and sued the chain trying to stop it. At the time, Warner also was the parent company of the Atari video game company, and its largest customer for systems and games was Crazy Eddie. Therefore, in retaliation for the lawsuit, Eddie Antar said that if Warner was going to sue over the commercial, he would stop selling Atari products in his stores. The suit was eventually settled.^[4]

The commercials were so memorable that HBO's news parody series Not Necessarily the News created a parody TV commercial featuring a caricature of Oliver North (from the then-infamous Iran-Contra affair), known as "Crazy Ollie", selling used weapons at bargain prices.^[5] Carroll and the commercials became significant 80s icons, with the commercials often appearing in the background of films of the time, including Splash.^[6]

Fraud

Almost from the beginning, Crazy Eddie's management was engaged in various forms of fraud. The Antars deliberately falsified their books to reduce (or eliminate) their taxable income.^[7] They also 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 million to $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.^[3]

By 1983, it was becoming more and more difficult to hide the millions of illicit dollars. The Antars decided that the way to cover up their growing fraud was to take the company public. In preparation, 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 171%.^[8]

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 cousin, 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% growth in sales.^[3]

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.^[3]

As a public company, Eddie, Sammy, and others engaged in increasing amounts of inventory fraud to increase reported profits and inflate the value of Crazy Eddie stock. For the fiscal year ended March 1, 1985, Crazy Eddie falsified inventories by $3 million. The next fiscal year, that amount increased to between $10 and $12 million.

Collapse

Only months after Crazy Eddie's IPO, the once tight-knit Antar family began to crack. Eddie Antar started fighting with his wife and former high school sweetheart, Debbie. He began having an affair with another woman named Debbie. They were caught by Eddie's wife and sister on New Year's Eve 1984. Crazy Eddie's troubles began almost immediately afterward; the scam had relied extensively on family members helping keep up the appearance that it was an immensely successful company.^[7]

By 1987, Sammy's goal was no longer to show higher profitability, but rather to cover up previous frauds.^[3][8] In fiscal year 1987, they falsified inventories between $22.5 and $28 million. In addition, Crazy Eddie booked $20 million in phony debit memos or charge backs to vendors that reduced accounts payable.

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 dropped 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 million and $30 million.^[3]

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.^[3] In May 1987, Eddie began proceedings to take the company private again.^[9]

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 were filed against the Antar family.^[3]

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.^[3][9]

Legal battles

In the meantime, a longtime Crazy Eddie associate named Arnie Spindler, who left the company after Eddie Antar engineered the firing of his father Sam, brothers Allen and Mitchell and others after a family rift, 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.^[3]

By June 1988, Crazy Eddie's suppliers were demanding the liquidation of the company, so they could recover money owed to them;^[3] in 1989 they got their wish. The closing of Crazy Eddie began in March 1989, as the company shuttered 17 of its 43 stores. On June 6, 1989 Crazy Eddie was served with a petition by five of its creditors, who had not been paid a total of $860,000 they were owed, which sought to have the company forced into bankruptcy. The company originally planned to fight the petition and file for dismissal, but fifteen days later Crazy Eddie voluntarily filed for Chapter 11 bankruptcy protection.^[10] Company president and CEO Peter Martosella cited problems created by the creditors' position (which he termed "ill-advised"), but said business would be conducted as usual at the remaining 26 stores and that Crazy Eddie was still a strong franchise.^[10] The company vowed to stay in business but despite Martosella's assertions Crazy Eddie continued to falter. By the fall of 1989, sales were continuing to fall and stores were unable to keep items stocked due to lack of supplier interest in the company. Faced with these facts, Crazy Eddie management decided that the chain was not worth saving. Soon after Crazy Eddie began going-out-of-business sales, but store supply remained minimal even when leftover merchandise from stores that had shuttered was sent to others that were still in operation. By the end of the year the remaining 26 Crazy Eddie locations closed and the chain ceased to exist.^[11] In a period of three years Crazy Eddie had gone from one of the hottest and most lucrative retailers in the United States and trading at $75 per share to bankruptcy and liquidation.

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.^[12] 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. Eddie 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.^[3]

February 27, 1990 arrest warrant for Eddie Antar

Eddie 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. Sammy pleaded guilty to three felonies. However, 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.^[3][13] As of 2009, Sammy was an advisor for government agencies and businesses investigating fraud.^[14]

Eddie Antar was arrested near Tel Aviv in June 1992. While being held in Israel, Eddie 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. Eddie 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.^[3]

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.^[3]

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.^[3]

Revival attempts

Shortly after the chain closed in 1989 a New Jersey-based investment group led by Alex Adjimi bought the rights to the Crazy Eddie trademark and announced in January 1990 that they had purchased the leases on Crazy Eddie's Brooklyn flagship store and another in East Brunswick, New Jersey. The intent of Adjimi's group was to reopen the chain, but nothing ever came of the attempt.^[15]

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, crazyeddieonline.com.^[16] The revived company retained the slogan "his prices are insane" and brought Jerry Carroll, who by this time had founded his own ad agency, back as spokesman. Despite plans to expand the chain to a potential ten stores, the new Crazy Eddie did not expand beyond the Wayne store and in 1999 the only store in the revived chain closed.

Eddie Antar returned to the company in 2001, which by this point had been doing business solely as an Internet and buy-by-phone business for over a year.^[17] He relaunched the website as crazyeddie.com and once again hired Jerry Carroll to do its advertising. By 2004 crazyeddie.com had disappeared again, and after a brief attempt to revive the online retailer in 2005 Crazy Eddie ceased to exist once again. The Crazy Eddie trademark and associated intellectual property were then acquired by Texas-based firm Trident Growth Fund. In July 2006, Trident attempted to auction off the brand and the domain name crazyeddie.com on eBay, to limited success. The auction ended without the reserve price being met, the highest bid being $30,100 (US).^[18]

On March 3, 2009, it was announced that Brooklyn-based businessman Jack Gemal had bought the rights to the Crazy Eddie name and quickly launched a new online Crazy Eddie venture at pricesareinsane.com. Gemal was also reported to be scouting retail space for new Crazy Eddie retail locations, stating that he wanted to open fifty locations within the next two years.^[19] This online venture conducted business in the same manner as Crazy Eddie's other online stores, selling appliances and other electronics through the Internet. However, Gemal was never able to find the retail space he sought to relaunch the Crazy Eddie store chain and in 2012 the online business ceased to exist (a placeholder page currently occupies pricesareinsane.com).

See also

• Nutty Nathan's
• Madman Muntz
• Malfunctioning Eddie

References

External links

• Crazy Eddie Insane Tribute Page
• CE history page
• CE Commercials
• New Crazy Eddie online store