International Fraud Awareness Week - Crazy Eddie's | Bennett Thrasher Skip to main content

This week is International Fraud Awareness Week. If you’ve ever taken an accounting or finance class, chances are you’ve probably heard of Crazy Eddie. Crazy Eddie is a fraud case study that has been taught to aspiring accountants for decades. Owned by Eddie and Sam Antar, Crazy Eddie was a chain of consumer electronic stores founded in 1971 and operated in New York, New Jersey, Connecticut and Pennsylvania.

Crazy Eddie Commits Early Fraud

Almost from the beginning, Crazy Eddie’s engaged in various forms of fraud by using a variety of schemes to avoid taxes and manage earnings. The company went public in 1984 and by 1987 Eddie and other management were routinely overstating income and dumping stock at inflated prices.

Hostile Takeover

After a hostile takeover in November 1987, the frauds were exposed. In just a few weeks it was discovered that inventory was overstated by as much as $80 million. In 1989 the company collapsed and was forced to file for Chapter 11 bankruptcy and liquidate in order to pay suppliers.

Why do Students Study Crazy Eddie?

Crazy Eddie serves as a case study because for years the company was able to hide from auditors the fact they had manipulated earnings, inflated inventory, laundered money and understated accounts payable, even though auditors performed procedures to detect these very misstatements.

Crazy Eddie might seem like small peanuts in terms of dollars compared to more recent and high profile accounting frauds we see today.

  • AIG’s accounting fraud was estimated at $3.9 billion
  • The Lehman Brothers allegedly hid over $50 billion in loans disguised as sales
  • Bernie Madoff masterminded a Ponzi scheme that tricked investors out of over $64 billion

While the dollars may have increased, the schemes really haven’t changed. Case in point, Charles Ponzi began his swindling career in the 1920’s and it’s still being replicated.

Accounting Fraud Today

Eddie Antar passed away earlier this year, but Crazy Eddie’s will not soon be forgotten. Ben Affleck currently stars in the movie The Accountant about a math savant that works as a freelance forensic accountant to assist criminal organizations. When he’s hired to determine where and how a legitimate robotics company is seemingly losing money, the action starts. It’s in the middle of his investigation that he recalls Crazy Eddie’s schemes and in-turn is able to determine what happened. While the film is fictitious, today’s accounting frauds still involve the same schemes. They just use different techniques to overstate revenue and assets, and understate expenses and liabilities. For this reason, it is so important to raise awareness of fraud, waste, and abuse.

How You Can Prevent Fraud

The Association of Certified Fraud Examiners consistently estimates that 5% of revenue is lost to fraud. Imagine if your organization could add back 5% of revenue. Maybe it’s worth asking, could this be happening to your company right now? Where is your organization vulnerable? What do you need to do today to help prevent and detect fraud before it happens?

If you suspect fraud, waste or abuse at your organization, contact Justin Snell at 770.396.2200.