April 21, 2015: For a Baruch student and future auditor, the Crazy Eddie case is infamous. Over a decade, auditors, Wall Street and millions more were fooled by cousins Eddie and Sam Antar who ran Crazy Eddie from 1971-1987. As students, we learned about Crazy Eddie in multiple accounting classes; documentaries and innumerable case studies have been made about it as it was one of the greatest embarrassments to the accounting profession.
I have the distinct good fortune of being in the Zicklin Graduate Accounting Society – the ones that invited Sam Antar to Baruch College. As I was waiting for Mr. Antar to arrive and the event to begin in the campus’ main conference room, the ex-president of my club suddenly rushed by with a short, unfriendly and unassuming man. Though it seemed very hard to believe, this had to be the man that had perpetrated one of the largest frauds in American history.
After we spent some time awkwardly introducing ourselves and fumbling for cables to hook up his computer to the projector, we took him into a smaller room where a private lunch had been set up for members of ZGAS. Unabashedly, he sat down at the front of the room and declared that he would answer all our questions. Of the club members, I sat closest to him to help him feel welcome as well as to be able to engage him in conversation. From my angle, I felt he looked decidedly untrustworthy.
As soon as he opened his mouth, however, it was clear he was one of the most engaging, interesting and charming speakers I had ever encountered during my time at Baruch. Ethics don’t help at all, Mr. Antar told us. “I don’t subscribe to a code of ethics. A code of ethics only makes it easier for people like me to take advantage of you.”
Throughout the lunch and presentation, Mr. Antar was unrestrained about how he cheated millions. The crowd was enraptured. “Disarm with charm,” he repeated multiple times. “Appeal to vanity: flattery and compliments will get you everywhere.” One female student asked him how to he got people to like him. He responded, “you’re sexy” – demonstrating for us.
So how did Crazy Eddie fool the auditors for so many years? Simply put, they were experts on human behavior. “I have no problems lying,” he told us. “But distraction is better than a lie.” The demographics of the audit profession used to be made up of mostly single men. All they had to do was distract the auditors with attractive female employees. Mr. Antar took auditors to strip clubs and parties for the majority of their audit. Then, they would find themselves with lots of work to do and little time, rushing their decision-making. It wasn’t that the auditors were stupid, he told us. The auditors simply did not want to believe they were bad people.
Mr. Antar was adamant that he was not reformed. “The Feds don’t know I’m sleeping on a million dollars in my bedroom every night” he told me. I laughed, though a part of me is still unsure whether he was joking. “Don’t trust me? I might be cheating you all right now.” he said as we laughed.
Despite his warnings and reputation, I had a very difficult time believing such a charming man could be so malicious. I could identify with him. After all, why go through the effort of sharing how fraudsters take advantage of others? Why teach us the tricks of his trade? I started wondering if maybe this was just his character, his shtick, his way of showing us what a villain was like. Perhaps deep down he was actually a good guy that had gotten himself into a bad situation. Thinking I might catch him in this apparent paradox, I asked him why he bothered explaining himself. “I like to brag about my accomplishments,” he said. “Is this true?” I pushed. “Yes,” he replied without a second thought.
Crazy Eddie managed to fool auditors for more than a decade. They fooled Wall Street and many investors as well, managing to take their company public and making millions. The cause of their undoing? A hedge fund manager, believing in the integrity of Crazy Eddie’s financial statements, thought he could acquire the company cheaply. Within two months of having acquired it, the manager realized the millions of claimed inventory were nonexistent; Crazy Eddie came crashing down.
“Who here can claim that they have not lied today?” he asked us. Uncertain, I did not raise my hand, but neither did anybody else. I was shocked; these were the accounting hopefuls of the future. It was only noon. Had everybody really lied? How could nobody be willing to hold themselves as an honest person in front of their peers? Was I so naïve to not realize that people lie so often?
It’s human nature, he said. According to Mr. Antar, 80% of people are situationally ethical, whereas only 10% are always either ethical or unethical. Clearly, none of us are really as good as we like to believe. The way Mr. Antar worked the room quickly exposed all of our attraction to power. Are these grim forebodings for those pursuing careers in the field of accounting?
Surprisingly, it was Mr. Antar himself with an answer to this question. We need to increase whistleblower protections and bounties. Nearly 40% of frauds are discovered from tips, as opposed to external or internal audits (as common sense might have you believe). “The state of education is fantasy-land,” says Mr. Antar. “An audit shouldn’t be called an audit, it’s really just a review.” We should be more realistic about accepting human nature and realizing that the AICPA’s, and even society’s, code of ethics is often bent or broken. According to Mr. Antar, it takes a villain like him to expose these issues and give us all a reality-check.
At the end of the event, my accounting club took a picture with Mr. Antar. As we took it, he joked how one of the benefits of these pictures was being able to take them near young, attractive women – causing them to giggle. I continued to refuse to believe he was really so bad, despite his warnings and the evidence to the contrary. I left the event believing I just witnessed something incredible. Two weeks later, though, the only question on my mind is: is he the perfect criminal?