Tuesday, October 30, 2007
Crazy Eddie - The Dude was Insane
I am aware that everyone doesn’t really know who Crazy Eddie is, but he was the szhit back in the day. He had the late 80’s on lock down. These commercials used to come on like every 5 minutes, to the point you were repeating the slogan in your sleep. That guy we all knew as Crazy Eddie on the commercials was not really crazy Eddie. He was DJ Jerry Carrol. He was a face man cleverly hired to bring in the masses. What better then an average looking, white guy with his own electronics store. Almost like a favorite Uncle to make you feel comfortable about purchasing electronics from him. Similar to Richard Goldman’s dancing for DOC glasses or Marty Hartunian given his spiel for ABC warehouse.
Richard Golden, 59President and CEOD.O.C. Optics Corp., SouthfieldRevenue: $108 millionCivic and corporate involvement: Gilda’s Club.Golden made eyewear sexy. Golden, with his aggressive advertising campaign, coined the term “sexy specs” and was one of the first retailers to market glasses with an emphasis on fashion. D.O.C. was founded in 1946 by his father, Donald Golden, and Richard Golden has been president and CEO since 1986. D.O.C. has grown into the 10th-largest retail optical chain in the country with more than 100 locations in six states, and it also operates 14 stores under the name SEE, or Selective Eyewear Elements.
Gordon Hartunian, 73President and CEOABC Appliance Inc., PontiacRevenue: $390 millionHartunian’s ABC Appliance is Southeast Michigan’s only remaining regional chain of appliance and electronics stores. Hartunian has outlasted other competitors such as Highland Superstores Inc. and Fretter Inc. and continues to battle national giants Circuit City Stores Inc. and Best Buy Co. Founded in 1964, ABC has 35 stores in Michigan, Ohio and Indiana and is known for its commercials starring Hartunian.
The crazy Eddie empire peaked with 43 stores in four states and 300 million in sales. Not a lot by today’s standards but that was pretty good back in the 80’s.
The real guys behind Crazy Eddie were Eddie Antar and Sam Antar. Eddie Antar was fraudulent from the beginning.
Excerpt from Wikipedia
“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.
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%.
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).”
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.
Here is the story behind their low price guarantees in Sam Antar’s own words; who is also currently doing time as a convicted felon.
"Much attention has been paid to Crazy Eddie’s famous price policy – “Shop
around. Get the best prices you can find. Then go to Crazy Eddie's and he'll
beat it!” Even more attention has been paid to its legendary commercials
featuring Jerry Carroll. However, many people do not know the real story behind
Crazy Eddie’s aggressive sales tactics. Yes, we “offered” the best price and at
times it was sometimes true. However, most customers never purchased the items
that they initially came into Crazy Eddie to buy. We had an entire procedure
built around Crazy Eddie lingo code words described below to maximize profits
for the company. We had in Crazy Eddie lingo called an “SW” or “switch the
customer” policy which was to initially seek to sway the customer to purchase a
more profitable item that offered “better value.” If the initial sales person
could not SW the customer he would “TO” the customer to let another more
experienced sales person “take over” the sales pitch with the customer in order
to “guide” them to the more profitable purchase. If the customer was still
insistent on buying the items that they had originally come into Crazy Eddie to
purchase rather than lose the sale we would sell them the merchandise but try to
sell them high profit accessories and long term warranty contracts to make up
for the low profit of the units purchased. If the merchandise was not in stock
we would sneak the display item off the shelf and “lunch it” or repackage it and
sell it as brand new. Finally, if a customer decided not to purchase a product
for any reason after going through various phases of this process Crazy Eddie
has a “NAD” or “nail at door” policy where a sales person located at the exit
would try to “kosher” the customer. The Crazy Eddie Empire was built on deceit.
The massive financial fraud that followed was based on a culture of deceit the
permeated from the Antar family that ruled Crazy Eddie. There are many lessons
to be learned from the Crazy Eddie frauds. Specifically as it relates to your
commentary I would suggest something I learned in my first day in economics
class, “There Ain't No Such Thing As A Free Lunch.” Company’s have costs and
must earn a profit. Yes, some companies can make money more efficiently than
others. However, as a former criminal I can assert that old line, “If it looks
too good to be true, it is probably is.”
All this Crazy Eddie Stuff's got me nervous. I'm going to see my accountant on Thursday!