This page has been archived and commenting is disabled.

Convicted Felon, Former Crazy Eddie CFO, Sam Antar, Talks to Lauren Lyster About Accounting Fraud

EB's picture




 

Submitted by EconomicPolicyJournal.com

We first became apprised of the appliance star of Crazy Eddie in 1984, having watched Daryl Hannah breathlessly regurgitate one of the store's transfixing commercials in the movie "Splash."  While Crazy Eddie filled a major plot hole (namely, teaching a mermaid to speak English in an afternoon), the company also created a gaping hole in its financial statements, which helped to defraud investors of tens of millions of dollars in the 1980's.

 

In the fledgling days of the electronic retailer, one of the founders, Sam Antar, would learn the magic of double-book entry-keeping and eventually become the firm's CFO.  Cheating on taxes and embezzling funds could only go so far, however, because, according to the Net's truthiest source, "By 1983, it was becoming more and more difficult to hide the millions of illicit dollars."   What would the founders do?  In a testament to the historical prowess of the SEC, they "decided that the way to cover up their growing fraud was to take the company public."

 

The above is a must-see interview with Sam Antar by Lauren Lyster on RT's Capital Account, wherein the eminently quotable Sam began:

I'm happy to report, as a retired member of the criminal underworld, that fraud is good.  The fraud business is easy and fraud is getting easier.  The fraudsters have reached the top 1% of the American society....Democrats and Republicans alike are doing their best to make fraud even easier.

Sam then delved into the recently passed JOBS Act (affectionately dubbed, the "Fraud Made Easy Act"):

In the guise improving the economy, [it] peels away internal controls requirements for public companies, peels away various levels of oversight by the government, peels away at the requirements for audits, and it's going to make fraud easier.

Waxing nostalgically (and, a bit tongue in cheek [hopefully]), he said, "I might even go back to my life of crime because of the JOBS Act--because it makes fraud too easy."

 

Also covered was why jail time not a deterrent:

People commit crimes simply because they could and the opportunity exists.  Most criminals do not consider the consequences of their acts as far as jail time is concerned.  There's an old saying that prisons are filled with criminals who never planned on being there....Opportunity is what makes us commit the crime...if no internal controls, if no oversight, if there's nobody watching over us...

When Lauren asked, "What is the deal with these auditors--are they complicit? Are they dumb?  Do we have too-high expectations?" Sam said:

The word "audit" itself is a fraudulent term.  They're limited compliance reviews of GAAP which may or may not catch book keeping errors.  They're not designed to catch fraud.

Segueing to Capitol Hill, James Koutoulas, co-founder of the Commodity Customer Coalition, also weighed in:

In a sense, the regulators are almost a smoke and mirror facade of these Ponzi schemes that they fail to catch.  People feel safe when they invest in a "regulated entity," but a lot of times, I think that's a false sense of security.  These regulators clearly have proven that they can't catch these frauds, and I think that people do less due diligence on these regulated entities.  

Sam had to agree, and also highlighted the perennially understaffed SEC as not only incapable of making a dent in securities fraud, but also having very little desire to use its existing resources to do so.  Witness the vacuum of prosecution pursuant to the now decade-old Sarbanes Oxley Act.

 

Not to focus solely on criticism, solutions were discussed, such as management clawbacks: as in, "personal liability: you lose your house, you lose your car."  Think Corzine on a bike in Brooklyn.

 

When Lauren asked, "how close are we to a situation where we could have a Crazy Eddie situation again?" Sam was not shy to answer:

It's occurring right now.  It's occurring all over the place.  Firms, with impunity, manipulate numbers.  And, the SEC does nothing except--we caught you, fix your numbers, and go away. 

Sam detailed the [alleged] fraud perpetrated by one company in particular, which you will have to tune in to learn about (hint: its portmanteau neologism of a name rhymes with "poop on").

 

And, a few more choice quotes to close the interview...

 

On auditor incestuousness:

In my day, I had to fool auditors--I had to lie to auditors in order to defraud my investors.  Today you don't have to lie to auditors--you don't have to fool them.  In many ways, they're complicit with management.  They're in bed with management.  They have this incestuous relationship with management, which makes crime easy.

Responding to whether it's easier to commit fraud now or in the eightees:

In my day, I knew auditors were stupid.  I knew auditors were incompetent.  But I always thought that if they saw something wrong, they would do the right thing.  Today, you don't have to worry about them doing something wrong, because they're going to do the wrong thing.  They've gone from being enablers--they've gone from being duped--to being actual co-conspirators, in many cases...co-conspirators to financial statement manipulation.

PwC could not be reached for comment.

 

Again, the whole thing is here:

 

http://www.youtube.com/watch?v=Egfiqr8TcK8&feature=player_profilepage

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 08/04/2012 - 10:08 | 2677851 GMadScientist
GMadScientist's picture

Big ups to Banzai7 for the "prime-time" shout-out from Lauren.

Sat, 08/04/2012 - 08:57 | 2677768 disabledvet
disabledvet's picture

I don't know which billionaire is going down with the collapse of Knight Captial but the fact that "fraud exists but goes unprosecuted" is simply not news. What isn't mentioned here is "We have been fast upon the wreckoning for some time." her name is Facebook in case anyone is wondering..."but that's just the poster child." an entire trillion dollar social media complex is blowing up before our eyes and not even the Goverment can let out a collective yawn anymore. Wall Street is only now being confronted by it's existential crisis begun in 2008. The theory that "we'll just be bailed out again" will be proven false IMMINENTLY. The irony that more than likely it will be the staggering losses suffered by Short Sellers as the triggering event should be lost on no one. Simply put "this is your punishment for stealing" Wall Street. And once a human heads down this path...the behavior becomes pathological...impossible to change. The implications for State and local governments will be profound...and profoundly negative. "You make that bed you sleep in it" puckers.

Sat, 08/04/2012 - 08:51 | 2677755 Ned Zeppelin
Ned Zeppelin's picture

An excellent piece I agree - this is something that should be pulled up everytime one of those trolls says the "we're overregulated" theme that is being drummed constantly by those who continue the fraud. 

There is a real economy and then there is the bullshit economy - I hope the former is bigger.

Sat, 08/04/2012 - 10:19 | 2677864 Blankman
Blankman's picture

Ned,

 

Let me correct your blatantly igonorant statement.  Big business is under-regulated, small business is over-regulated.  I spent 20k (Legal fees) last year fighting a regulation which I ended up winning the case.  I could not recoup legal fees from the other side and actually was ordered to pay for part of the prosecutions legal fees... and I won the fucking case.    

Fri, 08/03/2012 - 20:21 | 2677254 I am on to you
I am on to you's picture

Wonderfull,having a criminal saying,he wants to back,to join the Mobsters,i love to steal???

Is it Guatamala??Or is it Guantanamo.

Wonder if anyone would laugh,if he was Charles Mason,saying,of course,ill go and have an other slaughter,beef em up boys,the steoroids!

Gues ,Madoff, would have loved, to be interwied to,but he is longterm toast.

Ha ha ha,and SHE and HIM, killed Gaddafi,and cant even handlle their own two bit Gangsters:

Money talks, and the Mouthwaters are running on all the Hores,Gambinos and Bananas:Somebody said Constitution:Cant hear it,i got a yawn in my ear.

US.SEC equals?CPI Brasil,same sick show,money for Advocats,and acrobats,and other kind of Bats,say Badmen.

Fri, 08/03/2012 - 18:51 | 2677117 Grinder74
Grinder74's picture

"And, the SEC does nothing except--we caught you, fix your numbers, and go away. "

Ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha *whew* ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha !

Of course unless you're a small fry and can't afford fancy lawyers to defend you or match the government's "unlimited" resources.  Then the SEC throws everything they've got at you until you're literally bankrupt.

Fri, 08/03/2012 - 16:03 | 2676704 steelhead23
steelhead23's picture

Antar has it all wrong.  The SEC is not an enabler of fraud, rather it is the high priest in the fraud confessional.  You see, fraud is bad. It is evil.  It is a sin.  And the wages of sin are death.  But, as all good Catholics learn in Catechism, forgiveness is divine.  Hence, if stealing client money makes a bankster feel bad, or if he just gets caught, the SEC-priest will be there to offer reconciliation.  All sins are forgiven.  But, as penance, the guilty bankster may have to fork over a few more millions of his customers money.  Now, go visit with lovely Lauren and make a full Act of Contrition.

Fri, 08/03/2012 - 18:46 | 2677098 Tippoo Sultan
Fri, 08/03/2012 - 19:30 | 2677192 Buck Johnson
Buck Johnson's picture

You know he was interviewed for an American Greed episode of a jewish conman who outed a ton of Political hacks he bribed and sent to prison.

Fri, 08/03/2012 - 15:15 | 2676553 dogbreath
dogbreath's picture

if there's nobody watching over us...      Sam,  by "us" do you mean the citizens of the country (too plural) or us good fellas??

Sat, 08/04/2012 - 05:01 | 2677627 Disenchanted
Disenchanted's picture

 

 

 

I had read this before quite awhile back. Thanks for the reminder. One should read the whole thing, just for the Jim Cramer/CNBS parts.

Here's the part about Sam Antar from your link:

 

Gary regularly suggests, meanwhile, that Overstock is some kind of fraud. He provides not a single scrap of evidence for this, but instead makes vague accusations and then instructs anyone wanting details to visit another blog – this one authored by Sam Antar, former chief financial officer of a family-owned electronics firm called Crazy Eddie. In the 1980s, Crazy Eddie (“Our prices are…..INSAAAAANE”) perpetrated a $145 million swindle involving receipt skimming, bogus inventory and international money laundering. When Sam was busted, he ratted out his two cousins in return for a reduced sentence of six months house arrest.

 

According to a recent court case, Sam has funneled at least $250,000 to Barry Minkow, who is also a criminal. Minkow served seven years in prison for his role in ZZZZ Best, a fraudulent carpet cleaning company that cost investors $100 million. Minkow now runs an outfit called the Fraud Discovery Institute out of the Community Bible Church in San Diego, where he is a preacher. In one of the financial world’s great ironies, The Fraud Discovery Institute specializes in identifying companies that have supposedly cooked their books – though no reputable investigator has ever concurred with any of its analysis.

 

Both Sam and Minkow hold themselves out as reformed criminals who can shed light on corporate crime. But it is clear they have merely found a new scam: publishing false information for short-sellers. Utah Attorney General Mark Shurtleff, who has had dealings with Sam, has written a public letter warning investors that, “in light of Mr. Antar’s background as a convicted white collar criminal, we believe that the public should carefully scrutinize and objectively examine any public statements that Mr. Antar makes.”

 

Invariably, Sam and Minkow attack the same companies as the Cramer constellation of hedge funds, and, unsurprisingly, that is where they derive at least part of their income. Court documents show that Minkow has received at least $10,000 from Whitney Tilson, a friend of Cramer who has shorted companies along with David Einhorn, for whom Dan Loeb, a.k.a. Mr. Pink, vowed to go “to war.”

 

Mr. Pink, meanwhile, contracts with an outfit called Magic Consulting – owned by convicted stock manipulator Michelle McDonough (formerly Michelle Sarian). McDonough’s job is to coordinate a stable of internet stock message board posters and complicit journalists who bash stocks shorted by Loeb and his friends. McDonough was herself a fairly prolific message board basher, prior to going to prison in 2000.

 

One message board poster in McDonough’s stable is the crooked mortgage broker and financial flimflammer who is frantically emailing back and forth with former BusinessWeek reporter Gary Weiss in the winter of 2006, soon after Gary established his blog devoted to bashing Patrick Byrne and denying that phantom stock is a problem.

 

The flimflammer is named Floyd Schneider — a former employee of Amr Elgindy, the gun-toting goon, a.k.a. Manny Velasco, who plotted short strategies with Mr. Pink before instructing his Smith Barney broker to liquidate his kids’ trust funds on the day before 9/11, causing him to get caught in a giant stock manipulation scheme. Floyd has a long history of credit card fraud and stealing money from customers, and once he even filched $20,000 from his own uncle. On his death bed, Floyd’s father said to several associates: “My son – he is a liar and crook. Floyd is the reason that I am dying.”

 

Floyd has posted tens of thousands of messages smearing Patrick Byrne, Overstock, and many other companies–all, coincidentally, swimming in phantom stock. Meanwhile Sam Antar of Crazy Eddie, who is delivering large sums of money to convicted fraudster Barry Minkow (paid, in part, by Whitney Tilson, colleague of Mr. Pink and Cramer) has posted thousands of his own false and defamatory statements about Overstock, both on message boards and on his blog.

 

A number of journalists are on strangely good terms with these crooks. Fortune magazine, for example, has written a positive profile of Sam Antar. Roddy-Boyd-The-Post has written an email to a known conman in which he refers to Michelle McDonough as “our mutual best friend.”

 

But few journalists are closer to this cast of swindlers than Gary Weiss, the former BusinessWeek reporter.

 

And who, exactly, is this Gary Weiss character?

 

Well, this is where the story gets really weird.

 

excerpt from: http://www.deepcapture.com/the-story-of-deep-capture-by-mark-mitchell/

Sat, 08/04/2012 - 10:03 | 2677633 Disenchanted
Disenchanted's picture

 

 

DTCC (Depository Trust & Clearing Corporation) has been mentioned on this site before if I remember correctly.

 

s/ I sure hope VIc V. considers this a suitable post. /s

 

In regards to this:

 

"And who, exactly, is this Gary Weiss character?

 

Well, this is where the story gets really weird."

 

Excerpt from "the story" link:

 

#6) Gary covers-up for the DTCC from within DTCC offices:

 

Speaking of strange places from which to post: at the heart of our nation’s stock settlement system, and hence, at the heart of the issues of concern to DeepCapture, is a nearly unknown corporation called “The DTCC.” The company provides settlement for the nation’s capital market: $1.5 quadrillion in trades are settled there every year (that is, about 30X the economic output of the entire planet). For most of its history it has largely escaped regulation: state regulators are admonished that they cannot peer inside because the DTCC is federally regulated, and the DTCC has told federal regulators it escapes their regulation due to its strange ownership structure (one former federal regulator, and one former employee of the DTCC, have both told me the feds would not know where to begin if they tried to regulate it).

 

In short, at the heart of the world’s economy is an enourmous black box that is regulated except on the days it’s not, and through which 30X the economic output of the world flows. It is my contention that much of Wall Street’s illegal activity is funneled through this strange entity.

 

The huge, nondescript building in downtown Manhattan that houses the DTCC is something of a Fort Knox. Long-gun toting guards watch the entrances, and journalists who have been inside tell me that entering it is tougher than getting into the Federal Reserve or any comparable institution.

 

Gary recently made a slip that revealed he was inside the offices of the DTCC, using one of their computers to post on Wikipedia about the DTCC. Given that it’s like getting into Fort Knox, I’m pretty sure that’s odd. However, it casts some light on why Gary has been stridently denying that the DTCC is dirty and that none of the issues I have been raising regarding stock market manipulation are legitimate, and why he has (according to a colleague of his in the financial press sympathetic to me) devoted 93% of his blogs to criticizing my efforts to expose the illegal Wall Street activity which, I claim, intersects within the DTCC. Just as interestingly, when given opportunity to comment, the DTCC went into cover-up mode straight out of Bizarro World.

 

Also see: Gary Weiss: his DTCC ties and lies

Sat, 08/04/2012 - 12:58 | 2678135 dogbreath
dogbreath's picture

Thanks Dis.

ZH a while back had some nobodies top 10 list for finnancial websites.  ZH was on it but so was Sam Antar's website and I was like wtf??   I posted at the time a link to DeepCapture .   Google Patrick Byrne and just the Wiki stuff and some other fluff shows up.   DeepCapture seems not to be a goog favorite.    You are also right about Jim Cramer.  I wonder how much Jim has spent on coke in his lifetime.  After reading DC illustrating Jims connection to a rougs gallery, wtf is cnbc doing employing that shithead.

 

Sun, 08/05/2012 - 05:28 | 2679144 Disenchanted
Disenchanted's picture

 

 

You're welcome db.

 

I believe at some point in time in the last several years that Deep Capture was also hacked and a lot of their stuff disappeared. Or maybe it was a court order to take their site offline(related to one of the lawsuits) but I can't remember for sure. I think they are just now getting things back in order, but there are still some broken links. Plus I think there had been far more material on their site prior to the hack or whatever it was that happened.

 

Just for shits and giggles here's another little excerpt regarding Cramer from Deep Capture Part 2  Boo-yah!

 

Shortly before Bethany’s MBIA story came out, New York’s then-Attorney General Eliot Spitzer was obligated (because of the sheer volume of evidence) to investigate Bethany’s source, William Ackman, for stock manipulation and publishing false information. But characteristically, Spitzer quickly dropped that investigation. Then he did a complete 180, and began investigating MBIA. That investigation went nowhere. But then Spitzer became governor of New York. Before the FBI caught Spitzer with a hooker while investigating allegations of money laundering and bribery, the governor continued to push for legislation that would have done damage to MBIA’s stock price.

 

As Kimberly Strassel bravely wrote on The Wall Street Journal editorial page (which operates independently of the captured “Money & Investing” section), “Mr. Spitzer’s main offense as a prosecutor is that he violated the basic rules of fairness and due process: Innocent until proven guilty; the right to your day in court. The Spitzer method was to target public companies and officials, leak allegations and out-of-context emails to a compliant press, watch the stock price fall…Most of Mr. Spitzer’s high-profile charges have gone up in smoke…The press was foursquare behind Mr. Spitzer in all these cases, and in a better world they’d share some of his humiliation.”

 

The italics are mine. If it all sounds familiar, it will not surprise to learn that Eliot Spitzer is Cramer’s best friend. They were college roommates. Cramer’s constellation of hedge funds were Spitzer’s biggest campaign donors, and the Cramer clique of journalists were the very journalists who were “four square behind Mr. Spitzer.”

 

And Spitzer didn’t just attack public companies so that his short-selling friends could make more money. He also manufactured the “independent research” racket. As attorney general, he sued the big Wall Street banks for publishing financial research that supposedly overstated companies’ prospects. This opened the doors for the “independents” – like Sam Antar, Spyro Contogouris, Barry Minkow, the folks at Gradient Analytics, and others who make their living harassing public companies and understating their prospects for short-selling clients.

 

Spitzer was the most aggressive attorney general Wall Street has ever known. But perhaps in deference to Cramer and his friends, he almost never went after hedge funds. Indeed, one of the only hedge funds he ever prosecuted was Millennium Partners, founded by Israel Englander and John Mulheren, who died of a heart attack in 2003.

 

Englander and Mulheren were not friends of Cramer. To the contrary, Mulheren was once arrested while driving to the home of Cramer’s friend, Ivan Boesky, with a trunk full of high-powered weaponry. As is recounted in Den of Thieves (the classic account of Mike Milken, Ivan Boesky, and Carl Icahn), when faced with prosecution, Boesky ratted out everyone who had done business with him (and even wore a wire on Milken), in return for a lighter sentence. Mulheren’s involvement was minimal, but he was among those ratted out. So one day Mulheren snapped, and drove to Boesky’s house, planning to assassinate him.

 

In an ugly world, Boesky or his friends would seek revenge by trying to kill Mulheren and Englander.

 

Kill them, or call in the Attorney General and the Media Mob.

 

Sun, 08/05/2012 - 21:31 | 2680619 dogbreath
dogbreath's picture

Dis

One of the rouges went to a judge in British Columbia and without informing Byrne of the hearing/motion the judge ordered DeeepCapture shut down an the internet and everybody complied.  The story is there but i think mostly that DC does not post as prolificly as ZH.  Given the lack of coverage of Deep Capture on Zerohedge I would say Deep Capture is to hot to handle for ZH.  

Fri, 08/03/2012 - 14:32 | 2676432 Disenchanted
Disenchanted's picture

 

 

Wasn't there a furniture outlet chain back in the day that went public Crazy Eddie style, and ended up causing a lot of muppet tears??

 

Anyone remember their name?

Fri, 08/03/2012 - 21:43 | 2677372 James
James's picture

.

Fri, 08/03/2012 - 14:54 | 2676492 Disenchanted
Disenchanted's picture

 

 

 

Oh yeah...it was Levitz Furniture I was thinking of, but I don't remember the dirty details.

Fri, 08/03/2012 - 15:19 | 2676566 SoNH80
SoNH80's picture

"You're gonna love it at LEV-itz!!!"  They advertised non-stop in the Northeast anyway.  They used to be a family-run business until some LBO types got a hold of it.  I remember their bankruptcy sale when their area location was closed, we bought a glass coffee table for something like $35.

Sat, 08/04/2012 - 09:50 | 2677827 Disenchanted
Disenchanted's picture

 

 

Yeah that's the ones...thanks. I'm pretty sure they went public/IPOed and quite a few Ma and Pa Kettle muppet types in my neck of the woods lost a lot in that debacle. It's funny I'm not finding much on that with a Web search...

But the moral of the story is that what we're seeing today is not really new. Because the money mafia perps have never been properly punished. Result, it just keeps on going and going.

Fri, 08/03/2012 - 13:25 | 2676272 ebworthen
ebworthen's picture

"Bad behavior has become socialized."

Exactly.

Groupon = Gropeone, as in, a neophyte investor.

Wonder what the other dozen were he was thinking of?  Zynga?  Facebook?  Chipotle?  Green Mountain Coffee?

Fri, 08/03/2012 - 13:09 | 2676200 q99x2
q99x2's picture

As long as fraud is not considered work I'll do it.

The Feds and Obama are removing all law so the country is forced into revolution and the UN and NATO forces working along with AlCIAda will implement the population reduction.

Fri, 08/03/2012 - 12:49 | 2676172 billsykes
billsykes's picture

I don't even know why ZH even covers stock market related stories anymore.

It's all corrupt, all the Cxx's are bent, the regulators are impotent, the government is continually ripping you off, the credit rating agencies are all complicit and GAAP accrual accounting is easily faked.

 

So what's next?

Where can one go and what can one do to earn a living that is above average (to save for retirement)?

Or even forget about retirement and a better wage and take that out of the equation. 

 

 

Fri, 08/03/2012 - 20:48 | 2677270 Vic Vinegar
Vic Vinegar's picture

This was a nice piece by EB.  He does some of the best work of any of the contributors on ZH.

As for you and your comment...as an "international ex-private equity guy", why go with the gun for a picture?  Should we surmise that there is something Freudian about it, and you really just wanna turn that thing on yourself?

Also, as an "international ex-private equity guy" why are bemoaning where one can go to earn a living?  Did you find God or something?

Fri, 08/03/2012 - 12:48 | 2676170 SoNH80
SoNH80's picture

My old man bought a Sony Betamax from Crazy Eddie circa 1979 for some absurdly low price.  'We stiff our suppliers, don't pay taxes, and pass the savings on to you!'  Mr. Antar, thank you for bringing joy, in the form of "Tootsie" and "Ghostbusters" on video, into our humble home through your efforts.

Fri, 08/03/2012 - 14:32 | 2676434 dark pools of soros
dark pools of soros's picture

ahh back when watching a video at the home was an event.  now everyone has stacks of unwatched red envelopes, can stream on 10 devices, and already have 500 opinions shoved down their brain from the internet on day one of release

 

 

Fri, 08/03/2012 - 15:26 | 2676556 SoNH80
SoNH80's picture

You know, that burnt-orange, beige, and avocado-green world had its charms.  Pulling the "ON" switch out on the portable Sharp, turning the knobs to catch Bugs Bunny or The Wide World of Sports, maybe some wrestling if you were lucky.. or a "Creature Feature"... but today? (Charlton Heston voice) YOU BASTARDS!!! YOU UNLEASHED THE MACHINES!!

Fri, 08/03/2012 - 12:34 | 2676125 Dburn
Dburn's picture

Sam's site did wonders for me. He described the personality of person engaged in financial fraud as in embezzlement . The description wasn't a check list but how they managed to ingratiate themselves into a position of trust and then use a variety of methods to engage in accounting control fraud . He described my controller down to  as if he knew him  personally. They don't have to be new hires either. That right hand person you have had for years , who always seems happy and never talks too much about raises? You know, the person you would trust with your life? You're wide open for a facial.

Unfortunately the FBI is too fucking busy investigating Poker sites and such. I had evidence that seemed to me like at least enough for probable cause. They just didn't see it that way.

That's why this interview is so dead on. If financial fraud is happening to you, the RISK-OFF sign has been on for the embezzler for a long time, ever since the banks got/gets away with it. They either don't have the manpower , which sounds probable or they have the manpower but the expertise and budget to pursue these cases is gone.  So if you think this is happening just at banks, you might want to check in real close to anyone who has a hand in collecting money for you and/or  directing the flow of funds. They have an amazing array of justifications for stealing money that allows even non-criminal types to sleep at night. Some have been at it for years and companies just don't want to admit it happens to them because customers would lose faith or just because of ego. If there is a will there is a way , especially now-a-days. Never has it been more easy to fake financials and the audit checks behind the numbers like bank statements etc. Thanks to Excel, they can keep track of their lies for years.

If they are methodical and aren't over greedy, they can go for years and never get caught.  It's the criminals who spend money overtly on ostentatious displays of wealth that their income could never justify that get nailed. In other words they are dumber than fuck and think, after a few years, they are invulnerable.

Watch the fuck out. If your not a "detail" person and have gotten used to having people handle stuff for you, someone is probably ripping you off right now. Even the most sophisticated systems set-up by outside neutral parties are vulnerable. Never say never. That's what these assholes are hoping you say and think.

Sat, 08/04/2012 - 08:45 | 2677749 disabledvet
disabledvet's picture

Poker? I don't even know her!

Fri, 08/03/2012 - 14:36 | 2676444 dark pools of soros
dark pools of soros's picture

ok but who are YOU stealing from?

Fri, 08/03/2012 - 11:57 | 2676013 adr
adr's picture

A successful fraud, at least for a while, only enables more fraud because even more people think they can get away with it. Now that the entire system is a fraud, the regulators have to let everyone get away with it, or else there isn't even a system to regulate.

If a company is filing to go public, that is an immediate red flag for fraud. In fact in order to go public you must cook your books, there is no other way to show the revenue growth required to get a n investment bank to underwrite your IPO.

----- an example of fraud that would make Crazy Eddie jealous.

Power Balance, one of the greatest frauds of the past ten years, was trying to go public and the financial media was getting in on it. CNBC writers were proclaiming the energy band business would hit $4 billion by 2013. CNBC made Power Balance product of the year. They didn't count on the fraud of the actual product to cause problems. When the consumer product board of Australia banned the product because of mistatements and outright lies regarding the claims that the product did amazing things, it set off a worldwide storm of lawsuits.

In court the company had to reveal financial statements. The company had $40 million in total sales and had spent over $150 million on marketing and promotion. So $40 million in sales was supposed to grow to $4 billion in five years? Not to mention that the company was spending over three times its revenue on marketing. You can't run a business that way. But you can run a stock fraud. The goal was never to make money on product, but to make money on stock. The criminal founders of the company stood to make millions selling stock with an IPO. The directors of all the sport retailers were going to get in on it as well. They would have no problem taking hundreds of millions in inventory that would never sell of a company going public. Shock Doctor and Skull Candy being prime examples.

The lawsuits pretty much ended the company and they were ordered to pay $60 million in damages. Money the company didn't have. So they declared bankruptcy and negated the lawsuit payment. They exited bankruptcy in two weeks after filing when the Chinese manufacturer of the fraudulent product agreed to buy the company. Amazingly the product is still available for sale.

So you have the creation of a fraudulent product made for the explicit purpose of running a fraudulent stock scam, in order to make millions of dollars for early investors and the owners of the company. Not only is nobody in jail, the product is still being sold with the hopes it can be resurrected to enable to the stock scam to go forward anyway.

Fri, 08/03/2012 - 22:06 | 2677415 Arnold Ziffel
Arnold Ziffel's picture

Crazy Eddie's honesty is deafening.

Fri, 08/03/2012 - 12:40 | 2676150 illyia
illyia's picture

That is an extremely informative comment. Thank you for posting it. The question remains two-fold. First: are we headed - globally - for a totally corrupt financial (and, thus, social) system for which the end-game is collapse (game theory). Or, Second: will some still-creditworthy national structures (such as Australia did with this one) expose the megafraud and become the "good money" that evicts the "bad".

To me this is the primary question. The two outcomes are polar opposites. The first instance is Rome and the Dark Ages (albeit for a limited time due to technology). The second recalls the former United States of America after WWII.

Fri, 08/03/2012 - 17:05 | 2676852 adr
adr's picture

For a living I work in business development. Small companies hire me to work on their products and redo all of their marketing, promotions, and sales strategy. I really like the work because I actually help get ideas off the ground and build real sales. Through years of networking I meet with buyers at almost every major mass retailer in the country, so I have intimate knowledge of the real retail operation.

We are not headed for a totally corrupt system, we are in a totally corrupt system. I can't tell you how hard it is to even get an appointment to show a new product to a buyer at a major retailer. 80% of what a buyer buys are products he is told to buy by upper management, ie corporate directors. So you are fighting for a very small slice of pie.If you are doing honest business and want to remain private, you almost have no chance.

Shock Doctor is another example of fraud. In the beginning the company was barely able to get shelf space. It is just a simple mouthguard, one of hundreds on the market. This went on for years until a VC firm took interest and bought into the company. Almost immediately the company started receiving huge orders from the major retailers. There wasn't demand for the product, but the VC firm was connected to banks that finance the operations of the retailers. Essentially that is how the scams all start. The VC firm backdoors private shares of the company to retail directors, some who even sit on the boards of companies that produce competing products. The boards agree to purchase X amount of inventory from the company and start the revenue pump. You can walk in a store and all of a sudden see an entire gondola of product that wasn't there a few weeks ago. The inventory isn't there to sell, it is there for marketing. If there is that much inventory, the product has got to be selling like mad, right?

Then you get the guys like Cramer who start to pump a company, telling people to buy shares when it goes public. The next big thing. The company goes public, most often receiving a multi billion dollar market cap, even if profit is miniscule or negative. Think how fast you can make $100 million selling stock, with a couple billion dollar market cap. Now think how hard it is to sell $100 million worth of mouthguards to retail consumers. The stock is nearly 100% cash to whoever sells it. The actual product has a net profit of somewhere around $4, that's 25 million mouthguards.

It even gets better. In order to pump the stock more some retailers actually took products and had Chock Doctor copy them, and then threw the other products out of their store assortment. McDavid products, that have been sold by some of these retailers for two decades was thrown out so the inventory could be replaced by Shock Doctor branded products.

People think retail is about making products to sell to consumers, in order to make profit and pay employees. That couldn't be further from the truth. A publicly traded product vendor doesn't care about making profit off individual products. They only care about the revenue they generate by putting as much inventory as possible into retailers. How many times do you see revenue in the hundreds of millions, yet net profit like $5 million. If you own the company and hold $20 million in stock, a 10% rise in share value just made you $2 million richer. That $2 million could be more than the entire profit for the business.

Now can you begin to see why so much inventory has been produced since 2009. It has all been to fake revenue growth.

Sat, 08/04/2012 - 12:09 | 2678040 illyia
illyia's picture

Thanks for the expansion. Very interesting and why I remain a one-on-one customizing small player. Although... it sounds like you create/open markets... hmmmm.....

The corruption is so overwhelming that becoming a "player" risks getting a) lost soul in the rush of activity, b) losing the point of the enterprise and/or c) being cornered by a shark and eaten for lunch.

Kudos to you adr. You have gutz and, obviously, talent.

i.

Sat, 08/04/2012 - 01:41 | 2677567 SAT 800
SAT 800's picture

Excellent. I knew there was some reason I was reading these pages of deluded crap; but it was getting hard to remember what it was. Actual information; that's what I wanted. And, I won't forget it either.

Fri, 08/03/2012 - 14:41 | 2676459 dark pools of soros
dark pools of soros's picture

That good money was going to be the gold dinar.. 

Fri, 08/03/2012 - 11:58 | 2676004 trichotil
trichotil's picture

Hey it's Lloyd's long lost brother!

Peel not peal goddamnit!

Fri, 08/03/2012 - 12:19 | 2676093 EB
EB's picture

Okay, fixed.  But, cool it on the Lloyd comments.

Fri, 08/03/2012 - 12:33 | 2676129 illyia
illyia's picture

But otherwise a great, well written, read.

Fri, 08/03/2012 - 11:37 | 2675951 printmoremoney
printmoremoney's picture

The elites did the same thing to Rome as it collapsed. Human ding-a-ling rewind, only this time with Nukes and Bioweapons enough to deform our DNA for good. Nice combo to upsize with.

Fri, 08/03/2012 - 11:29 | 2675933 Rainman
Rainman's picture

Thanks to the JOBS Act, IPOs can " phase in " internal controls over 5 years. I think GM now has a few years left. Meanwhile, the channel-stuffing wheels are in motion.

Crimerica !!....I love it so !!

http://www.pehub.com/158043/jobs-act-update-sec-misses-rulemaking-deadline-but-the-wheels-are-motion/

Fri, 08/03/2012 - 11:24 | 2675918 CheapBastard
CheapBastard's picture

No one saw this coming.....that ZH and RT would be two of the most informative news outlets......

Fri, 08/03/2012 - 11:23 | 2675913 NotApplicable
NotApplicable's picture

As I mentioned in a thread yesterday, I learned of a local entity that cannot even reconcile its accounts payable bank account statement with their internal accounting system, EVER. Yet they pass the audits every time, thanks to some "balancing" entries, along with promises to do better to make the auditors happy.

Fri, 08/03/2012 - 12:16 | 2676083 Rainman
Rainman's picture

FTC reports fraud complaints are up 62% in the past 3 years. Then, of course, there is Fakebook.

http://marketplayground.com/2012/03/29/beware-facebook-ipo-other-frauds-are-making-the-rounds-video/

Fri, 08/03/2012 - 11:18 | 2675901 Rainman
Rainman's picture

Excellent.....in a straight world Sam should be running the SEC !

How is that  " e " in p-e workin out for ya ???

Fri, 08/03/2012 - 11:12 | 2675884 Duke Dog
Duke Dog's picture

Darn, Lauren is wearing pants today. Man, pretty and smart as a whip! JD

Fri, 08/03/2012 - 11:01 | 2675839 DavidC
DavidC's picture

Because of the number of pretty airheads presenting TV business programmes, when I first saw Lauren Lyster my heart sank a bit ('Oh no, not another one'), because she is undoubtedly exceptionally pretty.

But she is VERY smart, she allows guests to speak, she has a handle on everything that is discussed and gives the impression of having done her homework on every guest. The show, as far as I am concerned (and credit to Demetri and Shannon as well) just gets better.

DavidC

Sat, 08/04/2012 - 01:44 | 2677568 SAT 800
SAT 800's picture

Oh, oh. You're exhibiting symptoms of Male Thrusting Dementia.

Do NOT follow this link or you will be banned from the site!