Ahhh, Crazy Eddie. Those were the days, before home shopping, before infomercials - heck, before cable television. On regional tv stations hungry for advertizing dollars the local-business pitchman was king of the airwaves. And if ever there were a Holy Roman Emperor of the the local pitchmen, it was the tri-state area's Crazy Eddie.

Crazy Eddie, who always promised that his prices were insaaaannnnee was the mascot of an electronics chain run by New York-area businessman, Eddie Antar. Unfortunately, the accounting at Crazy Eddie's was as insane as the prices. Antar eventually fled to Israel with some $50 million squirrled away in Swiss Bank accounts. He was later extradited and convicted of securities fraud and raketeering.

Starting this week, the SEC will begin dispursing some $6 million in collected fines to former investors of the electronics chain. Investors had previously shared in some $125 million in distributions.

Via NJ.COM:

A 'surprise' for Crazy Eddie investors - After fraud dragged down the company in 1989, SEC will distribute $6 million

October 11, 2005
by Greg Saitz
Star-Ledger Staff

At some point, perhaps after seeing one of Crazy Eddie's ubiquitous advertisements insisting its prices were "insane," thousands of investors decided it was perfectly reasonable to buy stock or bonds in the consumer electronics company. It wasn't.

Now nearly 16 years after the company crashed amid a spectacular fraud, many of those investors will be getting a reminder in the mail of their ill-fated venture -- a check.

The failure of Crazy Eddie, which in its final years had its headquarters in Edison, spawned a web of civil and criminal actions against those involved. Last month, a federal judge in Newark approved a plan to disperse $6 million that securities regulators collected from members of the Antar family, primarily Sam M. Antar, who co-founded the chain with his son Eddie Antar.

Years ago, investors received other distributions totaling nearly $125 million.

"People had given up trying to get anything back a long time ago," said Rick Simpson, an attorney with the Securities and Exchange Commission who has been involved since 1989. "So any time we can make a distribution, it's a pleasant surprise."

Business headlines often mention huge settlements reached in shareholder class-action lawsuits. A judge last month approved a $6.1 billion settlement in the WorldCom case, and experts believe the Enron settlements eventually will prove to be even bigger.

But the point at which investors are actually repaid a portion of their losses comes years after the agreements. Often, rummaging to find the necessary trade confirmations and filling out claims forms is rewarded with a check that's just a fraction of the amount that was lost.

"At the end of the day, you ask, 'What's this worth?'" said James Cox, a law professor at Duke University Law School who has studied the rate at which institutional investors submit claims in class-action settlements. "Sometimes not very much."

Aside from settlements reached in class-action cases, the SEC also tries to get money back for investors. Since 2002, the agency has identified more than $4.8 billion in penalties and disgorgements that should be returned to harmed investors.

But even though regulators had collected money in 73 of the 75 cases, as of April, just $60 million from three cases had been distributed to investors, according to a recent report by the federal Government Accountability Office. Another $25 million was being prepared for disbursement, said the report, which characterized the SEC's payment to investors as slow.

Crazy Eddie investors are luckier than most. About $124 million has been distributed to not only former shareholders, but also other creditors such as Sony and an investment team that bought out the company only to discover it was rife with fraud. Estimates of investor losses were pegged at about $140 million.

Howard Sirota, a New York attorney who represented shareholders in the Crazy Eddie class action filed in 1987, said a typical recovery for investors -- after attorneys' fees -- is about a penny a share. But Simpson, from the SEC, estimated Crazy Eddie stockholders have gotten perhaps 35 cents back for every dollar they invested.

The figure includes the latest $6 million payment, which is being divided among more than 10,000 claimants. Some of those claimants are brokerage houses, which means their recoveries must be divided again among all the individual clients who owned Crazy Eddie stock.

Securities regulators first went after Eddie Antar, who now lives on the Upper East Side in Manhattan, suing him in civil court for accounting fraud in 1989, about the same time the company collapsed. The SEC then sued Eddie Antar's father, Sam, and other family members in 1993, accusing them of reaping millions in illegal profit from selling stock that was artificially high because the company was making up its financial figures.

After a 1997 trial, a federal judge in 2000 ordered Sam Antar to repay $57.5 million in ill-gotten gains and interest.

The elder Antar, who was in his 80s when he died within the past year, battled efforts to collect for years, transferring assets to his wife and others, attorneys said. By this spring, though, a receiver appointed in the case amassed $10.4 million. Costs, fees and expenses account for the $4 million difference between the amount collected and the distribution. Bruce Goldstein, a Newark attorney who represented Sam Antar in the SEC case, declined to comment.

Thousands of investors received $82.2 million via payments in 1997 and 1998, part of a judgment against Eddie Antar, who served time in prison for stock fraud after living on the run in Israel. The money was in addition to a $42 million settlement with outside auditors and others in the class-action case.

"This is, in terms of dollar-for-dollar, the best result in the history of class actions in America, but it still leaves the victims out of pocket," Sirota said. Many investors don't even bother filing claims forms to get part of the settlements. In general, about half of those eligible actually participate, said Ron Miller, a senior consultant with NERA Economic Consulting.

Sirota has a pretty good idea why more don't. "There's a justifiable, widely held belief that it's not worth the paperwork because you get back a check for $16," he said. And the apathy isn't restricted to individual investors. A study by Cox, the Duke professor, and a colleague found less than 30 percent of institutional investors -- mutual funds and other large shareholders -- filed claims to collect on these settlements.

The professors found that amount could come to more than $1 billion a year.

The original article (which fisrt ran in the News Star Ledger) appears here.

-- MDT

Labels: Crazy Eddie, Enron, New York AG