According to news reports (here), Alan Greenspan recently made public statements critical of the Sarbanes-Oxley Act, apparently telling the Massachusetts Technology Leadership Council on September 24, 2006 that the Act has become a “nightmare” that should be scrapped. Greenspan apparently told the audience that the SOX regulations are hampering business, discouraging risk taking, and driving listing companies to London.
As you might expect, these kinds of remarks from someone as highly regarded as Alan Greenspan have excited considerable commentary (here and here). But by far the most interesting comments about Greenspan’s remarks appear on the While Collar Fraud blog (here), which is maintained by none other than Sam “Sammy” Antar, infamous for his role in the Crazy Eddie criminal securities fraud. Antar was the CFO at electronics retailer Crazy Eddie, which turned out to be one of the largest financial frauds of the 80’s. Sammy’s cousin, Eddie Antar, ultimately pled guilty to securities fraud after his initial criminal conviction was reversed on appeal. Sammy never did time because he testified as a prosecution witness at Eddie’s criminal trial.
In his blog comments and in an October 2, 2006 interview in the Boston Herald (here), Sammy asserts that if Sarbanes-Oxley been in place at the time, his company would never have been able to sustain the wholesale fraud they engineered.
Sammy specifically addresses two aspects of Sarbanes-Oxley as particularly important in preventing fraud. First, he contends that the Sarbanes-Oxley ban on having accountants perform consulting work is important to preventing fraud from going undetected. Antar asserts that because Crazy Eddie’s outside accountants were so grateful for the lucrative consulting work the company gave them, the company was able to manipulate the accountants’ audit work: “Whenever ‘red flags’ came up, they always accepted management’s version of the truth where any reasonable person would not.”
Second, Sammy also asserts that the Sarbanes-Oxley internal control requirements are important in preventing fraud: “Strong internal controls are the most effective means of preventing white collar crime.”
The only part of Sarbanes- Oxley that Greenspan was willing to defend was the Act’s requirement that senior company officials certify the company’s financial statements. Ironically, that also is the one part of Sarbanes-Oxley in which Sammy does not set much store: “Criminals have no problem signing false certification documents in furtherance of crime. It is simply a natural extension of the deceit and lies we use to successfully execute our crime.”
Greenspan may have all the credibility in the world when it comes to markets and the economy. But Sammy’s commentary might be just cynical enough (or realistic enough, depending on your point of view) to be persuasive. I know, I know – the very idea of Antar defending Sarbanes-Oxley against Alan Greenspan is not just crazy, it’s “INSANE!”
The whole Crazy Eddie financial scam has moved into the arena of myth and legend, and even further – into modern cyberspace. Crazy Eddie even has its own page on Wikipedia, here. Among other interesting details in the Wikipedia article is the historical footnote that one of the prosecuting attorneys at Eddie Antar’s first criminal trial was none other than the current Secretary of Homeland Security, Michael Chertoff, who reportedly referred to Eddie Antar as the “Darth Vader of Capitalism.” (The Wikipedia quotation helpfully provides hot links to both Darth Vadar and capitalism, and so we feel compelled to do the same. ) But the reason that Crazy Eddie’s legend endures in the popular imagination is not the criminal fraud, but the store’s manic, iconic commercials, which also live on in cyberspace. The official Crazy Eddie website (here) archives some of the best ones (click on “Crazy Eddie TV Commercials” link in the right hand column — you might want to turn the volume down on your computer first).