Fraud, Felons & Whistleblowers – An Interview with Convicted Fraudster Sam Antar
Ethics Suite Founder Juliette Gust talks to Sam Antar, a convicted felon and a former CPA. As the CFO of Crazy Eddie, Mr. Antar helped mastermind one of the largest securities frauds uncovered during the 1980s. According to a senior SEC official, "This may not be the biggest financial statement fraud of all time, but for outrageousness, it is going to be very hard to beat."
Today, Sam Antar is a forensic accountant. His primary work focuses on identifying and investigating public companies engaged in securities fraud by performing an in-depth forensic analysis. He also advises law enforcement agencies and professionals about white-collar crime and trains them to catch the crooks. His clients include government agencies, law firms, accounting firms, independent investment research firms, hedge funds, public companies, and other organizations.
Excerpt From Sam Antar's whitecollarfraud.com Crazy Eddie FAQs:
What was your biggest threat to you while you were committing your crimes?
The biggest threat was that a whistleblower from within the company would inform the government of our crimes. Lying to auditors, Wall Street analysts, and journalists was easy.
A Convicted Felon's View of White-Collar Crime
ETHICS SUITE: In your fraud essay, A Convicted Felon's View of White-Collar Crime, you wrote that "our society must primarily rely on the actions of whistleblowers to inform us about most frauds." Why do you believe this to be true?
SAM ANTAR: Despite all the efforts over the last twenty-five years at making fraud more difficult, such as passing the Sarbanes-Oxley Act and requiring stricter internal controls, most frauds are still learned about from whistleblowers. Society must incentivize whistleblowers to come forward and protect them from potential retaliation.
According to the Association of Certified Fraud Examiners 2016 Report to the Nations on Occupational Fraud and Abuse, "tips are consistently and overwhelmingly the most common method by which frauds are detected." Specifically, the study states that 39.1% of occupational frauds are initially detected from tips. The second and third most common methods of detecting fraud were by internal audits at 16.5% and management review at 13.4%. Only 3.8% of frauds are discovered by external auditors. Therefore, more fraud is detected by whistleblower tips (39.1%) than internal audits and management review combined (29.9%).
ETHICS SUITE: Do you believe that companies should establish ethics hotlines?
SAM ANTAR: Whistleblower hotlines help legitimate organizations self-police themselves to demonstrate to the public and regulators that they are serious about running an ethical business. Employees should be encouraged to report wrongdoing to management and management should be encouraged to respond responsibly. It is far better for management find out about internal wrongdoing and self-report it if necessary, than to suffer the humiliation of learning about it from a New York Times expose. If management ends up learning about internal wrongdoing from the media, it will have zero credibility.
ETHICS SUITE: You also wrote that "most whistleblowers have an ax to grind." If so, do you think their reports should still be taken seriously?
SAM ANTAR: After a 16-year crime spree, and two years of lying under oath to cover up my crimes, I cut a deal with the US Attorney's Office and the Securities and Exchange Commission to testify against my fellow co-conspirators. My testimony led to the convictions of Eddie Antar and other family members. It's common to attack the vulnerabilities of the person reporting the crime. All that matters are that the facts support the allegations.
ETHICS SUITE: You stated that "ethics is a matter of convenience depending on the situation and pressures involved." A lot of people believe that in a small to medium business, everyone knows and trusts each other, and unethical behavior/fraud doesn't occur in those environments, only at big corporations. Do you agree with this philosophy?
SAM ANTAR: All people are capable of committing crimes and everyone sins. Can anyone truthfully claim that they live without sin and temptation? We all decide which rules to abide by or break based on what suits us. People are most vulnerable to the people who they like and trust the most, whether it be family members, friends, co-workers, and employees.
ETHICS SUITE: You say that "White-collar criminals fabricate false integrity to gain the trust of their victims." Can you elaborate on what you mean by "false integrity"?
SAM ANTAR: Fraud is a crime of persuasion. White-collar criminals measure their effectiveness by the comfort level of their victims. Fraudsters use a combination of charm and deceit to achieve their objectives. It's far easier for a fraudster to get a potential victim to believe their lies, if they are likable. In addition, fraudsters seek to fabricate false integrity to gain the trust of their victims. The implied credibility that fraudsters gain by fabricating their integrity makes it less likely that their potential victims will question their behavior and more likely that potential victims will believe their lies.
ETHICS SUITE: You said: "learn to exercise professional paranoia. Do not trust. Just verify." Can you explain what you mean by professional paranoia?
SAM ANTAR: Fraud will always be with us. It's as old as humanity and it started with Eve trusting the serpent in the Garden of Eden. Many people erroneously believe that prostitution is the oldest profession. Fraud is the world's oldest profession.
Frankly, trust is a hazard. Our society is built on trust and giving people the benefit of the doubt. The main pillar of our legal system is the "presumption of innocence." However, fraudsters consider trust and the presumption of innocence as vulnerabilities to be exploited in the execution of their crimes. Fraudsters will always have the initiative to commit their crimes. While their potential victims trust them, fraudsters prey on them.
Manipulation is part of the human condition. People need to be conditioned to be less accepting and more skeptical. There is simply too much unexamined acceptance of information as truthful.
Smoking Guns
ETHICS SUITE: In your essay Smoking Gun, you state: "Enablers of criminals are often quick to ask, "Where's the smoking gun?" or cry, "It's a fishing expedition." Can you elaborate on what you mean by enablers of criminals?
SAM ANTAR: Enablers of crime can be witting or unwitting enablers. They can be the auditors who miss things and give you a clean audit, which gives you implied credibility. It could be employees who witness the misconduct and do nothing about it. It could be the directors who know their employees might be doing something improper and do nothing about it because they don't care or because they like the results.
