Case 3: Crazy Eddie (1987)

• Prof. Dr. Klaus Henselmann
• Dr. Stefan Hofmann

When Crazy Eddie, Inc., blew up in a financial scandal in 1987, the debacle involved just about every kind of accounting fraud then known, as well as receipts skimming and money laundering. Although the total dollars involved were puny and the scams simple compared with later swindles like Enron, the case of Crazy Eddie remains unchallenged as a colourful saga of a multi-pronged fraud, probably one of the twentieth century’s most infamous frauds. And even though the fraud is more than two decades old, it provides vivid examples of how these crimes can be pulled off and how auditors can be deceived. According to one 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.”

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