Full opinion text
OPINION HAROLD A. ACKERMAN, District Judge. I. INTRODUCTION There is perhaps no more insidious drain on the overall welfare of society than greed unchecked. The saga of the Antar family and their operation of a major retail consumer electronics business is but a manifestation of that tenet. In this and related cases, it has become evident that various members of the Antar family engaged in a pattern of fraud and deceit in their attempt to enrich themselves by selling securities, the price of which had been artificially inflated through a multitude of schemes. This appears to be the last chapter in a story of a family and its deception of the public. This matter concerns allegations of insider trading in the stock of Crazy Eddie, Inc. (“Crazy Eddie”), a defunct electronics retailer which, during the relevant time period, operated stores in New York, New Jersey, and Connecticut. At the heart of this case are allegations that defendants Sam M. An-tar, Allen Antar, and Benjamin Kuszer, along with others not part of this action, engaged in an extensive, multifaceted fraud which consisted of cash skimming, falsification of inventory counts, and the inflation of sales figures of certain key stores, for the purpose, according to the plaintiff Securities and Exchange Commission (the “SEC”), of artificially inflating the price of Crazy Eddie stock. The SEC further contends that the defendants, having artificially and fraudulently inflated the price of the stock, then sold their substantial stockholdings to an unwitting public, while profiting in excess of $20 million. On September 8, 1993, the SEC initiated this civil enforcement action. The SEC filed an Amended Complaint on April 24, 1997, alleging insider trading in violation of § 17(a) of the Securities Act of 1933 (the “Securities Act”), 15 U.S.C. § 77q(a); § 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78j(b); and Rule 10b-5, 17 C.F.R. § 240.10b-5. Specifically, the SEC alleges that in violation of federal securities laws, the defendants sold Crazy Eddie stock when they knew or were reckless in not knowing that: (a) Crazy Eddie had materially misstated its earnings growth in the years prior to its initial public offering in 1984 (“IPO”) ^ systematically and gradually scaling back an alleged cash skimming scheme so as to skim from the Company’s proceeds $3 million in 1980, $2.5 to 2 million in 1981, $1.5 million in 1982 and less than $1 million in 1983, see Amended Complaint, ¶¶ 3,28; (b) in the years subsequent to the IPO, Crazy Eddie had fraudulently overstated its pretax income by engaging in a series of inventory inflation schemes and related frauds, id. at ¶¶ 3, 33-44,57-67; and (c) subsequent to the IPO, Crazy Eddie had implemented a series of schemes designed to artificially inflate the sales growth figures reported for certain key stores whose performance was closely monitored by the investing public, id. at ¶¶ 3, 45-56. In addition, the SEC alleges that Eddie An-tar (“Eddie”), the son of defendant Sam M. Antar and a co-founder of Crazy Eddie, sold certain shares of Crazy Eddie stock on behalf of the children of Allen Antar and Benjamin Kuszer when he knew or was reckless in not knowing that the company’s earnings growth prior to the IPO had been materially misstated. Id. at ¶ 5. Based on these alleged instances of insider trading in violation of the federal securities laws, the SEC seeks an order: (a) enjoining Sam M. Antar, Allen Antar, and Benjamin Kuszer from engaging in future violations of the securities laws; and (b) requiring Sam M. Antar, Allen Antar, Benjamin Kuszer, along with the Relief Defendants, to disgorge the illegal profits allegedly made and losses allegedly avoided as a result of their trading. See Final Pretrial Order, § 13. This court has jurisdiction over this matter pursuant to §§ 20(b) and 22(a) of the Securities Act and §§ 21(d)(1) and 27 of the Exchange Act. 15 U.S.C. §§ 77t(b), 77v(a), 78u(d)(1), 78aa. Venue is proper in this district pursuant to § 22 of the Securities Act and § 27 of the Exchange Act. 15 U.S.C. §§ 77v, 78aa. The SEC has the burden of proving its allegations by a preponderance of the evidence. See SEC v. C.M. Joiner Leasing Corp., 320 U.S. 344, 355, 64 S.Ct. 120, 88 L.Ed. 88 (1943) (establishing preponderance of evidence standard for actions involving § 17(a) of Securities Act); Herman & Mac-Lean v. Huddleston, 459 U.S. 375, 389-90, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983) (establishing preponderance of evidence standard for actions involving § 10(b) of Exchange Act). II. PRIOR CRIMINAL ACTIONS To better comprehend the nature of the present action, it is important to take note of the prior criminal action against two central figures in the alleged fraud at Crazy Eddie: Eddie and Mitchell Antar (“Mitchell”). As will be discussed later in this opinion, the Antars’ hegemony over Crazy Eddie came to an end in 1987. In September of that year, the SEC initiated an investigation into alleged violations of the federal securities laws by certain Crazy Eddie officers and employees. In February, 1987, the United States Attorneys’ Office for the District of New Jersey commenced a federal grand jury investigation into the activities at the company. Both investigations focused on, among others, Eddie and Mitchell. By this time, Eddie had begun to liquidate his assets in the United States and move them offshore. He also began to assume numerous other identities and obtain a variety of passports under those assumed names. In September, 1989, Eddie was sued by the SEC for, among other things, disgorgement of illegally gained proceeds from the sale of his Crazy Eddie stock. See SEC v. Eddie Antar et at., Civ. No. 89-3773 (D.N.J.) (JCL). In February, 1990, the court entered an order directing Eddie, among other things, to surrender over $52 million in funds he had previously transferred to Bank Leumi le-Israel, B.M. (“Bank Leumi”) in Israel and held him in civil contempt for failing to appear before the court as previously ordered. He was ordered by the court to appear and purge himself of the civil contempt order. Eddie failed to appear and the court issued a warrant for his arrest. Eddie remained at large, a fugitive from justice for approximately twenty-eight months. Using the many falsified passports and multiple aliases, Eddie traveled as a fugitive to Israel, the United Kingdom, France, Canada, Switzerland, Brazil, and the Cayman Islands. After a two-year international manhunt by the United States Marshals Service, in cooperation with the SEC, the Federal Bureau of Investigation, the United States Attorneys’ Office, Interpol, the Israeli National Police, and other agencies, Eddie was finally located and arrested in Israel on June 24, 1992. After contesting extradition for some months in the Israeli courts, Eddie was extradited to the United States in January, 1993. On August 10, 1993, a federal grand jury sitting in Newark returned a Superseding Indictment against Eddie, Mitchell, Allen Antar, and Eddie Gindi, a cousin of the other three defendants who worked with them at Crazy Eddie. Count 1 of the Superseding Indictment charged all four defendants with conspiracy to conduct or participate in the affairs of Crazy Eddie through a pattern of racketeering activity in violation of 18 U.S.C. § 1962(d). The alleged racketeering acts consisted of multiple acts of securities fraud and mail fraud arising from a scheme to falsify Crazy Eddie’s books and records with the purpose of fraudulently inflating the market price of the company’s securities. Counts 2 through 4 charged the defendants therein with causing false and misleading statements to be made in documents and reports Crazy Eddie filed with the SEC, in violation of 15 U.S.C. §§ 78m and 78ff(a). Count 5 charged the defendants therein with mail fraud in violation of 18 U.S.C. § 1341 arising from the mailing of a falsified SEC filing to a Crazy Eddie shareholder. Counts 6 through 16 charged Eddie with securities fraud arising from the sale of Crazy Eddie stock, in violation of 15 U.S.C. §§ 78j(b) and 78ff(a) and 17 C.F.R. § 240.10b-5. Counts 17 and 18 charged Mitchell with similar fraud offenses. Count 19 charged the defendants therein with conspiracy to commit securities fraud and mail fraud in violation of 18 U.S.C. § 371. All four defendants in the criminal action pled not guilty to the Superseding Indictment and proceeded to trial. On June 20, 1993, Eddie was found guilty on all counts charged against him, i.e., Counts 1 through 16 and 19. Mitchell was found guilty on Counts 1 through 5 and 19, and acquitted on Counts 17 and 18. Allen Antar was acquitted of all charges. The convictions of Eddie and Mitchell, however, were overturned by the United States Court of Appeals for the Third Circuit, and the matter, as to them, was remanded and assigned to this court. Thereafter, on May 8, 1996, Eddie pled guilty to one count of conspiracy to commit racketeering in connection with his activities at Crazy Eddie. In his allocution, Eddie admitted, among other things, the following: 1.prior to Crazy Eddie’s initial public offering in September, 1984, and continuing through 1987, he and others agreed to carry out various schemes to falsify Crazy Eddie’s books and records to make the company appear financially healthier than it actually was; 2. in 1985, he caused the value of Crazy Eddie’s inventory to be overstated by approximately $2 million; 3. he caused the falsification of Crazy Eddie inventory count sheets, thereby overstating Crazy Eddie’s 1986 fiscal year-end inventory by approximately $10 million; 4. he arranged for the delivery of approximately $2 million in merchandise to Crazy Eddie shortly prior to year-end 1986 and simultaneously arranged for post-dated invoices for this merchandise to be issued after the start of the next fiscal year; 5. he caused an infusion of approximately $2 million into bank accounts of Crazy Eddie comparable stores to inflate the reported sales in those stores; 6. in fiscal year-end 1987, he caused the falsification of Crazy Eddie inventory count sheets, thereby inflating inventory by millions of dollars; 7. the primary purpose of these schemes was to defraud the investing public by artificially inflating the price of Crazy Eddie stock; and 8. he urged Crazy Eddie employees to destroy business records to conceal the falsification of the company’s business records from the SEC and others. This court sentenced Eddie on February 10, 1997, inter alia, to eighty-two months imprisonment. See United States v. Antar, Criminal Action No. 92-347 (D.N.J.) (HAA). In total, between 1984 and 1987, Eddie sold approximately 6.5 million shares of Crazy Eddie stock for proceeds in excess of $74 million. On October 10,1996, Mitchell followed suit and pled guilty to one count of causing false and misleading statements to be made in documents and reports Crazy Eddie filed with the SEC and one count of conspiracy to commit securities and mail fraud. In his allocution, Mitchell admitted, among other things, the following: 1. in 1986 and 1987, he and others connected with Crazy Eddie agreed to carry out various schemes to falsify Crazy Eddie’s books and records to make the company appear financially healthier that it actually was; 2. during the company’s fiscal year 1987, he and others fraudulently inflated comparable store sales; 3. he and others caused the falsification of inventory sheets for fiscal year-end 1987 to inflate reported inventory by $16 to $18 million; 4. he and others executed the approximately $20 million phony debit memo fraud at Crazy Eddie’s 1987 fiscal year-end; 5. he was aware as of year-end 1987 that Crazy Eddie’s reported inventory had been inflated by approximately an additional $25 million because temporarily borrowed merchandise had been included in the year-end inventory count; 6. he and others arranged for the delivery of merchandise to Crazy Eddie shortly prior to year-end 1987 and simultaneously arranged for post-dated invoices for most of the merchandise to be issued after the start of the next fiscal year; and 7. the primary purpose of these schemes was to increase the price of Crazy Eddie stock to public investors. Mitchell was sentenced by this court on June 13, 1997, inter alia, to thirty months imprisonment. See United States v. Antar, Criminal Action No. 92-347 (D.N.J.) (HAA). The case at bar followed on the heels of the criminal action against Eddie, Mitchell, and Allen Antar. In light of the past history of this case, the defendants herein, in large measure, do not dispute that various frauds were indeed perpetrated at Crazy Eddie. The predominant questions before this court, therefore, are what the extent of those frauds were, who was involved and to what degree, who had knowledge or was aware of the frauds occurring at Crazy Eddie, and who, if anyone, traded their Crazy Eddie stock on the strength of material, non-public information in violation of the federal securities laws. A trial without a jury was conducted before this court from September 9, 1997 to October 27, 1997. This court heard twenty-two days of testimony from fifteen witnesses, and nearly two hundred exhibits were admitted into evidence. What follows are this court’s conclusions of fact and law pursuant to Federal Rule of Civil Procedure 52. III. CONCLUSIONS OF FACT A. The Parties and Credibility Determinations (1) Sam M. Antar Defendant Sam M. Antar (“Sam M.”), a resident of West End, New Jersey, co-founded and co-owned Crazy Eddie. At the time of Crazy Eddie’s IPO in September, 1984, and until late 1987, Sam M. was the Executive Vice President and a member of the Board of Directors of Crazy Eddie. Together, Sam M. and his son Eddie built Crazy Eddie. As Sam M. testified at trial: THE WITNESS: ... Oh, before any trouble, we were the greatest combination in the world. I had an idea, and he was a fantastic executor. I can come up with beautiful ideas, but I never was able to execute them, but Eddie was able to execute them. Testimony of Sam M. Antar, Vol. 10.120. According to Sam M. and the other defendants, however, there was trouble within the tightly-knit family, with the main protagonists being Sam M. and Eddie. The defendants have attempted to persuade this court that a bitter and divisive family dispute, which began in the early 1980’s and culminated in a near-complete fracture of the family in late 1983, made it nearly impossible for the members of the Antar family, particularly Sam M. and Eddie, to cooperate with each other in devising and executing the various fraudulent schemes alleged by the SEC. This dispute, the defendants contend, made it impossible for the Antars not only to carry out the cash skimming scheme prior to the IPO, but also to cooperate in the multitude of frauds perpetrated at Crazy Eddie between 1983 and 1987. By all accounts, the relationship between Eddie and Sam M. was sound and stable during the early Crazy Eddie years of the 1970’s. By the early 1980’s, however, their relationship began to become strained as Sam M. voiced opposition to Eddie’s personal lifestyle, including his heavy drinking and indiscrete extramarital affairs. Sam M. testified at trial on this point as follows: Q. What was the nature of your relationship with Eddie Antar in 1983 before we get to New Year’s Eve? H* H* H* H* •!■ H» A. It was fair. It was all right. We got along very, very well, but something seemed to be brewing. H? H« Hi Hi * Q. Let me be more precise to you. What was the status of his marital relationship in 1983? A. That it was starting to — I would say starting to dwindle because he was running around, and I really did not go for that lifestyle because we live in a very tight-knit community. Hi H« Hi Hi Hi Hi Q. Did you tell your son what you thought? A. Oh, yes. Q. Did he welcome your views? A. No, I don’t think so. Hi Hi Hs Hi Hi Hi Q. What did he say, if you remember? A. What did he say? “I am a big boy, I am over 21, you know.” You know, I can’t tell him what to do. Testimony of Sam M. Antar, Vol. 10.108-109. Eddie, for his part, felt that Sam M. was jealous of his success and resented Sam M.’s interference in his personal affairs. The simmering feud erupted on the night of December 31,1983. On that date, Eddie’s wife, Debbie (“Debbie I”), arrived at Sam M.’s house in Brooklyn visibly upset over an argument with her husband. Apparently, Eddie had committed to celebrate New Year’s Eve with Debbie I, but subsequently broke the engagement. Debbie I learned, however, that Eddie intended to celebrate the holiday with another woman, Debbie Er-lich (“Debbie II”). Upon arriving at Sam M.’s house that evening, Debbie I advised Sam M. and his wife, Rose, that she intended to drive to Manhattan and confront her husband and his mistress. She was accompanied on this trip by Robin Antar, Mitchell’s wife, and Ellen Kuszer, Eddie’s sister and Benjamin Kuszer’s wife. Debbie I ultimately confronted Eddie and Debbie II that evening, and the near-melee that broke out between them has been referred to by the family as the “New Year’s Eve Massacre”. The next day, a visibly angry Eddie, who apparently blamed Sam M. for his marital difficulties, went to Sam M.’s house to confront him. Sam M. was not at home that day. Eddie, however, had a verbal dispute with his mother, Rose, who passed out from the stress. Sam M. apparently became so upset by Eddie’s hostile response and treatment of Rose that in early January, 1984, he suffered a heart attack. After the so-called New Year’s Eve Massacre, the defendants contend that the family rift became far more pronounced, with family members taking sides. Sam E. Antar, Eddie’s cousin, testified as to which family members sided with whom: THE COURT: And some members of the Antar family took [Debbie I’s] side, is that correct? THE WITNESS: That is correct, sir. THE COURT: And they were Sam M. Antar? THE WITNESS: That is correct, sir. THE COURT: Allen Antar? THE WITNESS: Yes. THE COURT: Who else? THE WITNESS: Mitchell Antar. THE COURT: Mitchell Antar, who else? THE WITNESS: And Ben Kuszer. Testimony of Sam E. Antar, Yol. 4.14-15. It appears that Sam E. Antar was one of the few who supported Eddie in this family dispute. This court agrees with defendants that a family feud did exist, with Eddie and Sam M. as the main protagonists. This court does not agree, however, that the feud made it impossible for members of the Antar family, including the defendants herein, to cooperate in conducting the frauds at Crazy Eddie. The evidence reveals that the intensity of the family dispute waxed and waned over time, and it was not until late 1987 that it had any significant effects on the Crazy Eddie business. Prior to that time, the family feud did not prevent the Antars from operating Crazy Eddie, engaging in other business ventures, or indeed, perpetrating the extensive frauds at the company. With respect to the relationship between Sam M. and Eddie, it does not appear to have been as fractured as the defendants would now have this court believe. For instance, after his heart attack in January, 1984, Sam M. recuperated for some time at Eddie’s house in Oakhurst, New Jersey. Indeed, on his tax return for 1984, Sam M. listed Eddie’s residence as his own “present home address.” At the time, Eddie visited Sam M. and said, “you know, we are going public, Dad, we’re going to be friends and all that. Everything is forgiven, everything is forgotten.” Deposition Testimony of Sam M. Antar, January 24,1992 at 2197-98. In fact, by May, 1984, Sam M. and Eddie were working together on Crazy Eddie’s IPO, and it appeared that the anger between them was subsiding. See Testimony of Sam E. Antar, Vol. 6.49 (“I recall sometime around when they were working together on the public offering that the anger was subsiding and that they were cooperating with one another-”). The defendants’ characterizations of the relationship between the two men notwithstanding, Eddie and Sam M. were certainly cooperating to a sufficient degree that both went on the “road show” together to promote the IPO. There was no indication on the road show of a feud between the two, see id. at Vol. 2.34, and according to Sam M., by the time of the IPO, he and Eddie “were on very nice terms,” Testimony of Sam M. Antar, Vol. 11.89-90. Sam M.’s position in this case that the New Year’s Eve Massacre represented a clean fracturing of his relationship with Eddie is belied by his own testimony given in a previous deposition, in which he testified that significant strains in their relationship did not appear until August, 1986: A. ... They were nice to me and stuff like that, and everything was hunkydory, and Eddie was very civil to Debbie and he treated her very, very well and he gave her his whole salary every week, and everything like that. Everything was very, very nice. Deposition Testimony of Sam M. Antar, January 24, 1992 at 2202. It is clear to this court that whatever strains affected the personal relationship between Eddie and Sam M., they were able for quite some time to insulate their business relationship from these tensions. As Sam M. himself testified at trial: Q. Isn’t it a fact between January and May of 1984 you had a conversation with Eddie in which Eddie said to you, in words or substance, quote: “Everything is forgiven”? A. Yeah. We had that — quite a few times we had that.... [Everything was forgiven for, let’s see, for the next couple of years, everything was forgiven. But down in the heart, it wasn’t forgiven. It was forgiven because we had to be in business. I can’t stop the business just like that, but I didn’t like what he was doing. I didn’t like his morals. Testimony of Sam M. Antar, Vol. 16.46. Thus, even if this court were to accept the defendants’ theory of a divisive family dispute between Sam M., Allen Antar, and Benjamin Kuszer, on the one hand, and Eddie, on the other, the evidence presented at trial reveals that the tensions were not so great— at least before late 1986 — that they were unable to cooperate in operating Crazy Eddie and perpetrating extensive frauds at the company. For example, Mitchell sided with Sam M. in the alleged family dispute. But Mitchell also admitted to conspiring with Eddie to commit fraud at Crazy Eddie. In his allocution, Mitchell admitted that he had participated in and was aware of the multitude of frauds perpetrated at the company. Mitchell carried out these schemes despite the defendants’ contention of a “bitter and deeply divisive” family dispute which supposedly made the level of cooperation necessary to carry out such scams impossible. Of significance is the fact that many of the frauds to which Mitchell admitted were perpetrated in 1986 and 1987, the time period when the family dispute was supposedly at its most bitter. Moreover, despite the lingering family dispute, members of the Antar family engaged in new business ventures together. For instance, on or about April 15, 1985, Sam M., Eddie, Allen Antar, Benjamin Kuszer, among others, invested together in two real estate partnerships known as Deal-Rite Realty Associates and Rising Tide Real Estate Associates. Upon close examination, there is no doubt that from the early 1980’s forward, there was a lingering source of tension between Eddie and Sam M., with various family members taking sides in the dispute. What is also clear from the evidence, however, is that the family dispute was not so deeply divisive that the family members, no matter which side each chose to take, were unable to cooperate with each other to perpetrate the frauds at Crazy Eddie from 1979 through 1987. It is evident that the familial bad blood, while always simmering just beneath the surface, did not have a truly significant impact on the business until about April, 1987. As Sam M. himself testified at trial, the “familial war broke out after [Eddie] was served with the summons by” Debbie I in April, 1987 reopening the divorce action. Testimony of Sam M. Antar, Vol. 10.122. As will be discussed later in this opinion, after April, 1987, the family dispute was a factor in the eventual end of the Antars’ run at Crazy Eddie, but even then it was not the sole factor. Indeed, the ability of the members of the Antar family to segregate their personal differences from their business and other interests is clearly exemplified by their conduct in connection with the government’s criminal prosecution for the frauds perpetrated at Crazy Eddie. With Eddie facing federal criminal charges, Sam M. was able to put their differences aside: A ... I said, look, he is my son. I don’t want you to think that I am that hard or anything, but all he had to do — all he has to do is pick up the phone and say Ma, Pa, help me. He is my son, still my flesh and blood. Testimony of Sam M. Antar, Vol. 15.42. Sam M. forgave Eddie and paid for his legal bills, which ultimately came to between $1.5 million and $1.7 million. Id. at 16.38. Time and again, the closely knit Antar family, and particularly Sam M. and Eddie, was able to put aside their personal differences for the greater common good, whether that be operating the Crazy Eddie business, joining forces in other business ventures, defending against federal criminal prosecutions, or getting rich off Crazy Eddie stock. Sam M. testified for six days at trial. Over that time, this court obtained a rather clear sense of him as hardworking, ambitious, and highly intelligent. I also found him to be a skillful and inveterate liar. Sam M.’s evident strategy in this and related litigation appears to have been this: concede not one inch and admit to nothing; when confronted with prior conflicting testimony or evidence, be evasive; if boxed into an inescapable position, simply admit you lied then but now you are telling the truth. The record in this case is replete with instances where Sam M. has given inconsistent, contradictory testimony. Sam M.’s credibility, or lack thereof, becomes quite evident upon a review of his testimony concerning his role at Crazy Eddie. In a deposition taken in 1992 in connection with a civil matter then-pending in the Eastern District of New York, entitled In re Crazy Eddie, Inc. Securities Litigation, Civ. No. 87-0033 (E.D.N.Y.), Sam M. provided what he admitted at trial in this case to have been false testimony concerning his secret bank accounts in Israel. Sam M. lied when he stated under oath that he had only one account at Bank Leumi in Israel: Q. Sii', have you ever had any bank accounts in Israel? A. I have had bank accounts in Israel. Q. One or more than one? A. One. Q. Are you sure? A. Almost sure. Q. What does that mean? A. I really don’t know.... Q. Didn’t you open more than one bank account at Bank Leumi in Tel Aviv? A. Not that I know of. Q. What’s your recollection as to how many bank accounts you opened at Bank Leumi in Tel Aviv? A. One account. Deposition Testimony of Sam M. Antar, January 22, 1992 at 1875-76. In fact, and as will be discussed in more detail later in this opinion, Sam M. had opened three accounts at Bank Leumi in Israel. Sam M.’s testimony in the securities litigation concerning the secret Israeli accounts was continually molded and adapted depending upon what information was already available to the opposing side: Q. What was it that caused you to change your testimony? A. Oh, what caused me to change my testimony was the amount of information that ... Mr. Sirota [plaintiffs counsel in In re Crazy Eddie, Inc. Securities Litigation ], who was cooperating with you and with Solomon Antar, and because that information could have never been known unless Solomon Antar had to tell you, because nobody knew, not even Sam E., not even Uncle Eddy— Testimony of Sam M. Antar, Vol. 15.13. Upon questioning by this court, Sam M. further testified: A. ... Your Honor, I hate to say this, but the reason that I am here right now is because of the man, Solomon Antar, who is — who was the attorney of the corporation, who was so devious and so — I cannot find the words to explain what happened. * $ ‡ ‡ ‡ :¡: — in essence, once he told them, I had no other alternative but to tell the truth. Id. at Vol. 15.15. Sam M. repeatedly made clear to this court that he told the “truth” only when he was backed into a corner: A. ... I remember the main thing is this: That I was deposed; that I got the deposition back; that I realized that they had all of the information — they had all of the goods on me, and I had to do something. So now, the best thing to do is either try to lie your way out of it, or tell the truth about it, so I decided I have to tell the truth about it. There is no way out, and that is exactly what I did. ¡I» But when I found out that I was dead— dead in the woods, let’s use that expression, that they found out about my — they had all of the information, they knew everything that was going on, what I had in Israel, there was no sense for me to kid around anymore, so I had to come back and tell the truth the best that I could remember. Id. at Vol. 15.47-48; Vol. 16.9. Sam M. also gave conflicting testimony concerning the opening of his second account with Bank Leumi in Israel. In June, 1983, Sam M. withdrew approximately $2.8 million from his existing account and deposited the money into a second account at the bank. At his deposition in January, 1992, however, he denied that he ever made the transfers in the first place and stated that there was no reason for him to make such transfers. Deposition Testimony of Sam M. Antar, January 24, 1992 at 2179-80. Then in a May, 1992 deposition, Sam M. testified that he made the transfers — which he finally admitted — because Eddie had asked him to: Q. What was there about those transfers that jogged your memory? A. Yes. My wife and I were going to Israel and before we left— s|i * * * :!« * Before we left we saw Eddie. Eddie said, when you get to Israel, transfer some money from the account to you and my mother because of problems Eddie has been having with his wife Debbie, that that money should belong to me. Deposition Testimony of Sam M. Antar, May 21, 1992 at 57-58. Yet, at trial, Sam M. denied that he made the transfers at Eddie’s request and testified unequivocally that Eddie “certainly did not” ask him to make the transfers. Testimony of Sam M. Antar, Vol. 16.10. At trial, Sam M. also claimed that he never signed a document authorizing the transfer of any money at Bank Leumi: “As a matter of fact, if you look at all your papers, I never signed a document transferring any money at all. Solomon and Eddie did, but I didn’t.” Testimony of Sam M. Antar, Vol. 14.56. Upon questioning by this court, Sam M. immediately retracted this blanket statement: THE COURT: Didn’t you transfer money out of one of the accounts which— THE WITNESS: In 1993? 1983? No, 1983, right. THE COURT: Well, I thought you just said you didn’t transfer any money out of any accounts. Did you or didn’t you? THE WITNESS: I didn’t transfer any — at that time only that one time. Id. On the following day of trial, Sam M. conceded that he made two more transfers from his bank accounts in Israel: A. Yes. Matter of fact, I made two transfers. Yes. That is the transfer that Mr. Shiv did — and then the transferring was transferring 12245 into 13459. Id. at Vol. 15.7. Sam M. also provided conflicting testimony concerning his son Allen Antar. At trial Sam M. testified that he fired Allen Antar from a business called “Sound Machine,” in which he had a one-half ownership interest. Sam M. testified, “I threw him out myself,” and on the question of whether Allen Antar left Sound Machine on good terms, he stated flatly, “no way.” Testimony of Sam M. An-tar, Vol. 10.102-103; Vol. 13.3. At his January, 1992 deposition, however, Sam M. provided a very different description: Q. Do you recall a time when you threw your son Allen out of Sound Machine? A, I didn’t throw him out. Q. Do you recall when he left Sound Machine? A. Yes. Q. When was that? A. I don’t remember. Q. Did he leave on good terms? A. Yes. Deposition Testimony of Sam M. Antar, January 23, 1992 at 2015. At trial, Sam M. attempted to explain the inconsistency: “If I lied in the past, when I talk about — you talk about my son, I maybe like to cover certain things up, you know what I mean?” Testimony of Sam M. Antar, Vol. 13.35. Unfortunately, this court does know what Sam M. means. It is evident that Sam M. provided inconsistent, intentionally erroneous information and testimony to protect his interests and the interests of his family members who have remained loyal to him. Sam M.’s credibility may be summed up nicely with his own testimony provided at trial: A. ... You are 1000 percent right, you can show me 29 books of depositions. I did lie, I did lie, but I am not lying now. ****** So I lied the next day, and I lied the next day and I lied the next day, but eventually I changed my testimony, and today I am telling you the truth. H* 'i ^ ^ í I thought I just answered it yeah. How many times do I hear it? I lied, I lied, I lied, I lied, I lied, I lied, but then I rescinded the lies and told them the truth. That is all I did. Testimony of Sam M. Antar, Vol. 11.114; Vol. 11.119; Vol. 11.121. Simply stated, this court cannot, as a general matter, accept Sam M.’s most recent pronouncements of his honesty. (2) Allen Antar Defendant Allen Antar (“Allen”), a resident of Oakhurst, New Jersey, is one of Sam M.’s three sons, and the brother of Eddie and Mitchell. From 1986 to 1987, Allen was the Director of Corporate Sales at Crazy Eddie. Prior to that time, Allen held various other positions in the company, including salesman and manager. Allen testified for three days at trial. From his testimony as well as other evidence presented in this case, it is clear to this court that in relation to his brothers and his father, Allen was cut from a slightly different cloth. Indeed, the picture presented of Allen is of a man not quite as ambitious or driven as his brothers or father. The evidence shows that Allen was not as instrumental as Eddie or his father in developing and implementing the schemes perpetrated at Crazy Eddie, nor was he as intricately involved in carrying out those schemes as Mitchell. But as a member of the family, Allen occupied a position of trust, and thus, he was in the unique position of not only being aware of what was happening at the company, but also sharing in the wealth. At trial, however, Allen attempted to paint a wholly different picture. He attempted to show that because of various personal tensions between him and the family, he could not have been aware of, let alone involved in, the fraudulent schemes perpetrated at the company. Allen contends that in or about 1975, he was essentially banished form the family when he left his wife for another woman. For several years thereafter, he was persona non grata as far as his family was concerned. Allen ultimately returned to his wife and began working at Crazy Eddie in 1979. Allen contends that although back with the family, he was never brought into the inner circle of the family’s business at Crazy Eddie, and thus, never participated in or was aware of the fraudulent schemes at Crazy Eddie. He contends that he was employed at the company as a low level salesman and a store manager until 1985, when he was fired by Eddie. When he returned to the company in 1986, he was given only the “nominal” position of overseeing the company’s “modest” wholesale operations. In addition to this ostracism from his family for his personal life, Allen also took Sam M.’s side after the New Year’s Even Massacre. He contends that this further deepened the rift between him and Eddie, the main architect of the frauds at Crazy Eddie. He was therefore not included in the frauds perpetrated at the company. The evidence presented in this ease reveals that Allen has overstated the extent and severity of the tension between him and his family, particularly Eddie. What must be remembered is that the Antars’ business activities were founded on their strong family bond. Thus, the interrelationship of members of the Antar family, as far as their business was concerned, was far more subtle, nuanced, and complex than what would ordinarily be found at other companies where business and family were not inextricably intertwined. Whatever transgressions were made by Allen, the fact remained that he was a member of the family, and thus, could be trusted like no outsider could ever be. This was particularly important as Crazy Eddie became more successful and opened new stores throughout the tri-state area. The sheer breadth of Crazy Eddie’s business operations necessitated Allen’s involvement, for the Antar family would not and could not easily trust anybody outside the family. That was simply not their makeup. It is true that Allen did take Sam M.’s side after the New Year’s Eve Massacre. But as with Sam M., this fact did not preclude his involvement in or his awareness of the frauds engineered by Eddie, for the Antars could and did set aside their personal differences for the good of the business. Indeed, the tension described by Allen is belied by the fact that Eddie approved a large raise for him in 1985. Allen’s 1984 salary from Crazy Eddie, as reported to the Internal Revenue Service, was $21,000. In 1985, Eddie approved Allen’s salary of $176,000, plus $295,-558 from what Allen claims was the exercise of Crazy Eddie stock options. As for his contention that he was fired from Crazy Eddie in 1985 after a heated disagreement with Eddie, there is a question as to whether this constituted a formal termination or simply a period when he stayed away from Eddie. There is, for example, evidence to suggest that he continued to get paid during this time, and that he attended a consumer electronics show in Las Vegas, Nevada along with other Crazy Eddie employees. Whatever the true nature of this episode stemming from his disagreement with Eddie, by 1986, Allen had become the Director of Corporate Sales at the company. This was not simply a “nominal” position as Allen would have this court believe. As the discussion above suggests, Allen’s apparent defense strategy was to downplay his role in the family’s business. For instance, at trial, Allen attempted to conceal his use of luxury cars paid for by Crazy Eddie: Q. By the way, in this trial there has been testimony that Crazy Eddie furnished you with a luxury car as an employee of Crazy Eddie. Is that so? A. No. ^ 4* Q. Now, isn’t it a fact, Mr. Antar, that Crazy Eddie provided you with a Jaguar? A. No, sir. Q. Well, did you drive a Jaguar? A. Yes, sir. Q. Where did you get it? A. I leased it myself. Testimony of Allen Antar, Vol. 18.8; Vol. 19.38-39. In a 1992 deposition, however, Allen provided the following testimony: Q. On an income of $21,000 a year, how did you come to be driving a Jaguar? * * * * * A. I think the company paid for my ear at that time. I guess so. Deposition Testimony of Allen Antar, January 21,1992 at 158. Under cross-examination at trial, Allen also conceded that he was driven to and from work in a chauffeur-driven limousine “a couple of times.” Testimony of Allen Antar, Vol. 19.42. When pressed, Allen stated that he rode in the limousine for “maybe one year,” but not a couple of years. Id. at Vol. 19.43. In his January, 1992 deposition, however, Allen testified that he was driven around in Crazy Eddie’s limousine, “I would say a couple of years.” Deposition Testimony of Allen Antar, January 22, 1992 at 218. Allen further testified at trial that he never received any off-the-books compensation while at Crazy Eddie. He claimed that his entire compensation in 1984 when he worked as a store manager, was a weekly paycheck of $300 or $400, and an annual salary of $21,000. Yet he drove a Jaguar (which he may or may not have leased himself), and was married with three children, two of whom were in private school with a tuition of approximately $25,000. Moreover, on a purported $21,000 annual salary, Allen was also able to take a three-day trip to Las Vegas where he proceeded to lose $19,000 playing keno. Allen’s denial of off-the-books compensation is unequivocal, and that is his right. The facts, however, suggest otherwise. (3) Benjamin Kuszer Defendant Benjamin Kuszer (“Kuszer”), a resident of Brooklyn, New York, is Sam M.’s son-in-law. Kuszer owned and operated Be-nel Distributors, Inc. (“Benel Distributors”), an outfit which sold records and tapes through outlets located inside Crazy Eddie stores under the trade name “Crazy Eddie Record and Tape Asylum”. All of its record stores were located inside Crazy Eddie stores, and its corporate offices were located within Crazy Eddie’s offices, both in Brooklyn and later in Edison, New Jersey. Benel Distributors paid a portion of the rent and gave Crazy Eddie a percentage of its record sales. Kuszer’s operation of Benel Distributors was symbolic of his position in the Antar family. Benel Distributors was technically distinct from, yet inextricably intertwined with, Crazy Eddie. In a similar vein, Kuszer was technically distinct from the Antar family, as he became a part of the family only through marriage. Yet, the evidence shows that in substance, Kuszer was considered a trusted member of the family. He was, for all intents and purposes, an Antar, and he was permitted to participate in and profit from the business. Kuszer, like Sam M. and Allen, also contends that his relationship with Eddie nosedived after the New Year’s Eve Massacre. Indeed, Kuszer testified that Eddie vowed to “destroy” him for his and his wife’s involvement in that episode. Based on this personal enmity, Kuszer contends that he could not have cooperated with Eddie to carry out the schemes. As with Sam M. and Allen, this court finds that any tension between Eddie and Kuszer was not such that it preeluded the latter’s participation in or awareness of the fi*auds perpetrated at Crazy Eddie. There is evidence that in September, 1984, Eddie paid off the debts of Educators International, Inc., a company owned entirely by Kuszer. Educators International provided recruiting and other services to Eddie’s for-profit medical school in the Caribbean, the University of St. Lucia School of Medicine. Although Kuszer assumed that Eddie was the real owner of the company, the fact remained that Kuszer owned all of the company’s stock. As of May 31,1984, Educators International and the medical school owed Crazy Eddie approximately $1 million. Although Eddie could have left Kuszer liable for Educators International’s debt, Eddie repaid all of the company’s debt personally out of his proceeds from Crazy Eddie’s IPO, almost nine months after the supposed beginning of the family feud. Kuszer testified for two days at trial. He came across to this court as a mild-mannered person who worked hard at gaining the trust and respect of the Antars. To gain that trust, Kuszer did what he was told, and he was willing to break the law. As will be discussed further below, Kuszer made two trips to Israel at Sam M.’s request to deposit cash. In 1980, Kuszer transported $600,000 to Israel and deposited the money into Sam M.’s account at Bank Leumi. In 1983, Kuszer deposited $1 million into the Israeli account. He did so while knowing that he was required to report to United States Customs the fact that he was carrying more than $10,000 in cash. He was willing to break the law “because my father-in-law asked me to.” Testimony of Benjamin Kuszer, Vol. 17.36. Under questioning by the court, Kuszer admitted that he would act in the very same manner today: THE COURT: If your father-in-law asked you to violate the law in any other way, would you do that? THE WITNESS: No, sir. THE COURT: Why the change of heart? * ‡ :K # ¿k THE WITNESS: Well, the best answer I could give you, sir, if this was his money and I was just carrying his money. I didn’t look at it as an active part of doing something that I shouldn’t have. Regrettably that was probably where I was coming from. THE COURT: If your father-in-law asked you to keep something to yourself in transactions involving himself with respect to his money, would you act.in the very same way as you did on those two occasions when you transported money surreptitiously to Israel? THE WITNESS: If it was his money, yes, sir. Id. at Vol. 17.36-37. The trust placed in Kuszer by the Antars was well-founded, as his testimony at trial and in prior depositions revealed that he has attempted to protect other members of the Antar family. For instance, when Kuszer traveled to Israel in 1980 to deposit the $600,000 into the account controlled by Sam M. at Bank Leumi in Israel, he was accompanied by Mitchell and Solomon Antar. At his deposition (which occurred shortly before Mitchell was to be sentenced), and again at trial, Kuszer testified that he did not know whether Mitchell or Solomon Antar knew he was carrying $600,000 and that he could not recall any discussion with them concerning the money or where it was to be deposited. It is implausible, however, that Mitchell and Solomon Antar did not know Kuszer was transporting $600,000 on their trip to Israel. The money belonged to and was being deposited at the request of Sam M., Mitchell’s father, who paid for the trip. Mitchell was also a key participant in the Crazy Eddie frauds. It is equally implausible that Kuszer would have concealed the $600,000 from Solomon Antar, who himself made two cash deposits totaling $1 million into the very same account. Kuszer gave similarly implausible and evasive testimony about his second trip to Israel in May, 1983, when he deposited $1 million in cash. Kuszer was accompanied on this trip again by Mitchell. At his March, 1994 deposition, Kuszer testified that he did not know whether Mitchell knew that he was transporting $1 million in cash. At trial, Kuszer backtracked slightly and testified that Mitchell “might have helped him carry the $1 million”: Q. Now, on your million-dollar trip, Mr. Kuszer, only Mitchell Antar went with you, isn’t that true? A. Yes, sir. Q. And the million dollars of cash that you were carrying, that wouldn’t fit all in one suitcase, would it? A. I don’t recall. Q. Isn’t it a fact that Mitchell helped you carry the million dollars in cash on that trip? A. I don’t know if it was a fact or not, but he might have. Q. He might have? A. Yes. Testimony of Benjamin Kuszer, Vol. 17.38. Kuszer was also evasive about the cash skimming at Crazy Eddie. At trial, Kuszer denied that he was aware that cash was being skimmed at Crazy Eddie from 1974 to 1978. However, as his co-defendant Sam M. testified, Kuszer “must have known that we did skim money prior to ’76.” Testimony of Sam M. Antar, Vol. 11.103. Unlike Allen, who gained trust within the family because of birthright, Kuszer earned his trust because he was hard working and reliable. Ultimately, this trust placed in him by the Antars may not have been in Kuszer’s best interest. (4) The Relief Defendants Relief defendants Rori Antar, Sam A. An-tar, and Michelle Antar are Allen’s children. Relief defendants Adam Kuszer, Sam Kuszer, and Simon Kuszer are Kuszer’s children. All are the grandchildren of Sam M. (hereinafter referred collectively as “Relief Defendants”). It is undisputed that the Relief Defendants received the monetary proceeds from the sale of Crazy Eddie common stock sold on their behalf by Eddie Antar in March, 1985. The Relief Defendants neither participated in nor were aware of the frauds perpetrated at Crazy Eddie. Their only connection to this case is based on the sale of stock held on their behalf by Eddie pursuant to the Uniform Gifts to Minors Act. (5) Other Key Players While not parties to this action, certain other individuals, who played varying roles in both Crazy Eddie and the allegedly fraudulently schemes perpetrated in that organization, must be mentioned. Eddy Antar (“Uncle Eddy”) was Sam M.’s brother. At the time of Crazy Eddie’s IPO, Uncle Eddy was a member of the company’s Board of Directors and Treasurer. Uncle Eddy received a grant of immunity from prosecution pursuant to an agreement with the United States Attorney for the District of New Jersey. While I found Uncle Eddy to have been a generally credible witness at trial, I also had the impression that he was not as closely involved in the operations at Crazy Eddie during the relevant time period as some of the others. First, while Uncle Eddy admitted that he, Sam M., and others skimmed cash from Crazy Eddie in the 1970’s, his testimony reveals that he cut back on his participation sometime around 1978, when he suffered a heart attack. Second, Uncle Eddy also had another business in Bridgeport, Connecticut, to which he attended, particularly during the busy Christmas season. As will be discussed further below, much of the cash skimming at Crazy Eddie occurred during the Christmas season. And third, Uncle Eddy’s testimony was limited specifically to cash skimming prior to the company’s IPO in 1984. He did not testify as to the various frauds which allegedly took place after 1984. In sum, I found Uncle Eddy to be a generally honest man, who did his job as he was told, primarily by Eddie and Sam M., and kept himself out of much of the personal tensions within the family. That being said, it is also clear to this court that Uncle Eddy was simply not a major player in the numerous schemes perpetrated at Crazy Eddie, and his testimony must be assessed accordingly. Sam E. Antar (“Sam E.”), Uncle Eddy’s son and Sam M.’s nephew, testified extensively at trial about the roles played by Sam M., Allen, and Kuszer in the alleged fraudulent schemes, as well as their awareness thereof, at Crazy Eddie. Growing up, Sam E. lived approximately one mile from Sam M.’s house and was close to all three of Sam M.’s sons. When he was twelve years old, Sam M. gave Sam E. his first job. Sam M. and Eddie also provided Sam E. with financial support to attend college, and in 1979, Sam E. graduated from Baruch College with a bachelor’s degree in business administration and public accounting. He then became a Certified Public Accountant. Sam E. began working full-time at Crazy Eddie in June, 1984 as comptroller and head accountant. He was then promoted to Chief Financial Officer and Executive Vice President in August, 1986, and was elected to the Board of Directors in December, 1986. His employment at Crazy Eddie was terminated on November 6,1987. In August, 1991, Sam E. entered into an agreement with the United States Attorney to plead guilty to a criminal information in connection with his activities at Crazy Eddie. He subsequently pled guilty to charges of conspiracy to commit securities fraud, conspiracy to commit mail fraud, and obstruction of justice. He was sentenced to six months home detention, 1,200 hours of community service, and fined $10,000. Sam E. completed his sentence, and in June, 1997, completed his period of supervised release. As part of his plea agreement, Sam E. agreed to testify about the allegedly fraudulent activities perpetrated at Crazy Eddie and to cooperate with the SEC in its investigation and prosecution of this and other cases involving Crazy Eddie. As noted above, Sam E. testified extensively at trial, and as far as live testimonial evidence is concerned, the SEC relied heavily on Sam E. He is not, however, without his credibility problems. He has, for instance, admitted to lying to the SEC in depositions. Moreover, in 1987, when Eddie was locked in a bitter matrimonial dispute with his first wife, he and Sam E. swore out a complaint against Lillian Rosen, Eddie’s mother-in-law, charging her with stealing approximately $7,500 from Crazy Eddie. In testifying before the grand jury investigating the charge, Sam E. intentionally misled the panel upon Eddie’s instruction. Not to be overlooked in assessing Sam E.’s credibility is the fact that he was a major player in developing and carrying out the web of fraudulent activities at Crazy Eddie. Thus, this court is not blind to Sam E.’s checkered history in this affair. Yet, this court was also able to assess Sam E.’s demeanor and credibility, as it pertains to this case, over the seven days he testified at trial. I found him to be intelligent and articulate, and for the most part, he provided a coherent explanation of what occurred at Crazy Eddie. His evident intelligence allowed him to grasp what was occurring at the company even at a relatively young age. And by the time he had finished college, Sam E. was armed with sufficient skills in both business and accounting to rise swiftly through the Crazy Eddie hierarchy once he began to work there. There is no doubt that Sam E. was right in the thick of things as far as the frauds perpetrated at Crazy Eddie are concerned. While this may arguably be germane in assessing his credibility, it also reveals that Sam E. was in a position to know what was happening and who was involved. Such is the nature of conspiracies. In short, I found Sam E.’s testimony provided at trial to have been truthful. As noted previously, Eddie and Mitchell pled guilty in the criminal action in 1996 and are currently incarcerated. They were not called to testify in this case. The defendants make much of this fact, as well as the fact that the SEC did not call many other potential witnesses who, based on their participation in various phases of the fraudulent activities at Crazy Eddie, presumably possessed knowledge of relevant facts. The defendants therefore ask this court to draw the conclusion that by failing to call these witnesses, the SEC knew or strongly suspected that these individuals would not implicate Sam M., Allen, or Kuszer in the frauds. This court will not draw such an adverse inference against the SEC. I note that the defendants themselves did not call these witnesses, even though they had the same subpoena power to compel their testimony. Just as this court would not infer from this that these witnesses, if called by the defendants, would have implicated them in these frauds, I cannot draw the opposite conclusion. The SEC’s case must stand or fall on the strength or weakness of the evidence actually presented by them. This court will not engage in speculative interpretation of the SEC’s trial strategy to divine what a potential witness’s testimony might have been and how that presumed evidence might have impacted on this case. (6) Sales of Stock At issue in this case are allegations that the defendants sold Crazy Eddie stock while in possession of material, nonpublic information in violation of the federal insider trading laws. The stock transactions at issue in this case are provided below. Sam M. Date Number of Shares Price/Share Gross Proceeds Sept., 1984(IPO) March, 1985 Oct., 1985 Feb., 1986 March, 1986 Sept., 1986 July, 1987 300,000 150,000 450,000 60,000 200,000 25,000 150.000 $ 8.00 $21.00 $12.00 $26.00 $26,375 $33.75 $ 6.02 $2.4 million 83.15 million 85.4 million 81.56 million $5,275 million $843,750 $903.125 TOTALS 1,335,000 $19,531,875 Allen Date Number of Shares Price/Share Gross Proceeds March, 1985 Feb., 1986 Dec., 1986 50,000 20,500 200,000 $21.00 $22.00 $12.00 $1.05 million $451,000 $2.4 million TOTALS 270,500 $3,901,000 Kuszer Date Number of Shares Price/Share Gross Proceeds March, 1985 50,000 $21.00 $1.05 million Relief Defendants Date Number of Shares Price/Share Gross Proceeds March, 1985 150,000 $21.00 $3.15 million B. Crazy Eddie: Background Crazy Eddie, which had become a major retail consumer electronics outfit in the tristate area, had relatively modest beginnings. In 1969, Sam M., Eddie, and Aaron Gindi, Sam M.’s nephew, opened “Sights and Sounds,” a retail audio equipment store, on Kings Highway in Brooklyn, New York. The business was incorporated as ERS Electronics, Inc. Eddie eventually bought out Aaron Gindi’s interest in Sights and Sounds and thereby acquired a two-thirds interest in the business, with Sam M. owning the remaining one-third. There is some dispute as to how well the business performed. While all parties acknowledge that business at Sights and Sounds was at first marginal, they disagree as to whether it continued to be marginal throughout its life. Sam M. testified at trial that the business did grow when it began to sell merchandise at prices below that charged by competitors and when it began to advertise. The SEC disputes this. What is clear through Sam M.’s own testimony, however, is that by the end of 1972, Sights and Sounds became unable to pay back its creditors — owing, for example, $400,000 to trade creditors alone — and by December, 1972, had ceased operations. Sam M. decided then to take advantage of the bankruptcy laws. He testified at his deposition that he had “read the bankruptcy laws” and “found the greatest loophole in the world.” Deposition Testimony of Sam M. Antar, November 22, 1988 at 33. This “loophole” was that “any creditor that gets paid within a period of 120 days is considered a preferential credit.” Id. Thus, “if I went bankrupt today, anybody that I paid money in the last four months now has to throw it back to the pot.” Testimony of Sam. M. Antar, Vol. 13.51. Accordingly, Sam M. formed a new corporation, “Ultralinear Sound Corporation,” to succeed ERS Electronics and operate the Sights and Sounds business. In 1974, Sights and Sounds changed its name and began doing business as “Crazy Eddie.” The business expanded from one store in 1973 to three stores in 1976. The second Crazy Eddie store opened in Syosset, New York, and the third opened in Manhattan in 1975. In 1975, Crazy Eddie, Inc., was incorporated to be the parent company of the three Crazy Eddie stores. In 1976, a fourth Crazy Eddie store opened on Fordham Road in the Bronx, New York. The opening of the Fordham Road store was simply the first in a period of rapid expansion throughout the tri-state region. By 1984, there were thirteen Crazy Eddie stores scattered throughout New York, New Jersey, and Connecticut. (1) Cash Skimming: The Early Years Rapid expansion was not the only business strategy carried out by the Antars. As early as 1971, Sam M. and Eddie began skimming cash from Sights and Sounds. Sam E. testified at trial that Sam M. and Eddie discussed “that some money was put aside for them that was not going to be reported to the Government; that would not be deposited in the store’s receipts for that day.” Testimony of Sam E. Antar, Vol. 1.73,1.75. He also testified that in accordance with their interests in the business, Eddie and Sam M. received two-thirds and one-thirds, respectively, of the skimmed cash. This cash was used for personal use and to pay employees “off the books” in cash. In 1974, Sam M. hired Uncle Eddy to work at Sights and Sounds. His duties were to receive daily store receipts, make deposits, pay creditors, handle the payroll, and maintain the company’s books. These books included records of cash skimmed to pay employees, enrich various members of the Antar elan, and avoid paying taxes. For the first few months on the job, Uncle Eddy worked out of Sam M.’s house in Brooklyn, where he would receive the day’s receipts — cheeks, charges, and cash — from Sights and Sounds. These receipts were delivered by Kuszer, Mitchell, or Eddie. Based upon the instructions given to him by Sam M. or Eddie, Uncle Eddy would then deposit only as much money as was needed to cover any outstanding cheeks. He used a portion of the remaining cash for payroll, which in part, was paid out in cash. The rest of the cash would then be placed in a file cabinet in Sam M.’s house. Uncle Eddy testified that in 1974, he was skimming between $5,000 and $10,000 a week. Uncle Eddy understood that cash was held back and not deposited to avoid paying taxes. When Uncle Eddy was away, the responsibility for maintaining the books was given to Kuszer. The cash-skimming proc