Remember Crazy Eddie, the electronics-store king who concocted one of the biggest public company frauds of the 1980s? Eddie Antar ended up in prison, but his cousin and onetime chief financial officer, Sam E. Antar, today advises federal and state law enforcement agencies about white-collar crime and trains them to identify and catch crooks.

Often, the former CPA refers cases as an independent whistle-blower and teaches about white-collar crime for professional organizations, businesses, and colleges. And, wow, did he have some eye-opening advice for investors at last week's Rider University 2012 Fraud Conference at the leafy Lawrenceville, N.J., campus.

Antar spoke about how investors can spot the red flags of fraud before they hand over their money by buying shares in public companies — instead of becoming victim to them afterward. No amount of auditing by Big Four accounting firms can protect investors from a white-collar criminal, he added.

"The plain truth is that the accounting profession today, whether in the role of external auditor or internal auditor and accountant, does not have the sufficient education, training, skills, and experience necessary to match wits with criminals of my former caliber," he told the audience. Antar runs a blog called, where he talks about his life as a former accountant and convicted felon. (Sam Antar cooperated with investigators and thus did not serve time in prison.)

In order to find fraud, investors have to spot patterns of inconsistencies in a company's public disclosures, such as those found in mandated Securities and Exchange Commission filings, earnings, conference calls, media interviews, trade journals, and even Internet forums.

Sam Antar had some helpful rules for spotting potential fraud in public companies: •Study SEC filings yourself. External auditors, audit committees, and Wall Street analysts cannot protect you from most fraud. Analysts often do not ask the important questions and are too quick to accept management's representations. •Read the footnotes first. Tiny things can be huge. In the Crazy Eddie fraud, the change of a single word (from "purchase discounts and trade allowances are recognized when received" to "recognized when earned") allowed Sam Antar, as chief financial officer, to inflate the company's earnings in fiscal year 1987 by about $20 million. •Watch for inconsistencies. If the CEO tells the media that "we are profitable," make sure the figures in the regulatory filings, such as the Form 10-Q, back up the statement. •Always cross-check disclosures. Compare the "Management Discussion & Analysis" section in the current report with MD&As in past 10-Qs. Look for any changes in disclosure language.

Sound like too much work? "If you don't have the time or expertise to do the above, don't buy individual stocks. Stick with index funds," he advised.

Investors need to be aware that fraudsters build a sense of false integrity to gain the trust of their victims. They even showcase their good deeds, such as giving money to needy causes, in order to help build a public perception of integrity. "For example, as the criminal CFO of Crazy Eddie, I walked old ladies across the street and gave huge sums of money to charity, while having no empathy whatsoever for the victims of my crimes," he said.

"White-collar criminals measure their effectiveness by the comfort level of their victims. Those false perceptions of integrity that criminals build around themselves help to mask their criminal intents by increasing the comfort level of their victims, and corroding skepticism of the criminal's actions," he added.

New book on ETFs

Trading with exchange-traded funds is more complicated than ever. There are roughly 1,400 of these funds out there, many leveraged or for sophisticated investors only. A local money manager, David Kotok, chairman and chief investment officer of Cumberland Advisors, just authored From Bear to Bull with ETFs, a Kindle best-seller in the investment arena. If you want to hear the opinion of a portfolio manager on the pros and cons of investing through ETFs, this can help. Available in paperback or in e-book.

Erin Arvedlund is a finance reporter in Philadelphia. Contact her at 646-797-0759 or Read more of her columns at