Should I be scared to buy Klipsch online?

[Brian King]

Found out CrazyEddie.com is selling some of the Klipsch line. For price comparison, I bought a KSW-12 at the local dealer for $400+. Crazy Eddie has it for $289. Is CrazyEddie a certified dealer? Here's a quote from his site :

Crazy Eddie is rated a CNET "Certified Merchant"

Check him out:

http://store.yahoo.com/crazyeddieonline/audio-speakers.html

------------------

Brian King

----------------------

Yamaha RX-V596

Klipsch SF-2 (mains)

Klipsch SC-1 (Center)

Klipsch KSB-1.1 (classic rears)

Klipsch KSW-12

Monster Cable THX Certified

Pioneer DV-333 CD/DVD Player

Sanyo VCR

35" Sanyo Direct View TV

[t-man]

I haven't heard too many good things about this merchant. No personal experience though.

T-man

------------------

KG 5.5 (mains)

KG 2.2v (center)

KG 1 (rears)

KSW-12 (sub)

Denon AVR 681/1601

Toshiba SD-3109 DVD

Kenwood LD Player

Sony CD changer

Sony 27" Trinitron

Sony PLX I

[dougdrake]

If this is the same Crazy Eddy I'm familiar with, they've been around for a long time in the New York area. I still remember his commercials from when I lived there. However, searching the Klipsch dealer locator using the zip code listed on CE's web site for their business address does not yield their name as an authorized dealer. The Klipsch guys can verify that -- call them at 1-800-KLIPSCH or wait for PhilH to post here. They may be a gray market dealer, buying excess inventory from authorized dealers. If so, you probably do not receive factory warranty -- possibly their own warranty coverage. That may not matter to you if the savings are large enough. Everyone has their own pain threshold!

Also, Klipsch has a policy with their dealers that pretty much precludes generic Internet sales. Dealers must be delivering directly to the customer, using their own trucks, which is pretty unlikely outside a 150 miles radius or so.

Doug

[edster00]

HI,

Being cnet "certifed" does not mean "Klipsch Authorized". Cnet just gives the rating to those dealers who meet certain requirements set by cnet.

As to warranty issues etc., you would have to check with Klipsch. I bought a subwoofer last year from J & R Audio (who at that time was a Klipsch Authorized dealer and Klipsch did honor the warranty. Klipsch policies have changed since then.

------------------

Ed W

[Ray Garrison]

N0, they are NOT authorized Klipsch dealers... check under this address:

Crazy Eddie

970B New Brunswick Avenue

Rahway, NJ 07065

in the dealer locator and you won't find anything.

And now, just for the curious...

In re CRAZY EDDIE, INC., Mitchell Audio, Inc., et al., Debtors.

CRAZY EDDIE, INC., as Debtor and Debtor-in-Possession Plaintiff,

v.

Eddie ANTAR, Sam E. Antar, Sam Antar, Solomon E. Antar, Allen Antar, Isaac

Kairey, Eddy Antar, Mitchell Antar, Edmond Levy, David V. Panoff, Steven

Pasquariello, James H. Scott, Jr., William Saltzman, Carl Zimel, David Pardo,

Deborah Rosen Antar, Simone Antar, Nicole Antar, Danielle Antar, Gabrielle

Antar, Noelle Antar, and Deborah Ehrlich Antar, Defendants.

Bankruptcy No. 89B11313-11457(TLB).

Adversary Proceeding No. 91-5731A (FGC).

United States Bankruptcy Court, S.D. New York.

Dec. 17, 1992.

F.D. Berkon of Leader & Berkon, New York City, for Eddy Antar, Solomon E. Antar, Edmond Levy, Steve Pasquariello, William Saltzman and Carl Zimel ("Eddy Antar et al.").

J.P. Marshall and R Ehrenbard of Kelley Drye & Warren, New York City, for James H. Scott Jr. ("Scott").

S.J. Reed of Kraft & McManimon, Newark, NJ, for David Pardo ("Pardo").

S.L. Dreyfuss of Hellring, Lindeman, Goldstein & Siegal, Newark, NJ, for Deborah Rosen Antar ("Wife 1"). Simone Antar, Nicole Antar, Danielle Antar, Gabrielle Antar and Noelle Antar (the "Children").

H.R. Hawkins of Cadwalder, Wickersham & Taft, New York City, for Crazy Eddie, Inc. ("CEI").

MEMORANDUM OF DECISION ON DEFENDANTS' MOTIONS TO DISMISS AND FOR SUMMARY

JUDGMENT

FRANCIS G. CONRAD, Bankruptcy Judge .

FN* Sitting by Special Designation.

*1 This matter comes before us on various motions for summary judgment, F.R.Civ.P. 56 made applicable by the F.R.Bkrtcy.P. 7056, and motions to dismiss under 12((6) and 9( of the Federal Rules of Civil Procedure. These motions were brought by Deborah Rosen Antar ("Wife 1") and the Children , David Pardo ("Pardo"), James H. Scott Jr. ("Scott") and Eddy Antar et al. For the reasons stated in this memorandum, the relief requested is partially denied and partially granted.

FN1. Our subject matter jurisdiction over this controversy arises under 28 U.S.C. § 1334( and the "Standing Order of Referral of Cases to Bankruptcy Judges" of the United States District Court for the Southern District of New York, dated July 10, 1984 (Ward, Acting C.J.). This is a core matter under 28 U.S.C. § 157(h). This Memorandum of Decision constitutes findings of fact and conclusions of law under F.R.Civ.P. 52, as made applicable to this proceeding by F.R.Bkrtcy.P. 7052.

FN2. Simone Antar, Nicole Antar, Danielle Antar, Gabrielle Antar and Noelle Antar.

FN3. Eddy Antar, Solomon E. Antar, Edmond Levy ("Levy"), Steven Pasquariello ("Pasquariello"), William Saltzman ("Saltzman"), and Carl Zimel ("Zimel").

Facts

The instant bankruptcy case was commenced on June 6, 1989 as an involuntary Chapter 7 against CEI and converted on June 20, 1989 to a voluntary Chapter 11. On June 4, 1991, CEI filed this adversary proceeding. CEI is a Delaware corporation with executive offices at 730 Fifth Avenue, New York, New York, 10019.

Eddie Antar ("Antar") founded CEI in 1969. He and his father were the principal owners until the company made its first public offering in September, 1984. Antar owned 2/3 of CEI at that time and his father owned 1/3 . Antar was president of CEI until 12/86, Chairman of the Board until 1/87 and CEO until 11/87. Antar is presently under indictment in New Jersey on RICO charges. Eddy Antar et al. were all officers or directors of CEI at one time or another.

FN4. Sam Antar is Eddie Antar, Sam E. Antar and Mitchell Antar's father. Eddy Antar (as distinguished from Eddie Antar) is Sam Antar's brother. Solomon E. Antar is Eddy Antar's cousin.

Wife 1 was Antar's wife from 1969 to 1985. Antar has a second wife, Deborah Ehrlich Antar ("Wife 2").

Scott was a tenured professor of finance at the Graduate School of Business of Columbia University. He was elected an outside director of CEI on October 5, 1984. Scott rendered professional advise to CEI and sought advise from Peat Marwick Main & Co. ("Peat Marwick"), CEI's outside auditors.

CEI gave five year Executive Employment Agreements (the "Agreements") to Solomon E. Antar, Eddy Antar, Pasquariello and Levy. The board of directors considered issuing the Agreements on March, 10, 1987, on May 4, 1987, and again on September 3 and 22, 1987. Scott voted in favor of the Agreements. The Agreements were entered into in September, 1987. Scott did not choose to be renominated as a director in 1987. Some would say he was removed by the shareholders.

Pardo was never a director of the company and never owned more than a few hundred shares of stock. CEI created the job title "Executive Vice President of Purchasing" on June 24, 1985 for Pardo after his father asked why he was not listed on the prospectus. Pardo no longer held the position in late 1986. In the Spring of 1985, CEI hired another person to perform Pardo's job. Pardo claims he orally resigned in the second week of September, 1985. Shareholders claim they removed him but new management offered Pardo and other selected employees a retention bonus if they continued to work after CEI went bankrupt. He is said to have continued working at CEI in the capacity of a purchasing director.

At all times relevant here, Antar maintained a bank account at Bank Leumi in Israel. He occasionally transferred large sums of money to that account from his Bank Leumi account in New York. The signature on the Israeli bank account included Deborah Antar's name and the writing "for Debbie Antar, Simone Antar, Danielle Antar, Gabrielle Antar, Noel Antar."

*2 During Antar's marriage to Wife 1, Antar asked her to keep money under their bed, and she did so. She also put money in the heating vent of their house and in the vault at Metropolitan Bank.

Also, allegations in the Complaint include hidden, funds, embezzlement, false invoices, fictitious accounting and so on. The allegations, if true, would be an auditor's and investor's nightmare. Additionally, debits were booked or taken against certain vendors' accounts to lower the costs of goods sold.

Of all the facts here, nothing is more clear than that CEI was a family run business. It has since been taken over by new management which has commenced this adversary proceeding against the various defendants.

The Amended Complaint, dated July 31, 1991, alleges the following;

First Claim--Fraudulent conveyances while CEI was insolvent. Specifically, long term Executive Employment Agreements ("Agreements") given to Sam E. Antar, Pasquariello, Solomon E. Antar, Levy, Kairey, Antar, Panoff, Scott and Saltzman were fraudulent conveyances.

Second Claim--Fraudulent conveyances with actual intent to defraud by Sam E. Antar, Pasquariello, Solomon E. Antar, Levy, Kairey, Antar, Panoff, Scott and Saltzman.

Third Claim--Fraudulent conveyance by Antar while CEI was insolvent.

Fourth Claim--Fraudulent conveyance by Antar with actual intent to defraud.

Fifth Claim--Fraudulent conveyance while CEI was insolvent by Antar, Sam Antar, Sam E. Antar, Pasquariello, Solomon E. Antar, Eddy Antar, Mitchell Antar, and Allen Antar. Specifically, they engaged in under-the-table transactions known in Arabic Slang as "Nehkdi".

Sixth Claim--Fraudulent conveyance by Antar, Sam Antar, Sam E. Antar, Pasquariello, Solomon E. Antar, Eddy Antar, Mitchell Antar, and Allen Antar, with actual intent.

Seventh Claim--Fraudulent conveyances by Wife 1 and the Children concerning 300,000 shares of CEI's stock.

Eighth Claim--Fraudulent conveyances by Wife 1 and the Children concerning 300,000 shares of CEI's stock, with actual intent.

Ninth Claim--Fraud by overstating inventory, fictitious sales, understatement of costs of goods sold, false margins, etc. These allegations are against Sam E. Antar, Sam Antar, Allen Antar, Solomon E. Antar, Eddy Antar, Mitchell Antar, Kairey, Levy, Panoff, Pasquariello, Wife 1 and Pardo.

Tenth Claim--Breach of fiduciary duty by Sam E. Antar, Sam Antar, Allen Antar, Mitchell Antar, Kairey, Pasquariello, Panoff, Pardo, Zimel and Levy.

Eleventh Claim--Civil conspiracy by Sam E. Antar, Sam Antar, Allen Antar, Mitchell Antar, Kairey, Pasquariello, Panoff, Pardo, Zimel and Levy.

Twelfth Claim--Return of salary by Antar.

Thirteenth Claim--Fraudulent conveyance and constructive trust against Wife 1 and Antar pertaining to the so-called "Wainscott Property."

Fourteenth Claim--Constructive trust against Wife 1 and the Children for funds received from the 300,000 shares of CEI stock.

Fifteenth Claim--Recovery of attorney's fees incurred in the action against Eddy Antar, Solomon E. Antar, Sam E. Antar, Sam Antar, Allen Antar, Mitchell Antar, Kairey, Pasquariello, Panoff, Scott, Saltzman, and Levy.

*3 Sixteenth Claim--Embezzlement by Antar and Wife 1.

Seventeenth Claim--Fraudulent conveyance with actual intent against Wife 1 and the Children.

Eighteenth Claim--Fraudulent conveyances with actual intent as it relates to stock dividends, against Wife 1 and the Children.

Wife 1 and the Children

Wife 1 and the Children originally moved for summary judgment dismissing Counts 7, 8, 9, 14, 16 and 17. Counts 7, 8, and 14 have been stayed on the ground that they relate to CEI stock owned by the Children and to $8,000,000 in proceeds which are the subject of proceedings in New Jersey. SEC v. Eddie Antar et al. Civ. 89-3773 (NHP).

The facts at issue are 1) whether CEI was insolvent at the time of the alleged transfers, or became insolvent as a result, 2) whether Wife 1 was a good faith transferee and received valuable consideration for the alleged transfers, 3) whether Wife 1 and the Children were beneficiaries or transferees of the money transferred to the Israeli Bank Account, and 4) whether Wife 1 knew of the alleged improprieties of her husband.

Scott

Scott moves to dismiss Counts 1, 2 and 11 for failure to state a claim upon which relief may be granted and, in the alternative, seeks summary judgment on Counts 1, 2, 10, 11 and 15.

The issues to be decided are 1) whether CEI was insolvent at the time of the alleged transfers, 2) whether Scott acted in good faith as a director of CEI, 3) whether Scott committed civil conspiracy, and 4) whether Scott benefitted from the alleged transfers.

Eddy Antar et al.

Eddy Antar et al. move for summary judgment to dismiss Counts 1, 2, 5, 6, and 9. In the alternative they move to dismiss Counts 1, 2, 5, 6, 9, 11 and 15 for failure to state a claim upon which relief may be granted. They also move to dismiss Count 6 and Solomon E. Antar moves to dismiss Count 9 for failure to plead fraud with particularity.

The issues to be decided are 1) whether CEI was insolvent at the time of the transfers, 2) whether the pleading requirements of Rule 9( were satisfied, and 3) whether the defendants received or benefitted from the transfers.

Pardo

Pardo seeks summary judgment as to Counts 9, 10, 11 and 15 of the Complaint. He also seeks to dismiss Counts 9, 10, 11, and 15 for failure to plead fraud with particularity.

The issues to be decided are 1) whether the pleading requirements of Rule 9( were satisfied, 2) whether CEI can meet its burden for fraud with respect to the debit memos, and 3) whether Pardo breached his fiduciary duty to CEI.

Discussion

12((6)

We first turn our attention to the Defendants' motions to dismiss for failure to state a claim upon which relief may be granted. A motion under F.R.Civ.P. 12((6) tests the formal legal sufficiency of the Complaint as to whether the plaintiff has conformed to F.R.Civ.P. 8(a)(2), which calls for a "short and plain statement" that the pleader is entitled to relief. See, Wright and Miller Federal Practice and Procedure, § 1356 at 590 (1982). Under 12((6), a complaint should not be dismissed for failure to state a claim on which relief may be granted unless "it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley et al. v. Gibson et al., 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed. 80 (1957), In re Ahead By A Length, 100 B.R. 157 (Bkrtcy.S.D.N.Y.1989). When reviewing a motion to dismiss, a Court must consider all factual allegations as true and in a light most favorable to the plaintiff. Sheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1638, 1686, 2 L.Ed.2d 90, 94 (1974). We must also examine the complaint to ascertain whether relief may be granted under any possible theory. In re Ahead By A Length, 100 B.R. at 162; Raine v. Lorimar Productions, Inc., 71 B.R. 450 (Bkrtcy.S.D.N.Y.1987).

Scott's 12((6) Motion

*4 Scott moves to dismiss Counts 1, 2 and 11 for failure to state a claim upon which relief may be granted. He moves to dismiss Counts 1 and 2 based on his claim that he never received or benefitted from the transfers. CEI claims that the board of directors caused CEI to enter into the Agreements with Eddy Antar, Solomon E. Antar, Levy, Pasquariello, and others.

Under New York law, there is no cause of action against a person who merely assists the transfer of assets. Federal Deposit Insurance Co. v. Porco, 75 N.Y.2d 840, 841, 552 N.Y.S.2d 910, 911 (1990). The only claim made in Counts 1 and 2 against Scott is that the Agreements themselves constituted fraudulent conveyances and that Scott was a member of the board of directors which caused the Agreements to be entered into. Nowhere in the Complaint does CEI allege that Scott was a transferee or beneficiary of the Agreements.

The elements of a cause of action for fraudulent conveyance are "a conveyance made by a person who is or will be rendered insolvent ... without regard to his actual intent if the conveyance is made ... without fair consideration." The Golden Budha Corp. v. The Canadian Land Company of America, N.V., 931 F.2d 196, 201 (1991). The first question which must be answered is, whether or not a conveyance was made to Scott. A conveyance requires transfer of title or some documentation. Standard Dyeing and Finishing Co. and Standard Textile Bonding Co., Inc. v. Arma Textile Printers Corp. and Hudson Valley Dyeing and Finishing Co. Inc., 757 F.Supp. 230, 237 (S.D.N.Y.1991). There is no evidence or claim of any documentation supporting a conveyance from CEI to Scott regarding the Agreements. Therefore, we hold that Scott's motion to dismiss Counts 1 and 2 pursuant to Rule 12((6) is granted.

Scott also seeks to dismiss Count 11, which alleges civil conspiracy. Under New York law, the resolution of a claim for civil conspiracy depends on the outcome of the underlying tort. The tort in this case is fraud. Because there is clear allegation of fraud in this case, the motion to dismiss Count 11 will be denied.

12((6) Motion of Solomon E. Antar, Levy, Eddy Antar, Pasquariello and

Saltzman

Solomon E. Antar, Levy, Eddy Antar, Pasquariello and Saltzman move to dismiss Counts 1, 2, 5, 6, 9, 11 and 15 for failure to state a claim upon which relief may be granted.

Counts 1 and 2 allege fraudulent conveyances with respect to the Agreements. As stated previously, the elements of a claim for fraudulent conveyance are 1) a conveyance, 2) insolvency and 3) consideration or intent. CEI alleges that the Defendants in question were transferees of the Agreements, that CEI was insolvent at the time and that they were entered into out of fear that the company would be taken over and those employees fired.

We conclude that all the named Defendants except Saltzman were transferees of the Agreements. They entered into the Agreements with CEI and expected to receive benefit therefrom. CEI has alleged its insolvency at the time, and there is an allegation that the Agreements were not entered into in good faith, but that their purpose was to hinder, delay and frustrate the legal rights of creditors. CEI alleges that the Defendants' purpose in entering into the Agreements was to protect themselves from termination. Construing the facts in favor of CEI, Eddy Antar, Solomon E. Antar, Levy and Pasquariello did not enter into the Agreements in good faith. However, Saltzman did not enter into any of the Agreements with CEI and was not a beneficiary of them, nor does CEI allege that he was. The motion to dismiss Counts 1 and 2 of the Complaint is denied with respect to Eddy Antar, Solomon E. Antar, Levy and Pasquariello. With respect to Saltzman, for the same reason we granted Scott's motion on Counts 1 and 2, the 12((6) motion to dismiss Counts 1 and 2 will be granted.

*5 Eddy Antar, Solomon Antar and Paqsuariello move to dismiss Counts 5 and 6 for failure to state a claim upon which relief may be granted. Counts 5 and 6 allege fraudulent conveyances with respect to the "skimming" of CEI proceeds. CEI alleges its insolvency and that the purpose of the "skimming" was to hinder, delay and frustrate the legal rights of creditors. In paragraph 31 of the First Amended Complaint, CEI accuses Eddy Antar of embezzling a substantial amount of CEI funds. There is no evidence that the Defendants, aside from Eddy Antar received any benefit from the "skimming." However, CEI alleges that Solomon Antar and Pasquariello benefitted from the embezzlement. This Court, construing the facts alleged in the Complaint to be true, holds that Counts 5 and 6 allege sufficient facts to support a claim for relief against the named Defendants. Their motion to dismiss Counts 5 and 6 is denied.

Count 9 of CEI's Amended Complaint alleges fraud. The elements of fraud are a misrepresentation of existing material fact, falsity of that misrepresentation, scienter, reliance, and injury." In re Sattler's Inc., 73 B.R. 780, 789 (Bkrtcy.S.D.N.Y.1987). CEI alleges that the Defendants inflated CEI's inventory to conceal the embezzlement. This allegation satisfies two of the above mentioned elements, misrepresentation and falsity. CEI also alleges damages as a result of the misrepresentation. Defendants assert that CEI can not establish the elements of scienter and reliance.

Defendants' argument with regard to the element of reliance is that CEI was the perpetrator of the fraud so they could not have relied upon it. The alleged fraud was perpetrated by the principles of CEI, acting for the benefit of themselves at the time. In Re Investors Funding Corp. of New York Securities Litigation, 523 F.Supp. 533 (S.D.N.Y.1980). CEI alleges facts in its Complaint which support reliance. They allege that the individual Defendants were acting to further their own interest, not the interests of CEI. According to the Complaint, the facts alleged show that the inflation of inventory and the creation of false debit memos, among other things, damaged CEI by causing it to crumble from the inside, out. We find that CEI could have relied on the acts of the Defendants.

Defendants also argue that CEI cannot prove the element of scienter. New York State allows a "reckless indifference" standard to substitute for scienter. Jo Ann Homes At Bellmore, Inc. v. Dworetz, 25 N.Y.2d 112, 119, 302 N.Y.S.2d 799, 803, 250 N.E.2d 214, 217, (1969). CEI has alleged that the Defendants were aware of the improprieties and thus had reckless indifference to the fraud. The Complaint alleges that the Defendants were intimately involved in the management and direction of CEI or that they set policy and made important decisions for the company while the alleged fraud was occurring. Construing the facts in the light most favorable to CEI, we hold that there was sufficient basis upon which to allege that the Defendants either knew of or recklessly disregarded the transactions and deny the motion to dismiss.

*6 Eddy Antar et al. move to dismiss Count 11 alleging civil conspiracy because, they claim, the underlying tort of fraud was not adequately pled. Viewing all facts in the light most favorable to the movant, we have held that CEI has pled fraud adequately enough in the Complaint to survive a Rule 12((6) motion. In this case, the Defendants' motion to dismiss Count 11, civil conspiracy, must also be denied.

Lastly, Eddy Antar et al. move to dismiss Count 15 because fraud has not been proven and attorney's fees depend on the outcome of the fraud charge. According to Rule 12((6), all that is needed is a sufficient allegation, complete with all of the elements of fraud, in the Complaint. Section 276(a) of the New York Debtor and Creditor Law provides that attorney's fees are appropriate in a fraudulent conveyance action under § 276. New York Debt. and Cred.Law, § 276(a), McKinney's (1991). Because many of the Counts remain as to parties except Scott and Saltzman, these 12((6) motions will be denied. As to Scott and Saltzman, they will be granted.

Rule 9( Particularity

Plaintiffs alleging fraud are under an obligation to plead with particularity. F.R.Civ.P. 9(. The reasons for the particularity requirement is to give a defendant fair notice of the charge against him and to protect him from harm to his reputation or goodwill by unfounded allegations of fraud. Vivian G. Bernstein v. Crazy Eddie, Inc., 702 F.Supp. 962, 976 (E.D.N.Y.1988). The requirements of Rule 9( must be reconciled with the requirements of Rule 8(a) and Rule 8(e) . Usually in bankruptcy cases, fraud is pled on secondhand knowledge by the trustee. This fact affords the trustee greater liberality in pleading. In re Ahead By A Length, 100 B.R. 157, 166 (Bkrtcy.S.D.N.Y.1989). The instant case was commenced by the debtor-in-possession, who presumably had firsthand knowledge of the alleged improprieties. The liberality rule does not apply here. Also, given the sensitive nature of a fraud charge the particularity requirement should be adhered to. The Complaint must answer the questions "what, when, where, how and why".

FN5. Rule 9( provides that "in all averments of fraud ... the circumstances constituting the fraud ... shall be stated with particularity.

FN6. Rule 8(a) of the F.R.Civ.P. provides in pertinent part that " pleading which sets forth a claim for relief ... shall contain ... (2) a short and plain statement of the claim showing that the pleader is entitled to relief ..." F.R.Civ.P. 8(a)

FN7. Rule 8(e) provides that "ach averment of a pleading shall be simple, concise and direct." F.R.Civ.P. 8(e).

Pardo's 9( Motion

Pardo moves to dismiss Counts 9, 10, 11 and 15 of the Complaint. Eddy Antar moves to dismiss Count 6 of the Complaint and Solomon E. Antar moves to dismiss Count 9.

Pardo's motion to dismiss the Complaint for failure to plead fraud with particularity comes to us for the first time in his brief for summary judgment. CEI has correctly argued that any objections made to the specificity of the pleading must be made in the responsive pleading. 2A James W. Moore et al. Moore's Federal Practice § 9.03<5> at 9-60-9-61 2d ed. (1991). A party who fails to raise a 9( objection in his answer waives his right to make that objection. Id. Pardo failed to raise the objection in his answer. He is therefore barred as a matter of law from objecting to the particularity of the pleading. Alternatively, the pleading is sufficient to deny Pardo's motion.

FN8. Rule 12( states in pertinent part that "very defense ... shall be asserted in the responsive pleading...." F.R.Civ.P. 12(.

Solomon E. Antar's 9( Motion

*7 Count 9, as against Solomon E. Antar, alleges that Solomon E. Antar was among many Defendants who knowingly committed "the foregoing fraudulent and dishonest acts." He suggests that the Complaint should specify his wrongdoing. Paragraph 74 of the Amended Complaint charges that Solomon E. Antar was "aware" of the fact that the wholesale transactions were rung up as retail, resulting in a loss to CEI, and that he did nothing. However, "individualization may not be necessary where a is asserted against a close-knit group of individuals if describes the fraudulent acts and provides the individuals with sufficient information to answer." In re Lion Capital Group v. A-Z Associates, 44 B.R. 690, 696 (Bkrtcy.S.D.N.Y.1984). CEI was a family run business. Solomon E. Antar was part of that family. This alone is enough to give CEI an inference of scienter. The Complaint sufficiently describes the fraudulent acts to provide Solomon E. Antar with sufficient information to answer.

FN9. The fraudulent conveyance claim with respect to the Executive Employment Agreements is listed in a separate Count.

Count 9 of CEI's Complaint alleges that Solomon E. Antar misrepresented wholesale transactions as retail, that he was aware of the misrepresentations as well as the injury which occurred as a result, and states the time and place of the alleged fraud. However, the Complaint does not satisfy the requirements of scienter, or the facts and circumstances which led to an inference of scienter. As mentioned previously, a complaint alleging fraud must include the elements of fraud as well as the time, place and nature of the Defendant's conduct and facts and events which led to an inference of scienter. Lumbard v. Maglia, 621 F.Supp. 1529. As has been established, reckless indifference will stand in the shoes of scienter in New York. Jo Ann Homes v. Dworetz, 302 N.Y.S.2d at 803. With the lesser standard of reckless indifference, CEI satisfies the pleading requirement of Rule 9( with regard to scienter by alleging Solomon Antar's close relationship with the Antar family and with CEI's management. This Court holds that Count 9, as against Solomon E. Antar, is pled with enough particularity to give the Defendant an adequate opportunity to answer.

Eddy Antar's 9( Motion

Eddy Antar provides this Court with no argument on his motion to dismiss Count 6. Regardless, CEI claims that discovery has produced new evidence alleging fraud differing from what was alleged in the amended complaint. Although this does not excuse CEI from complying with Rule 9(, it is free to amend its Complaint with respect to this Count. Count 9 alleges that Eddy Antar, from 1983 through 1987, embezzled CEI funds by giving cash to his family and transferring funds to his Israeli bank account, with intent to hinder, delay and frustrate creditors. CEI's Complaint answers the "who, what, when, where, why and how" questions and gives Eddy Antar sufficient information to answer. Eddy Antar's motion to dismiss Count 6 will be denied.

Summary Judgment

To prevail on a motion for summary judgment, the movant must satisfy the criteria set forth in F.R.Civ.P. 56 , as made applicable to this Court under F.R.Bktrcy.P.Rule 7056. The primary purpose for granting summary judgment is to avoid unnecessary trials where no genuine issue of material fact is in dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In Anderson, the Supreme Court said,

FN10. Rule 56 provides in part: "he judgment sought shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no issue of genuine fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Eastman Machine Company, Inc. v. United States, 841 F.2d 469 (2d Cir.1988).

*8 the judge must ask himself not whether he thinks the evidence unmistakenly favors one side or the other but whether a fair minded jury could return a verdict for the plaintiff on the evidence presented. The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff. The judge's inquiry, therefore, unavoidably asks whether reasonable jurors could find by a preponderance of the evidence that the plaintiff is entitled to a verdict ..."

Anderson, 106 S.Ct. at 2512.

The function of this Court when considering a motion for summary judgment is not to resolve disputed issues of fact but to determine whether there is a genuine factual issue to be resolved. Id. at 2509-11. In determining whether a genuine issue has been raised, a Court must resolve all ambiguities and draw all reasonable inferences against the moving party. United States v. Diebold, Inc., 396 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) (per curium) (cited in Donahue v. Windsor Locks Board of Fire Commissioners, 834 F.2d 54, 57 (2d Cir.1981). Not only must there be no genuine issue as to the evidentiary facts, there must also be no controversy regarding the inferences to be drawn from them. Donahue (citing Schwabenbauer v. Board of Education, 667 F.2d 305, 313 (2d Cir.1981).

The Supreme Court has held that a moving party is entitled to judgment as a matter of law "when the non-moving party has failed to make a sufficient showing on an essential element of case with respect to which has the burden of proof". Celotex, 477 U.S. 317, 322, Anderson, 106 S.Ct. 2512, Adickes v. S.H. Kress, 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). Speculation and conjecture will not suffice. Only after the moving party has met its initial burden must the opposing party set forth specific facts showing that there is a genuine issue for trial and that the disputed fact is material. Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir.1983), cert. den., 464 U.S. 960, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983). The court is not to determine credibility, but must determine only whether there exists a dispute regarding an issue of material fact. Computer Strategies, Inc. v. Commodore Business Machines, Inc., 483 N.Y.S.2d 716, 722, 105 A.D.2d 167.

Insolvency

Sections 273 through 276 of the New York Debtor and Creditor Law requires that the Debtor be insolvent or undercapitalized at the time of the transfers, or made insolvent as a result thereof, to constitute fraud.

The definition of insolvency is outlined in § 271 of the New York Debtor and Creditor Law. It provides that a person (or a corporation) is insolvent "when the present fair saleable value of assets are less than the amount that will be required to pay probable liability on existing debts as they become absolute and mature." New York Debt. and Cred.Law, § 271, McKinney's (1990).

*9 According to CEI's 1984 and 1988 prospecti, CEI's assets exceeded its liabilities. In cases involving summary judgment, all inferences must be drawn against the moving party. Celotex, 106 S.Ct. 2548. The only evidence or facts relied upon by Wife 1 in the present case are the prospecti. A prospectus is not necessarily an accurate indicator of a company's health or insolvency. In fact, CEI's prospecti may have been a manifestation of the alleged fraud, especially in light of the allegations pertaining to fraud, in the various Counts of the Complaint. To grant this motion for summary judgment, further proof is required than what is listed in CEI's prospecti.

Because we deny summary judgment at this juncture on the Counts that require the debtor to be insolvent, the motions addressed to them will be formally disposed of when considering subsequent issues.

Consideration

Counts 16 and 17 against Wife 1 claim that she embezzled CEI funds and was involved in the transfer of funds to the Israeli Bank accounts from 1982 and 1987.

The property transferred as a result of the divorce settlement between Wife 1 and Antar is attacked for not being supported by valuable consideration. Where a transfer is made without consideration, under New York law, there is a presumption of insolvency. In Re Cardon Realty v. Donald T. Singleton, No. 87-10054, 91-1123A, (Bkrtcy.W.D.N.Y., Oct. 8, 1992) (Lexis No. 1638), In Re O.P.M. Leasing Services, Inc., 40 B.R. 380, 393 (Bankr.S.D.N.Y.1984).

As a result of the divorce settlement, Antar was deemed the sole owner of all cash in banks, including the cash in the Israeli Bank account. Deborah Rosen Antar v. Eddie Antar, Supreme Court, Kings County, Index No. 6755/88. Wife 1 acquired any property she now owns by virtue of this divorce settlement. Id. This includes the property located in Brooklyn, New York and in Oakhurst, New Jersey, 40% interest in stock and approximately $30,000,000.00. Id.

New York Debtor and Creditor Law defines fair consideration as when "in exchange for such property ... as a fair equivalent therefore, and in good faith, property is conveyed or an antecedent debt is satisfied...." N.Y.Debt. & Cred.Law (McKinney 1990). A husband's obligation to support his wife is an antecedent debt and thus this obligation is supported by valuable consideration. Federal Deposit Insurance Co. v. Leonard and Phyllis Malin, 802 F.2d 12, 17 (2d Cir. E.D.N.Y.1986). Antar had an obligation to support Wife 1 pursuant to the court ordered divorce settlement. And although a judgment may be preclusive evidence of regularity, deposition evidence shows she knew many of the assets she received under the divorce decree were procured by fraud. Thus a genuine issue of material fact remains for trial.

Good Faith/Conveyance

Counts 16 and 17 of the Complaint allege that Wife 1 helped embezzle money by being the recipient of that money. Wife 1 claims she received money from Antar both to safeguard and as support for the household. She claims the money was given to her by Antar in good faith to be lawfully applied for household living expenses for the support of the family. There is no evidence in the record of any transfer of title or other documents relating to the money. In fact, according to Wife 1's deposition , she returned the money at Antar's request. There can be no conveyance of property if there is no contract or documentation in the record "purported to transfer any title or interest." Standard Dyeing and Finishing Co. v. Arma Textile Printers Corp., 757 F.Supp. at 237. Conveyance is defined by § 270 of the Debtor and Creditor Law as "every payment of money, assignment, release, transfer, lease, mortgage, or pledge of tangible or intangible property." N.Y.Debt. & Cred.Law § 270 McKinney's (1990).

FN11. Taken on 5/7/91 at page 63, line 13.

*10 Under the definition of conveyance in the New York Debtor and Creditor Law, Wife 1 was not the recipient of the conveyance from Antar. There is no evidence on record that the money given to her to safeguard was conveyed to Wife 1. But there is evidence that Wife 1 never questioned Antar about the sums of money, about members of the management, about hiding paper bags, envelopes and suitcases of money in the house or as to why Antar had money strapped to his body. Either Wife 1 is one of the most ignorant and innocent lambs in this world or she is possibly a willing participant or observer, but the facts show there are trial issues for decision. Wife 1's motion to dismiss Count 16 and 17 for summary judgment will be denied.

Civil Conspiracy

Pardo seeks summary judgment on Count 11 alleging civil conspiracy. Several recent cases have held that New York does not recognize an independent tort for civil conspiracy. New Dimensions Spa, Inc. v. Fitness Place Rockville Center, N.Y., Inc., No. 91-01962 (N.Y.App.Div. Nov. 9, 1992) (Lexis No. 12777). A claim for civil conspiracy must be accompanied by the pleading of "specific wrongful acts constituting independent torts." Riverbank Realty Company v. Martin D. Koffman, Joseph Koffman, Koffman Associates, and P.A. Realty Corporation, 179 A.D.2d 542, 579 N.Y.S.2d 870. If the underlying tort is not adequately pled, the conspiracy claim will also fail. Demalco CTD. v. C. Elvin Feltner, Jr., 588 F.Supp. 1277, 1278 (S.D.N.Y.1984). In the Demalco case, similar to the case at bar, fraud was the underlying tort. The court held fraud was not pled adequately, therefore, the claim for conspiracy fell. Demalco, 588 F.Supp. at 1278. The underlying tort in the present case is fraud.

Count 9 of the Complaint alleges fraud against Pardo. He is charged with involvement with allegedly false debit memos. He insists he was not involved in their creation. There is evidence in the record that at least suggests Pardo's involvement in the creation of debit memos. Whether or not he was involved in their creation is a genuine issue of material fact, better suited for a trial than for a motion for summary judgment. We hold that Pardo's motion for summary judgment as to Count 9 is denied.

Because summary judgment on the fraud charge against Pardo is denied, the conspiracy charge must be addressed. A conspiracy is an agreement between two or more persons involved in a common plan or scheme, for common action, for a common purpose, by common agreement or understanding among a group of people from which common responsibility derives. Interstate Cigar Co. v. I.B.I. Security Service, Inc., 431 N.Y.S.2d 1016, 1020 105 Misc.2d 179. The parties may agree tacitly to participate in a common scheme knowing of its nature and of the interdependence of its members. Merrill Lynch Futures, Inc. v. Robert Kelly, 585 F.Supp. 1245, 1254 (S.D.N.Y.1984).

Pardo was involved in the corporate planning, and if he did participate in the creation of the false debit memos, CEI has satisfied all of the elements of a claim for conspiracy. However, mere association does not constitute a conspiracy. Lawrence A. Hoffman v. Herdman's, LTD., 41 F.R.D. 275, 277 (S.D.N.Y.1966). There must be evidence of a common plan. CEI alleges that Antar instructed the Defendants, including Pardo, to conceal inflated inventory by issuing false debit memos. There is evidence that more than one individual was involved in the inflation of inventory and the creation of false debit memos. Circumstantial evidence is enough to prove a charge of conspiracy to commit fraud. Merrill Lynch Futures, Inc. v. Robert Kelly, 585 F.Supp. 1245, 1254 (S.D.N.Y.1984). We have been given enough evidence to deny Pardo's motion for summary judgment with respect to Count 11.

Fraud

*11 Count 9 of CEI's Amended Complaint claims that Wife 1 embezzled and converted money and assisted in the alleged conspiracy to "skim" proceeds from CEI. Wife 1 insists that she had no knowledge of the purposes of the alleged transfers. She asserts that Antar had legitimate sources for his assets and that the couple were well-to-do prior to the alleged "skimming." She stated in her deposition that she believed Antar received a substantial salary and maintained substantial ownership interest in CEI and other businesses. The evidence in the record pertaining to Wife 1's belief regarding Antar's assets may be found in the 1984 prospectus. It provides that CEI was controlled by Antar and sold merchandise to other related companies.

There is plenty of evidence in the record which implicates Wife 1 in fraud. She knew about large sums of money being hidden. Wife 1's motion for summary judgment as to Count 9 will be denied.

FN12. CEI has not alleged that Mrs. Antar aided and abetted the transfers. To be liable as an aider or abettor, a party must knowingly complete acts with the purpose of aiding or abetting the accomplishment of an illegal scheme. Atlanta Shipping Corporation v. Chemical Bank, 818 F.2d 240 (2d Cir.1987). CEI may amend its complaint to include this cause of action.

The Children seek summary judgment as to Count 17. Count 17 alleges that $11 million of skimmed cash was transferred to Bank Leumi in Israel for the benefit of the Children. There is no evidence that the money placed into this account was with their knowledge, nor did they possess or control it, but they did benefit from it. The Children's motion for summary judgment as to Count 17 is denied.

Eddy Antar moves for summary judgment as to Counts 5 and 6 of CEI's Amended Complaint. He claims he was never the beneficiary of the alleged "skimming" and that it was performed by Antar and his father. He has taken the Fifth Amendment privilege against self-incrimination in Bernstien v. Antar with regard to his actions concerning the alleged fraud. Although it is part of the discovery in the present action, that was a separate action. This fact, however, creates a controversy as to an evidentiary fact. Eddy Antar's motion for summary judgment as to Counts 5 and 6 is denied.

FN13. There is, however, evidence that Eddy Antar was at least involved in the alleged "skimming" of CEI funds, that he delivered cash receipts to Antar, that he was aware of the "skimming", and that he was aware of the illegality of the acts. CEI may amend their Complaint to include a cause of action for aiding and abetting.

Solomon E. Antar, Eddy Antar, Levy, and Pasquariello move to dismiss Counts 1 and 2 for summary judgment. The four Defendants claim that they have not, nor do they intend to, receive any benefit from the Agreements. Under Counts 1 and 2, CEI seeks to avoid payments under the Agreements and to disallow any claims pursuant to them. The four named Defendants entered into the Agreements and they are contractually entitled to receive benefit under them. Whether or not they choose to do so in the future may only be answered in the future. Summary judgment as to Counts 1 and 2 against them is denied.

Eddy Antar, Solomon Antar, Levy and Pasquariello move to dismiss Count 9 for summary judgment. The Defendants also claim that CEI could not have relied on the fraud because the company itself was the perpetrator and that the element of scienter is missing.

These issues have been discussed in the context of a motion to dismiss for failure to state a claim upon which relief may be granted. In the context of a motion for summary judgment, the court must consider the facts in favor of the non-moving party and it must evaluate the pleadings and all the documentation in the record to determine whether a fair-minded jury could return a verdict for the moving party.

*12 With regard to the element of reliance, a fair-minded jury might find that CEI relied on the acts and omissions of the named Defendants. The Defendants were not acting for the benefit of CEI but for their own benefit. Investors in CEI stock were led to believe certain facts in the prospectus and relied on those facts when purchasing CEI stock. The stockholders were the owners of CEI and thus were in the position to rely on the Defendants' actions. Moreover, the stockholders did not benefit at all from the alleged fraud. If anything, they suffered. If the prospecti did reflect the alleged fraud, their stock was not as valuable as they were led to believe. A fair- minded jury could conclude that there was reliance.

As previously stated, "reckless indifference" will substitute for scienter under New York law. Jo Ann Homes, 302 N.Y.S.2d 799. A fair-minded jury could find scienter. The Defendants were involved in policy decisions, management and direction of CEI at the time the fraud was occurring. Solomon E. Antar, Levy and Pasquariello's motion for summary judgment with respect to Count 9 is denied.

Breach of Fiduciary Duty

The first issue to be decided is which state's law will apply. Bankruptcy courts must look to the law of the state in which they sit to determine choice of law rules. In re Presque Isle Apartments, L.P., 118 B.R. 332, 334 (Bkrtcy.W.D.Pa.1990), Davidge v. White, 377 F.Supp. 1084, 1088 (S.D.N.Y.1974). New York choice of law rules require that "the Court must apply the law of the state of incorporation to determine the existence and extent of corporate fiduciary obligations and liability for violations." Davidge v. White, 377 F.Supp. at 1088. Davidge involved a Delaware corporation in a New York court on the issue of breach of fiduciary duty. CEI is incorporated in Delaware. Therefore, Delaware law applies.

Under Delaware law, directors owe the duties of "honesty, loyalty, good faith, diligence and fairness; they must act for the benefit of the corporation and shareholders, and never use their fiduciary positions to further their personal interests." Ruth Panter v. Marshall Field & Company, 486 F.Supp. 1168, 1192, affirmed 646 F.2d 271, Certiorari denied 102 S.Ct. 658, 454 U.S. 1092, 70 L.Ed.2d 631 (D.C.Ill.1980). CEI, citing Hanson Trust PLC v. ML SCM Acquisition Inc., 781 F.2d 264, 274 (2d.Cir.1986), argues that officers also have a fiduciary duty to the corporation.

CEI alleges that the Defendants either committed fraudulent acts or intentionally or recklessly failed to investigate, disclose and stop the frauds. The "frauds" include the issuance of the Agreements, the inflation of inventory, and the creation of false debit memos.

Scott claims that his decision to vote in favor of the Agreements was protected by the Delaware Business Judgment Rule. The Business Judgment Rule creates a presumption that "in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company." Senior Aronson v. Harry Lewis, 473 A.2d 805, 812 (1983). It may be used by a disinterested director who can "neither appear on both sides of a transaction nor expect to derive any personal financial benefit from it in the sense of self-dealing, as opposed to a benefit which devolves upon the corporation or all the stock holders generally." Id. The directors also have a duty to inform themselves of all information reasonably available to them. Id. The Business Judgment Rule is not applicable to inaction by Scott. Id.

*13 Scott was a disinterested outside director. He solicited information from CEI and Peat Marwick, CEI's independent auditors, regarding the compensation of its executive officers. However, CEI claims Scott's failure to investigate or disclose the fraud is what is being challenged. CEI claims that Scott learned about the fraud from an anonymous call. This call prompted Scott to investigate. He directed Peat Marwick to investigate the "rumors" of fraud and mentioned it to CEI's management. He was informed that the "rumors" were unfounded and no further action was taken.

With respect to the Agreements, there remains an issue of fact as to whether the circumstances surrounding the issuance of the Agreements should have been seen as suspect to Scott. For this reason, Scott's motion for summary judgment as to Count 11 is denied.

Pardo was a purchasing officer from June 24, 1985 to either September, 1985 or late in 1986. He claims he was no longer an officer at the time the debit memos were created. CEI claims Pardo continued to act as an officer after he claims to have resigned. This is supported by testimony including Pardo's. Since he was acting in the capacity of an officer, he is held to the same standard as he would be had he held the title. Officers have a fiduciary duty to a corporation. It is questionable whether or not Pardo breached that fiduciary duty. Therefore, Pardo's motion for summary judgment with respect to Count 10 is denied.

Attorney's Fees

Section 276(a) of the New York Debtor and Creditor Law provides for an award of attorney's fees where actual intent has been shown in a charge of fraud under § 276. New York Debt. and Cred.Law § 276(a), McKinney's (1990).

Eddy Antar et al. and Scott move to dismiss Count 15, alleging attorney's fees. Summary judgment with respect to the fraud charges brought under § 276 have all been denied. The question which remains is, can CEI show actual intent.

Actual intent is a state of mind and issues of states of mind involve issues of credibility. For this reason, the issue of attorney's fees is not appropriate for summary judgment. Both motions with respect to Count 15 are denied.

Conclusion

12((6)

Scott's motion to dismiss Counts 1, 2, is granted; and 11 is denied. Saltzman's motion to dismiss Counts 1, 2 and 15 are granted. Eddy Antar, Levy and Pasquariello's motion to dismiss Counts 1 and 2 is denied. Antar, Pasquariello and Solomon E. Antar's motion to dismiss Counts 5 and 6 is denied. Eddy Antar et al.'s motion to dismiss Counts 9, 11 and 15 is denied.

9(

Pardo's motion to dismiss Counts 9, 10, 11 and 15 is denied. Solomon E. Antar's motion to dismiss Count 9 is denied and Eddy Antar et al.'s motion to dismiss Count 6 is denied.

Summary Judgment

Eddy Antar's motion to dismiss Counts 5 and 6 is denied. Solomon E. Antar, Eddy Antar, Pasquariello and Levy's motion to dismiss Count 1, 2 and 9 is denied. Scott's motion to dismiss Counts 10 and 15 is denied. Pardo's motion to dismiss Counts 9, 10, 11 and 15 is denied. Wife 1's motion to dismiss Counts 9, 16 and 17 is denied. The Children's motion to dismiss Count 17 is denied.

*14 CEI has moved for sanctions. We believe there is merit to this motion and direct that a hearing be held to resolve this matter.

Counsel for CEI shall settle an order on five day's notice consistent with this Memorandum of Decision.

1992 WL 406543 (Bankr.S.D.N.Y.)

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Music is art

Audio is engineering

[HornEd]

One more grand feather in the war bonnet of Ray Garrison and another head on this electronic totem for which he stands. Thanks for the sharp eye and honest inclusion, Ray... and I am sure that comes from all of us. HornEd (Hmm, I can't seem to find the applauding happy face... oh, well, if you be there maybe they will build it) :clap :clap :clap

[dougdrake]

Gosh, not sure what all that means (since my eyes wore out about 2 paragraphs into it ), but it looks like the old family members took Crazy Eddie's for a ride back in the late '80s and the new owners/management wanted the money back. But then again, maybe it's a recipe for burnt toast. In either case, can someone tell me what it means with respect to Crazy Eddie's TODAY?

[Guest BobG]

Without getting myself into any legal mess, all I can tell you is that Crazy Eddie is NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT, NOT,

an authorized Klipsch dealer.

[Spider124]

Bob, could you clarify that a little, please? What exactly do you mean?

------------------

"What's that noise?" "It's the carpet, it kinda mutes the speakers." "No, it sounded more like the chandalier falling."

[belial]

So is he or isn't he?

[DwK]

I think what bob was trying to get at is that.

Crazy Crazy Eddie is NOT, an authorized Klipsch dealer.

lol

/me laughs ... for unknown reason

------------------

K6-2 450

SB Live Value ( not 5.1)

Klipsch Pro Media v2 400 ( soon to be 4.1 )

2 Fisher STV-873's on front channel

2 Fisher surrounds on rear channel

[Brian King]

So if wanted to buy, say, a second KSW-12 and Eddie has it for 249 and my local dealer has it for 459; which way should I go? I don't understand where Eddie is getting this merchandise and selling it so cheap.

Is Klipsch selling refurb compenents to dealers like Crazy Eddie? Where can I get ahold of some of these products?

Bob, can you please elaborate on Crazy Eddie NOT being an authorized dealer? If not, tell me why I shouldn't buy a Klipsch product from him.

Again, I LOVE my Klipsch products, but I also like my money! All I can think about is I can buy more Klipsch stuff with the extra money!

Thanks.

-Brian

------------------

Brian King

----------------------

Yamaha RX-V596

Klipsch SF-2 (mains)

Klipsch SC-1 (Center)

Klipsch KSB-1.1 (classic rears)

Klipsch KSW-12

Monster Cable THX Certified

Pioneer DV-333 CD/DVD Player

Sanyo VCR

35" Sanyo Direct View TV

[dougdrake]

Brian - I'll try to give a lay person's view on it. The authorized dealer network has working relationships directly with Klipsch which enables them to offer factory-authorized repairs and warranty coverage. They are also trained by Klipsch staff, and (presumably) maintain some level of inventory and service metrics that Klipsch keeps an eye on, all in the name of providing good customer service. Also, Klipsch probably reimburses the dealer for the cost of warranty repairs.

Places like Crazy Eddie probably buy their equipment from third parties who are authorized dealers that may be short of cash and need to liquidate an inventory, or which are going out of business. Since they are not factory authorized, they will not offer factory warranty (nor would Klipsch reimburse them for warranty repairs). They usually either repair it themselves or find a repair person in your area and pay them to do it. Some "gray market" dealers (and I'm NOT saying this is true of CE) obliterate serial numbers so they can't be traced back to the source.

All that said, it is a free-market economy (most of the time, anyway) and you are free to buy from anyone you want. You just have to decide if the savings you may get from buying gray market is worth the potential expense of repairs that are not covered by warranty, or any other service/return hassles you may encounter.

BTW, I am guessing that dealers probably buy at about 40-50% of MSRP. So a $600 speaker probably wholesales for about $300 (plus whatever incentives/promos/spifs may be in place from the factory to the dealer). A distressed dealer might liquidate it at $250-$275. The gray market dealer could sell it at $350-$375, have no overhead to speak of (sales force, repair shop, retail space, etc...) and still make money selling it for 40% off retail.

Just my view of it all, FWIW.

Doug

P. S. While you may not be able to get your dealer to match a price from an non-authorized dealer, if you are nice and explain your interest in doing business with him if he can get somewhat close to the price, he may make it worth your while to deal locally and from an authorized dealer.

This message has been edited by dougdrake on 06-11-2001 at 05:49 PM

[Mike Lindsey]

Doug,

That last sentence says it all. I too was considering the internet for my Klipsch Center and Surrounds. My local Sound Advice was hundreds of dollars more for the KLF-C7 center and RS-3 surrounds. I had spent a bit of time in this Sound Advice getting familiar with my salesman as well as demoing the speakers with a Denon 4800 (which I purchased recently). I really wanted that manufacturers warranty but didn't want to spend the additional cash to get it. I also wanted to establish a relationship with my salesman at Sound Advice since he spent a lot of time with me and I hadn't spent one red cent yet. As it turned out, he came within $30 of the internet prices and I went ahead and bought from him.

What's nice about this situation is it gives me a place where I feel comfortable buying and it's only 1 mile away from my house...plus I get the manufacturer's warranty. I think if you get familiar with your Klipsch dealer, and they know your serious, they may cut you a deal and get close to the internet prices...

Mike

[boa12]

ditto dd & mike. my local klipsch dealer was glad to come down from 1800 to $1300 on my klf-30 rather than lose the sale, after i informed that another klipsch dealer about 30 miles away would do that after I informed them of a net price of $1250. sometimes u have to broaden it out a lil further .

realize this would be harder if u only have 1 klipsch dealer in like a 100 mile radius, but the "i'm walkin"

way can still work. just be prepared to go w/ the net deal or go back & swallow some pride.

------------------

Klipsch KLF 30 (front), KLF C-7, Cornwall I (rear)

Velodyne HGS-18 sub woofer

Monsterbass 400 sub interconnects & Monster CX-2 biwire & Z-12 cable

Marantz SR-8000 receiver

Sony DVP-C650D cd/dvd player

Sony Trinitron 27" stereo tv

Toshiba hi-fi stereo vcr

Technics dual cassette deck

Scientific Atlanta Explorer 2000 digital cable box

Boa's Listenin Lounge:

Klipsch RF-3 (front), RC-3, cheap little Technics (rear)

Monster MCX Biwires

Sony STR-DE935 a/v receiver

Kenwood KR-9600 AM/FM stereo receiver (vintage 1975)

Russound AB-2 receiver switch to RF-3

Teac PD-D1200 5-disk cd changer

Technics direct drive turntable

Sega Genesis game player

Sub: None yet

rock on!

[belial]

I feel like, for my part, I should have given a more direct answer in my post. My feeling? Yes, it is safe--depending on who you buy from.

Some online dealers are going to be better than others. Check an online vendor rating site to see which have the most satisfied customers (I posted one here--try searching for it.)

As for the local dealer coming down on price, mine won't, and actually sells the RB-5 for $25 OVER what Klipsch recommends. They've also lied to me on several occasions (one month return policy when actually it is only three days--stuff like that). Just because someone is standing right in front of you, doesn't mean they are going to be more honest than someone online.

Yes, you will have to depend on the websites version of the warranty, and who knows how dependable that is, but from my extremely limited experience, if a speaker is still working fine a week after you got it, it will probably do so the forseeable future. For me, it is worth that risk to save literally hundreds of dollars.

I could not afford to complete my Klipsch setup if I did not purchase online, it is as simple as that. If I was rich, and my local dealer wasn't somewhat sleazy, I might do otherwise, but I'm not, and he is.

This message has been edited by belial on 06-11-2001 at 08:13 PM

[Pete C]

The biggest problem with internet purchases is shipping companies. I bought mine at near-retail from my dealer. One speaker had been damaged in shipping. I drove it back to the dealer and had a replacement within minutes. You'd have to ship it back to the internet dealer and he could decide to have it repaired rather than replace it. That would be quite a wait.

Do a search for other shipping company woes reported here on the BB.

This message has been edited by Pete C on 06-11-2001 at 08:55 PM