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Barry Minkow

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Barry Minkow Barry Minkow Barry Jay Minkow (born March 17, 1967) is a former businessman, pastor and convicted felon. While still in high school, he founded ZZZZ Best (pronounced Zee Best), which appeared to be an immensely successful carpet-cleaning and restoration company. However, it was actually a front to attract investment for a massive Ponzi scheme. It collapsed in 1987, costing investors and lenders $100 million—one of the largest investment frauds ever perpetrated by a single person, as well as one of the largest accounting frauds in history. The scheme is often used as a case study of accounting fraud. After being released from jail, Minkow became a preacher and a fraud investigator, and spoke at schools about ethics. This all came to an end in 2011, when he admitted to helping deliberately drive down the stock price of homebuilder Lennar and was ordered back to prison. At first, Minkow struggled to meet basic expenses. Two banks closed his business account because California law didn't allow minors to sign binding contracts, including checks. He was also plagued by customer complaints and demands for payment from suppliers. At times, he found it difficult even to meet payroll. Faced with a shortage of operating capital, he financed his business via check kiting, stealing and selling his grandmother's jewelry, staging break-ins at his offices, and running up fraudulent credit card charges. After that, Minkow branched into the "insurance restoration" business. With the help of Tom Padgett, an insurance claims adjuster, Minkow forged numerous documents claiming that ZZZZ Best was involved in numerous restoration projects for Padgett's company. Padgett and Minkow formed a fake company, Interstate Appraisal Services that verified the details of the restorations to Minkow's bankers. Flush with loans from these banks, Minkow expanded ZZZZ Best across Southern California. Minkow took the company public in January 1986, garnering a spot on NASDAQ. The accountant who audited the company before it went public didn't visit the insurance restoration sites himself. Had he done so, he would have discovered that they were mailboxes located throughout the San Fernando Valley. Minkow retained a 53 percent controlling interest, making him an instant millionaire on paper. Going public seemingly offered him a way to cover up his fraudulent activities. Under securities law of the time, he had to retain his personal shares for two years. He planned to sell a million of his shares to the public in January 1988, believing this would give him enough money to pay everyone off and go completely legitimate. On March 30, 2011, Minkow pleaded guilty to one charge of insider trading. He entered a plea agreement, and instead of the maximum sentence of 30 years, he was sentenced to five years in prison, and $584 million in damages to Nicholas Marsch, a San Diego developer. He has since been accused by congregants from his former church of swindling them, a claim the FBI is currently investigating. Minkow is serving his sentence at Federal Medical Center in Lexington, Kentucky. .
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