Ex-conman Minkow accused of securities fraud

AP News
Posted: Mar 24, 2011 4:07 PM
Ex-conman Minkow accused of securities fraud

Barry Minkow, who was convicted of defrauding millions from investors with a carpet cleaning company in the 1980s, was accused Thursday of conspiring to commit securities fraud against homebuilder Lennar Corp.

Federal prosecutors in Florida accused Minkow of releasing false information about the Miami-based firm on the Internet and by email in early 2009 to decrease the company's stock price and compel Lennar to make cash payment to another conspirator.

"These statements alleged widespread improprieties in Lennar's financial reporting and business structure, and attacked the personal character of Lennar's management," prosecutors said in court documents. Minkow did so with "reckless regard for their truth."

Lennar's stock tumbled 20 percent after Minkow's report.

Minkow also abused his relationship with federal authorities as an investigator to report false information and later traded Lennar securities for his own benefit, prosecutors said.

Minkow's attorney did not immediately return calls for comment.

Minkow was convicted of defrauding investors through his ZZZ Best carpet cleaning company. He started the company as a teenager in his family's Southern California home and at 21 became the youngest person in U.S. history to take a company public.

The company purportedly restored water and fire damaged buildings, and investors were even given hard hats and tours of restoration projects. Authorities determined the project was a scheme and Minkow was convicted of 57 counts of securities, credit card and mail fraud scheme.

Prosecutors said victims lost more than $100 million.

After serving seven years in prison, he became a pastor and operated a for-profit fraud investigation firm in San Diego, the Fraud Discovery Institute. Documents released Thursday described Minkow as a confidential source for the FBI, and investigators have credited him with helping uncover a number of fraud cases.

Minkow was charged Thursday in an information, a document that indicates he is likely to plead guilty. U.S. District Judge Patricia Seitz has scheduled a change of plea hearing for March 30.

A note posted last week on the Community Bible Church's website in San Diego, where Minkow had been a pastor, stated that he had resigned.

"He has informed the church that he will plead guilty to one criminal count related to a lawsuit with which he was associated," the note said.


AP Business Writer Marcy Gordon in Washington contributed to this report.