Barry Minkow was but 21 years old when he created ZZZZ Best, a carpet-cleaning company that was a classic Ponzi scheme.Â Mr. Minkow defrauded investors of $300 million and even duped Oprah inot being a believer in his entrepreneurship before his fake credit card charges emerged, with the result being a spool unwinding, the discovery of securities fraud at ZZZZ Best, Â 57 counts of fraud charges for Mr. Minkow, and 7 years in prison.
But, he emerged a converted man.Â He had a jailhouse ministry that was so effective that his 25-year sentence was reduced to the 7 he served. Upon his release, he became the pastor at the Community Bible Church in San Diego and a fraud detector extraordinaire. He was all over the media and internet with his takes on which companies were frauds. Folks listened because who knows a con better than an ex-con. In a 2005 â€œSixty Minutesâ€ segment he said that he had to be accurate in his assessments of companies as frauds because otherwise law enforcement would be all over him.
His interview words were prescient. Mr. Minkow will plead guilty to charges that he spread false information about Lennar Corporation, even as he positioned himself short in the stock.Â His statements about Lennar did indeed cause the companyâ€™s stock to go down.Â Indeed, he encouraged federal investigators to look into Lennar, alleging that the company was a â€œPonzi schemeâ€ that was shuffling funds from subsidiary to subsidiary.Â Mr. Minkow continued to push his allegations as Lennar executives tried to respond. At one point Mr. Minkow met with company officials and offered to stop making the statements in exchange for stock and cash.Â Lennar had had enough and then filed suit against Mr. Minkow for libel and extortion.Â The suit attracted federal investigators, and the result was charges charges against Mr. Minkow for conspiracy to commit securities fraud.
He was a convincing recovering trickster.Â The church was a nice touch.Â The bottom line is that this man should never have been allowed anywhere near securities â€“ their sales, their worth, and their sellers. The temptation was too great, the draw too strong, and the short sales too easy.Â Fool us once, shame on you.Â Fool us twice, shame on us.Â Except in the annals of â€œCheers,â€ recovering alcoholics should not run bars, and recovering security fraudsters should not be buying, selling, or analyzing securities. Mr. Minkowâ€™s guilty plea to the Lennar-related charges is welcome, but no churches, stock sales, fraud detection, or â€œ60 Minutesâ€ interviews when he gets out this time.