A Set-Back for Redemption

Barry Minkow was but 21 years old when he created ZZZZ Best, a carpet-cleaning company that was a classic Ponzi scheme.  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,  57 counts of fraud charges for Mr. Minkow, and 7 years in prison.

But, he emerged a converted man.  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 “Sixty Minutes” 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.  His statements about Lennar did indeed cause the company’s stock to go down.  Indeed, he encouraged federal investigators to look into Lennar, alleging that the company was a “Ponzi scheme” that was shuffling funds from subsidiary to subsidiary.  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.  Lennar had had enough and then filed suit against Mr. Minkow for libel and extortion.  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.  The church was a nice touch.  The bottom line is that this man should never have been allowed anywhere near securities – their sales, their worth, and their sellers. The temptation was too great, the draw too strong, and the short sales too easy.  Fool us once, shame on you.  Fool us twice, shame on us.  Except in the annals of “Cheers,” recovering alcoholics should not run bars, and recovering security fraudsters should not be buying, selling, or analyzing securities. Mr. Minkow’s guilty plea to the Lennar-related charges is welcome, but no churches, stock sales, fraud detection, or “60 Minutes” interviews when he gets out this time.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
This entry was posted in Analysis. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.