Minkow, Facinantingly Evil Financial Genius Awaits Sentencing

MinkowBarry Minkow, former pastor at Community Bible Church in San Diego, was convicted on Wednesday of embezzling more than $3 million from his congregation. Already in custody, the 46-year-old Minkow was in the midst of serving a five-year sentence in Florida on an unrelated securities fraud charge. Minkow, a business prodigy turned Ponzi scheme mastermind, then convict, pastor, fraud investigator, author, actor, and convict again, will be sentenced on April 7th.

Minkow’s path to ordination began in the late 80s, when he converted from Judaism to Christianity in preparation for a 25-year sentence that he had been given as a result of a 54-count conviction made up almost entirely of felonies related to financial fraud. Minkow ended up serving seven years of that sentence. Before his troubles with the law, Minkow was considered a young business genius. The “financial whiz kid” appeared on television and in magazines, “preaching” about how to run a successful enterprise in the lectures he gave at business schools.

In order to be able to fit in all of his various careers into one lifetime, Minkow started the ball rolling at an early age. By nine, he had a telemarketing job at the carpet-cleaning business where his mother worked. By fifteen, he was running his own carpet-cleaning business out of his parents’ garage in Reseda, California and had three employees. When the business encountered a shortage of operating capital, Minkow dealt with the problem through various illegal moves. Ultimately, Minkow settled on insurance fraud as the best way to finance his carpet-cleaning business, ZZZZ Best.

Minkow, in cahoots with insurance claims adjuster Tom Padgett, expanded ZZZZ Best to include “restorations” of non-existent fire and flood-damaged buildings. Operating capital shortage resolved, Minkow was able to grow his business fast and furiously. Four years from ZZZZ Best’s inception, a 19-year-old Minkow was employing 1400 people. Along with the media, investors believed Minkow’s claim that his carpet cleaning and restoration business was making $43 million a year, and in 1986, before his 20th birthday, Minkow became the youngest person in U.S. history to lead a company through an IPO. He became a paper millionaire. However, because investors were being paid on restoration jobs that did not exist, ZZZZ Best ran into cash flow problems once again. In January of 1998, exactly two years after the ZZZZ Best IPO, Minkow was indicted by an L.A. grand jury on the aforementioned 54 counts of financial fraud.

Upon Minkow’s release from prison in 1995, he worked as a pastor in Chatsworth. While there, wrote a book about the experience titled Clean Sweep: The Inside Story of the ZZZZ Scam–One of Wall Street’s Biggest Scams. A couple of years later in San Diego, where Minknow was working as a pastor at Community Bible Church and giving sermons on materialism in an orange prison jumpsuit, a member of the congregation solicited Minkow’s help in looking into an Orange County money management firm. Minkow’s investigation led to federal authorities’ discovery of a $300 million Ponzi scheme, which in turn gave Minkow the idea to found the Fraud Discovery Institute, a for-profit investigative firm. In his new role as fraud expert, Minkow again became a national sensation and appeared on the television programs Your World with Neil Cavuto and 60 Minutes. In 2009, in the production booth of a movie about his life, Minkow revealed to actor James Caan (in a recorded exchange) that he had financed the movie by “clipping”  (slang for swindling) companies.

Predictably, Minkow was the subject of several false accusation lawsuits that were filed by the companies he accused of fraud. Most of the lawsuits have not been fruitful, as criticizing companies is usually protected under the First Amendment. Removing a company from Minkow’s sights has cost companies as much as $300,000 in out-of-court settlements. Things went squirrely again for Minkow when he accused Lennar, a major homebuilding company, of fraud. Lennar countered by naming Minkow as a defendant in a libel-and-extortion lawsuit. The Florida judge hearing the case became infuriated with Minkow, calling him a liar in court and subsequently ordered him to pay Lennar $584 million in damages.

The SEC had long been looking into Minkow’s trading practices, and Miami federal prosecutors were eventually able to charge Minkow with one count of conspiracy to commit securities fraud. Minkow pled guilty to one count of insider trading on March 16, 2011, the same day he resigned from as senior pastor of Community Bible Church. Minkow, the business prodigy and Ponzi scheme mastermind, convict, pastor, author, fraud investigator, actor, and convict again awaits sentencing on his embezzlement conviction.

By Donna Westlund

Clean Sweep: The Inside Story of the ZZZZ Best Scam–One of Wall Street’s Biggest Scams

Bloomberg Business Week

L.A. Times

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