Trying not to let sleazy dogs lie

By Al LewisDow Jones Newswires
Posted: 01/25/2009 12:30:00 AM MST


People with no conscience can do well in business — at least until their schemes unravel.
Barry Minkow was one of those people.
"We could walk into a meeting . . . and I could tell a community of Wall Street investors that my company was profitable when I knew it was not — and not blink," he said. "I was a thief and a liar and a crook."
Today, he's different.
"Today, if my wife asked me if I emptied the trash, and I forgot and I say, 'Yes, I did,' I'll run and empty the trash and then feel guilty, and confess that I lied."
He still lies. But now it bothers him.
"Just because I'm not committing securities fraud or perpetrating a Ponzi scheme does not mean that my life is not in dire need of constant improvement," he said.
Minkow now claims to have a conscience, a still-small voice that empathizes, chooses right over wrong, and discerns truth from delusion and deception.
I find it improbable that a renegade businessman can grow a conscience like a salamander grows a lost appendage. But some things about Minkow are improbable.
At age 16, he started a carpet-cleaning outfit called ZZZZ Best Co. in his parents' garage in Inglewood, Calif.
Despite his youth and the low profit margins that such companies are known to generate, Minkow was able to take ZZZZ Best through an initial public stock offering in just a few years.
He claimed a net worth of $90 million, drove a red Ferrari with a "ZZZZ BEST" license plate and appeared on Oprah's show as a Wall Street whiz kid.
As it turned out, though, Minkow booked as revenue the money he had borrowed from the mob, so he could borrow millions more from banks and investors. He forged thousands of documents and leased buildings that he staged as work sites when auditors wanted to check his work.
By age 23, he had been convicted of 57 counts of fraud involving securities, credit cards and the U.S. mail. A memorandum prepared by prosecutors for his 1989 sentencing described him as remorseless.
"You're dangerous because you have this gift of gab, this ability to communicate," U.S. District Judge Dikran Tevrizian told Minkow. "You don't have a conscience."
Minkow told me he didn't have a conscience because he "didn't know the Lord." A Jew, he found Jesus in prison.
After nearly eight years behind bars, he went on to Jerry Falwell's Liberty University, where he earned a master's degree in divinity. He then became pastor of Community Bible Church in San Diego.
In 12 years, he said, his flock has grown from 135 to more than 1,500. "The whole theme of the Bible," said Minkow, now 42, "is that people can change."
In 2001, he started the Fraud Discovery Institute, where he profits by ratting out white-collar miscreants. Sometimes he shorts the stocks of companies he targets. Other times, people hire him for a fee.
This business model may seem ethically challenged to some, but news reports over the years credit him with uncovering about $1.8 billion worth of fraud, many of it in multimillion-dollar Ponzi schemes. He has even received applause from the FBI.
Several executives of publicly traded companies have had to resign after Minkow uncovered fabrications on their resumes, including MGM Mirage's former chief executive, J. Terrence Lanni, who stepped down in November.
"He has done some good things," Tevrizian told CBS's "60 Minutes" in 2005. "He's uncovered several hundreds of millions of dollars' worth of frauds. And I give him credit for that."
Now, Minkow is gunning for Lennar Corp.
On Jan. 9, Minkow started a website, lenn-ron.com, and he has made a YouTube video likening Lennar to Enron and alleged Ponzi-schemer Bernard Madoff.
Immediately after Minkow claimed that Lennar was "a financial crime in progress," Lennar's stock plunged as much as 28 percent. Lennar responded by denying Minkow's claims and filing a lawsuit accusing him of defamation and extortion.
A California developer named Nicolas Marsch III, who has sued Lennar over his partnerships with the homebuilder, is reportedly paying Minkow as much as $100,000.
Lennar said in its lawsuit that Marsch "threatened to air (Lennar's) dirty little secrets if Lennar did not make an immediate payment of $39 million."
Minkow said it's not true, and he claims Lennar's lawsuit will only lead more people to suspect his claims are true.
"Why else would anybody care about what Barry Minkow has to say?" he said.
So far, Lennar stock has yet to recover.
On Wednesday, a San Diego court rejected Lennar's motion for a restraining order and injunction against Minkow's disparaging website.
Whether Minkow has grown a conscience is a matter of faith. But for Lennar, one thing is certain: He's still in business.