Barry Minkow
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Barry Minkow (born March 17, 1967) is an American religious leader and ex-convict.
As a teenager Minkow was a fraudulent entrepreneur who managed to present the front of a successful businessman for a number of years during the 1980s. He was convicted of fraud and sentenced to 25 years in prison, but served only seven years. During his time in prison, Minkow became involved in Christian ministry, which continued after his probationary release from prison in April 1995.
Today he is senior pastor of the Community Bible Church[1] in San Diego, California. having renounced his felonious acts. Minkow is recognized as an expert on fraud, and speaks on the subject to university students and the business community in an effort to prevent fraud.
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[edit] Beginnings of Zzzz Best
Minkow was raised in a Jewish family in a modest house in Reseda, California, a town in the San Fernando Valley. He learned his business manners from his mother's job as a telemarketer. At the age of 15 while a high school student, he started his own carpet cleaning company, "Zzzz Best", in his parents' garage. In its first four years, the company grew from a home carpet cleaning service with a few employees into a company with 1,400 employees that specialized in "insurance restoration" cleaning. One of the first contracts Zzzz Best received was from the Genovese Mafia family. His frequent television commercials in the Los Angeles market during 1986-7 featured Minkow in a business suit, confidently extolling the superiority of Zzzz Best.
Minkow formed dozens of business contacts. One of his contacts was Tom Padgett of "Interstate Appraisal Services", an insurance claims adjuster who appeared to get large restoration contracts. Minkow was presented as a business success story in magazines and TV shows. Los Angeles mayor Tom Bradley declared a Barry Minkow Day. Minkow gave lectures at business schools, owned a Ferrari Testarossa sportscar, and bought a mansion in Woodland Hills, California. Zzzz Best' stock rose to $18 (USD) a share on Wall Street, valuing the company at more than $280 million dollars.
Behind the scenes, however, Minkow's company was little more than a front to attract investment for a Ponzi scheme. Zzzz Best did not clean anywhere near as many carpets as claimed. It generated a fraudulent paper trail to fool potential investors. Interstate Appraisal Services was formed as a separate company to support this fraud. Minkow raised money by factoring his accounts receivable for work under contract. He hired reputable accountants and lawyers to boost his image. Upon indictment, he claimed that he had intended to form a legitimate business empire and pay back everything before he could be found out.
[edit] Downfall
Zzzz Best went public on the stock market in 1986. When accountants wanted to inspect Zzzz Best's operations, Minkow borrowed fake offices for a tour of "Interstate Appraisal Services" and used an incomplete building to present a fake restoration job. He used $2 million to complete the building in twenty days.
There were signs of problems, but investors chose to ignore them. The company's Chief Financial Officer also owned a florist business, and that company was accused of having stolen over $92,000 by charging flowers to customers' credit cards without authorization. Minkow decided to ignore these allegations, and short-sellers including the Feshbach Brothers took positions betting that Zzzz Best's stock would fall.
Magazines and TV shows did not bother to check his background. Investigations by the U.S. Securities and Exchange Commission, the FBI, two accounting firms and various individual investigators found nothing. Minkow bribed a security guard to give him access to a newly constructed building in Sacramento, California, so that he could present it to his auditors as a wreck that Zzzz Best had recently finished restoring. Zzzz Best was about to buy rival carpet cleaning company KeyServe when their stock suddenly plunged. Members of the press had been researching the company, and communicating with short-sellers who had done their own research. These investigations indicated that the company's contracts had been largely fictional. The story ran in the Los Angeles Times and spurred FBI investigation of Minkow's link to the Genovese crime family and white separatist movements. Minkow was arrested and indicted in 1987.
[edit] Conviction and prison
The court's estimate of the extent of fraud was US$26 million. Eleven Zzzz Best insiders were convicted of fraud alongside Minkow, who received 25 years in prison. He served just under seven and a half years, most of them at Englewood Federal Prison in Jefferson County, Colorado. During his early prison stay in San Pedro, California before his trial, Minkow became a Christian. He earned Bachelor of Arts and Master of Arts degrees in Church Ministries (with an emphasis on Theology and Apologetics) from Liberty University. In 1996 he earned a Master of Divinity degree from Liberty.
[edit] Release and religion
After Minkow's early release from prison in 1995, he went to work at the Church at Rocky Peak in Chatsworth, California as Director of the Bible Institute and Pastor of Evangelism.
Since 1997 he has served as the senior pastor of San Diego's Community Bible Church.
Minkow also holds an executive position at the Fraud Discovery Institute in San Diego, which he helped found. In this capacity, he posed as a potential investor in order to uncover an investment scheme run by pastor Steve O. Cooper of Nu-Way Christian Ministries Inc. of San Diego. Cooper and his wife had been promising investors returns of 3% a month; Minkow passed the information to authorities, and the NuWayCorp investment firm scheme was shut down by regulators in August 2005.[1][2] He has similarly investigated Derek Turner's Turning International Ltd. scam in the Bahamas, Rainmaker Managed Living, MX Factors, and others.
[edit] Restitution
The original judgment on behalf of investors and lenders against Minkow was dismissed in 2002 by U.S. District Court judge Dickran Tevrizian, Minkow's judge at his 1987 sentencing. His probation was also cut short as of the fall of 2002. Currently the former convict's outstanding monetary debt remains with Union Bank of California, with principal and interest totalling around $19 million (USD) as of 2004. Minkow pays up to 30% of his $68,500 yearly salary to the bank.[citation needed] Additionally, it has been said that the great majority of his speaker's fees go to pay this debt.[citation needed] Minkow and his wife Lisa, live with two adopted Guatemalan children in southwest San Diego County, California.
[edit] References
- ^ Associated Press (2005). California regulators shut down pastor's investment firm. SFGate. Retrieved on Error: invalid time.
- ^ Wayne Strumpfer, Alan S. Weigner, Corporations Counsel (2005). In the Matter of the DESIST AND REFRAIN ORDER Issued To: Steve O. Cooper, Sr, Peggy Sue Cooper, Michael E. Stevenson, M.E. Stevenson, Inc. Department of Corporations of the state of California. Retrieved on Error: invalid time.
- Minkow, Barry, Clean Sweep:The Inside Story of the Zzzz Best Scam... One of Wall Street's Biggest Frauds, ISBN 0-7852-7916-4
- Minkow biography at Community Bible Church web site
- Minkow biography at Fraud Discovery Institute web site
- "Insights Reap Redemption For a White-Collar Criminal", Wall Street Journal, (date)
- California regulators shut down pastor's investment firm, Associated Press, 19 August 2005
- Desist and Refrain Order issued to Steve O. Cooper, Sr., Peggy Sue Cooper, Michael E. Stevenson, M.E. Stevenson, Inc., Department of Corrections of the State of California, OAH No. L-2006010092
- 60 Minutes segment on Minkow August 27, 2006
