Con man Minkow gets 5-year max for $500M fraud
{{#rendered}} {{/rendered}}Convicted con man Barry Minkow, in his youth a millionaire carpet cleaning entrepreneur who later reinvented himself as a fraud fighter for the FBI and a church pastor, was sent back to prison Thursday for five years for involvement in a scam that cost homebuilder Lennar Corp. some $580 million in lost stock value.
U.S. District Judge Patricia Seitz imposed the maximum possible sentence on Minkow, 45, who she said has obvious talents to inspire and lead people but appears unable to resist the temptation to commit fraud over and over again.
"He is a very gifted person. There is no moral compass that says 'stop,'" Seitz said. "That's what concerns me."
{{#rendered}} {{/rendered}}Minkow gained national attention as a teenager in the 1980s by founding the ZZZZ Best carpet cleaning company in Southern California. At age 21, he became the youngest person at the time in U.S. history to take a company public and became very wealthy on paper.
But ZZZZ Best turned out to be involved in a fraud scheme in which investors poured $100 million into fake fire and water restoration projects. In 1988, Minkow went to prison after conviction on 57 fraud charges.
After his release in 1995, Minkow founded the Fraud Discovery Institute that helped the FBI and other law enforcement agencies ferret out white-collar crimes around the country, and he was pastor of a San Diego church. Minkow's attorney, Alvin Entin, said the fraud institute helped uncover more than $1 billion in scams.
{{#rendered}} {{/rendered}}"He is not the devil incarnate," Entin said. "He's a person who has tremendous potential when it is properly channeled."
In the Lennar case, Minkow admitted being part of a scheme to pressure the company to pay a San Diego businessman, Nicolas Marsch III, who claimed Lennar owed him $39 million from a California land deal. Using his high-profile status and access to national media, Minkow in 2009 issued press releases, blasted out emails and posted YouTube videos claiming Lennar was beset by faulty accounting, misappropriation of corporate funds and other wrongdoing.
It was all false, Minkow admitted when he pleaded guilty March 30 to a securities fraud conspiracy charge.
{{#rendered}} {{/rendered}}"He knows that what he did was 110 percent wrong," Entin said.
Marsch has not been charged and has said he hired Minkow only to investigated Lennar, not to attempt to manipulate its stock prices.
Entin asked Seitz to shave some time off Minkow's prison term because he quickly accepted responsibility. But prosecutor Cristina Perez Soto said the maximum was warranted, particularly since Minkow had gotten a second chance to rebuild his life.
{{#rendered}} {{/rendered}}"He squandered his opportunities after his first conviction," she said. "The world at large embraced him, and he squandered that."
Minkow, who is to report to prison Sept. 21, was also ordered to pay Lennar more than $583.5 million in restitution for the estimated 20 percent drop in Lennar' stock price. The company said in a statement it was pleased with the sentence and efforts to "protect the integrity of our securities markets."
"We expect that other individuals responsible for the illegal attack on Lennar's stock and shareholders will soon be brought to justice," said the statement by Lennar attorney Daniel Petrocelli.
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