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Barry Minkow charged with scamming Lennar, FBI

By Palm Beach Business.com

MIAMI — One of the most notorious — and youngest — con men of the 1980s is in trouble with the law again, this time charged with manipulating the stock of Lennar Corp.

Federal prosecutors have charged Barry Minkow, 44, of San Diego with making false and misleading statements in order to depress the stock of Miami-based Lennar, one of the largest homebuilders in the nation. Prosecutors say Minkow, who in recent years, has become something of a corporate crime buster and used connections he developed with the FBI to initiate an investigation into Lennar based on false allegations. He faces a maximum of five years in prison, if convicted.

“In this case, Minkow's manipulation of the market and his relationship with the FBI for his personal gain caused a severe drop in the stock prices of a large, local corporation,” U.S. Attorney Wifredo Ferrer said. “This type of deceit and abuse of trust will not be tolerated. Together with the FBI and the cooperative efforts of the SEC, we will investigate and prosecute stock manipulation cases to help protect the integrity of our capital markets.”

Minkow made headlines in the mid-1980s as head of ZZZZ Best, a rug-cleaning company he created as a teenager. The company later expanded into  “insurance restoration” work, cleaning up fire and water damaged buildings.  As a 19-years-old,  Minkow took ZZZZ Best public, the youngest CEO of a company to do so.

While the rug-cleaning business actually had a reputation for doing good work, the higher end insurance business was little more than Minkow’s imagination, financed through bogus receivables and ultimately was exposed as nothing more than a Ponzi scheme.  Minkow was convicted of racketeering and spent seven years in prison as a result.

Afterward, Minkow founded the Fraud Discovery Institute, a for-profit company that claimed to expose corporate corruption for a fee.

Two years ago, according to court documents and published reports,  Minkow’s firm issued a devastating “expose” against Lennar, calling the company “a financial crime in progress” and questioning the integrity of Lennar’s financial reports and its top executives. Lennar’s stock plummeted; its market capitalizaton — the market value of its stock — fell by $500 million.

Lennar sued Minkow for libel and extortion, and in January, a Miami-Dade judge ruled in the company’s favor.

Federal prosecutors now are alleging that a client paid Minkow and his firm to pressure  Lennar into paying money demanded by a business partner in a prior land deal. Minkow used the internet, press releases, email, You Tube and regular mail to broadcast false and misleading statements about Lennar, with the intent of artificially depressing Lennar's stock price.

Minkow also fed false information to federal law enforcement with the aim of getting a criminal investigation started. And once Minkow confirmed that the FBI had indeed opeedn a criminal probe, he allegedly used that information to buy Lennar shares at depressed prices for his own benefit.

Minkow is expected to make his first appearance in court next week.

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MARCH 24, 2011 click to go home
 
         
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