Thursday, March 17, 2011

Barry Minkow, White Collar Rogue From The 80s Turned Fraud Analyst, Reportedly Will Plead Guilty To Insider Trading Charges

Media outlets report that Barry Jay Minkow, of Poway, California, who just turned 44 today, is expected to plead guilty to insider trading charges in connection with his trading in shares of Lennar Corp., a large home builder. Minkow is infamously known for his conviction on securities fraud, racketeering and a host of other financial fraud felonies in December 1988 when this apparent boy business phenom (he was 21 at the time) and his company, ZZZZ Best, turned out to nothing more than a Ponzi scheme. He was sentenced to 25 years in prison and ordered to pay $26 million in restitution, but was released in 1995. Since his release, Minkow formed a business called the Fraud Discovery Institute with which he would identify companies that allegedly had fraud issues or that had executives in their management team who had inflated their resumes (see our Resume Liar's Club). Minkow reportedly shorted those stocks he had identified and profited from the drop in stock price upon the announcements of his findings. In the Lannar case, Minkow led an online attack on the company in 1999 accusing it of fraud, based upon a disgruntled client's acusations. This led Lennar to name Minkow as a defendant in a libel and extortion case originally filed against the disgruntled client, Nicholas Marsch. Meanwhile, Minkow allegedly traded in the company's stock based on "non-public" information, which, in turn, has led to the current criminal action. The charge carries a maximum 5 year sentence.

Read the story here, here and here.

Update (1/23/14): Minkow has now pleaded guilty to charges he embezzled more than $3 million from the San Diego Community Bible Church.  According to Fox 5 TV:
Barry Minkow, who is currently in custody after his conviction on unrelated securities fraud charges, admitted his guilt in the embezzlement case in a hearing before Magistrate William Gallo.
 Minkow, who pleaded guilty to conspiracy to commit mail fraud, wire fraud and bank fraud, faces up to five years in prison when he is sentenced April 7.
 “Barry Minkow pled guilty today to embezzling more than $3 million in money intended as church donations (while employed as a pastor) and concealing it all from the IRS,” said Joel P. Garland, Acting Special Agent in Charge of IRS Criminal Investigations for the Los Angeles Field Office.
 “Barry Minkow has admitted not only his fraud, but his omission of over $890,000 in unreported income and over $250,000 in tax,” Garland said.
 Minkow, 46, admitted to a litany of improper conduct that continued for more than a decade, including opening unauthorized bank accounts on behalf of the San Diego church, forging signatures on church checks, using funds drawn on legitimate church accounts for his personal benefit, and charging unauthorized personal expenses on church credit cards.
Read the updated story here.
See Minkow profiled in our White Collar Rogues Gallery.

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