Barry Minkow, the millionaire entrepreneur-convicted ponzi-pastor, might go to jail again.
Minkow is negotiating a plea deal with the U.S. right now related to the charges that he falsely said Lennar, a huge home building company, was a fraud because he was short the stock. He could face up to 5 years in jail.
Minkow has a long history of credibility problems, so let’s start at the beginning.
Minkow went to jail for 7 years in the 1980s for operating the business he started in high school, ZZZZ Best, which he claimed was a carpet cleaning business, as a ponzi scheme.
In jail, he apparently changed, found God, and wanted to found a business that discover frauds and support itself by shorting the companies.
He also became a pastor (at the Community Bible Church in Mira Mesa). It sounds like the plot line of a movie, and it is, Minkow is making it – watch the trailer below.
But then he shorted Lennar, one of the nation’s largest home building companies, and released a report saying the company was a fraud. The LA Times describes the report’s being “laced with unsubstantiated allegations against the company and its executives.”
Lennar’s stock price tumbled $500 million in two days — 20% of its value — and Lennar filed libel and extortion lawsuits against Minkow.
Minkow said he didn’t profit off the tumble.
He wrote in an email in March 2010:
“Always assume we are shorting any public company we report on.”
“I had a 3 hour, 1400.002008 profit from a Lennar trade — BEFORE any report was issued, so technically I could not say I had never shorted Lennar.
“But in the spirit of the law, we all know that the question pertains to the period in which we released information and the answer to that question is no — when Lennar’s stock dropped 40% in 2 days in 2009 January I was not short.”
But, his trading records say otherwise. From the WSJ:
Mr. Minkow bought about $20,000 in options contracts on the stock of Miami-based home builder Lennar Corp. (LEN) in 2009, betting that the company’s stock price would fall, Mr. Entin said.
He declined to characterise the non-public information that his client allegedly received, or to reveal its source.
So now, people are doubting that he ever received inside information. And because he destroyed a fair amount of evidence, according to a judge on the case, who said, “Minkow has withheld key documents, destroyed or discarded important evidence, concealed the identity of material witnesses,wilfully violated court orders and engaged in actions to cloud his misconduct” — we probably won’t ever know if he received insider information or simply lied about Lennar.
His lawyer insists that he did not lie about Lennar’s being a fraud –
“He’s not pleading guilty to having made up info, he’s not pleading guilty to extortion, and he’s not pleading guilty to having lied about Lennar,” Mr. Entin said.
All we know is that he appears to be working out some deal with the judge where he doesn’t have to admit anything other than muted down insider trading charges in one company that is not Lennar, because-
Federal prosecutors haven’t charged Minkow in the Lennar insider trading matter, his lawyer said. He is negotiating a deal to plead guilty to one count of “trading on information that wasn’t otherwise public,” Entin told Bloomberg.
So if the judge accepts the plea deal (there’s about a week left), we won’t find out exactly what he plead guilty to, on the record at least. Sources tell LA Times that it is in fact the Lennar matter.
However! There is one bit of closure to this story that, aptly, comes from a church pamphlet after Mankow plead guilty –
“Pastor Barry no longer considers himself above reproach as he has agreed to plead guilty to a criminal count related to the Lennar lawsuit,” the letter from church elders to parishioners said, according to Bloomberg.
Click below to watch the movie trailer. Minkow is an executive producer.