Barry Minkow
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Barry Minkow (born March 17, 1967) was an American teenage 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 became a prison inmate for over 7 years subsequent to his misdeeds. During his time in prison Minkow became involved in Christian ministry, which continued upon his probationary release from prison in April, 1995. Today he is senior pastor of a San Diego, California church, having renounced and forsaken his previous misdeeds. Minkow is also a recognized fraud expert, and speaks on the subject to university students and the business community in an effort to prevent fraud.
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Beginnings of Zzzz Best
Raised in a culturally Jewish family inside a modest Reseda house within the San Fernando Valley of Los Angeles, Minkow learned his business manners from his mother's job as a telemarketer. At the age of 15 while a high school sophomore he started his own carpet cleaning company, Zzzz Best, in his parents' garage in Reseda. From its humble beginnings in home carpet cleaning by a few employees, in four years it had 1,400 employees and had begun to specialize in insurance restoration business. His frequent television commercials in the Los Angeles market during 1986-7 featured the then young entrepeneur in business suit with tie, confidently extolling the superiority of Zzzz Best.
Minkow worked hard to form dozens of business contacts. His most important contact was Tom Padgett of Interstate Appraisal Services, an insurance claims adjuster who could get large restoration contracts. He was presented as a business success story in magazines and TV shows. Mayor of Los Angeles Tom Bradley declared a Barry Minkow Day. He lectured in business schools and contributed to Narcotics Anonymous. He had a Ferrari Testarossa and a mansion in Woodland Hills. Zzzz Best' stock raised to $18 (USD) a share on Wall Street for a total of more than $280 million (USD).
However, behind the scenes his company was nothing more than a front to attract investment for a Ponzi scheme. Zzzz Best did not clean anywhere near as many carpets as claimed but generated a plausible 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. One of the first contracts he received was from the Genovese Mafia family. He hired reputable accountants and lawyers to boost his image. Later, upon indictment, he claimed that he had intended to form a legitimate business empire and pay back everything, nobody being the wiser. He hoped to attract public stock offering that he would not have to pay back.
Zzzzenith
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 (USD) to complete the building in twenty days.
He almost got away with it. Magazines and TV shows did not bother to check his background. Investigations by the Securities and Exchange Commission, the FBI, two accounting firms and various individual investigators found nothing. Zzzz Best was about to buy rival carpet cleaning company KeyServe when their stock suddenly plunged. The Feshbach Brothers investment firm had never believed the Zzzz Best story and had completed a series of damning investigations while shorting the company's stock. They then released their findings to the public, demonstrating that the company's large contracts had been largely fictional. This received widespread attention when the story was picked up by the Los Angeles Times, and spurred FBI investigation of Minkow's link to the Genovese crime family. Minkow gave himself up in 1987.
Conviction and prison
The court's approximation of the extent of fraud was $26 million (USD). Eleven Zzzz Best insiders were convicted of fraud alongside Minkow, who got 25 years in prison. He served just under seven and a half years, most of them while out of state at the federal prison in Englewood, Colorado. During his early prison stay in San Pedro, California before his trial, Minkow became a follower of Jesus. This decision was foundational in helping Minkow come clean with the justice system regarding his charged offenses, though he made missteps in telling the truth immediately after this decision. This intensified the charges against him - and led to the stiff 25 year sentence he received.
While in prison Minkow earned a B.A. degree and a Master of Arts degree in Church Ministries (with an emphasis on Theology and Apologetics) from Liberty University. In 1996 he earned yet another degree, a Master of Divinity, also from Liberty.
Release and a different path
After Minkow's early release from prison in 1995, he went to work at the Church at Rocky Peak in Chatsworth, California (near his Reseda childhood home) 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. As of 2005, Rev. Minkow remains in this position.
Minkow also is an executive at the Fraud Discovery Institute in San Diego, which he helped found.
Recent developments
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 per cent of his $68,500 (USD) yearly salary each month to the bank, and lives in a modest Imperial Beach, California stucco house so as to continue to be able to repay the debt in at least a partial way. Additionally, the great majority of his speaker's fees go to pay those he earlier had victimized. Minkow has repaid his victims each month for 12 consecutive years. He is married to his wife Lisa, and they live with two adopted Guatemalan children and three dogs in their southwest San Diego County home.
Sources/external links
- Minkow, Barry. Clean Sweep:The Inside Story of the Zzzz Best Scam. . . One of Wall Street's Biggest Frauds ISBN 0785279164
- Community Bible Church/Senior Pastor Barry Minkow (biography) (http://www.sandiegocbc.org/love/app/hdis/cbc/index3.html?min_id=53#minkow)
- Students learn from ex-con (http://www.dailyaztec.com/archive/1997/04/30/file002.html)
- Barry Minkow biography/Fraud Discovery Institute (http://www.frauddiscovery.net/barrybio.html)
- Insights Reap Redemption For a White-Collar Criminal (from the Wall Street Journal) (http://www.taonline.com/WSJArticles/DisplayArticle.asp?ID=128)