ZZZZ Best Co., Under SEC Gun, Files Chapter 11
ZZZZ Best Co., the Reseda carpet-cleaning firm founded by Barry Minkow, will file for Chapter 11 bankruptcy protection, the company said today, because it has discovered facts that “appear to substantiate allegations of fraud associated with the company’s restoration business.”
The company said an apparent misappropriation of funds has “substantially depleted the company’s liquid assets.” ZZZZ Best’s board of directors said that information has been turned over to the Securities and Exchange Commission and that it will fully cooperate with federal and state regulatory authorities.
The SEC is believed to be investigating the company in connection with possible securities violations and money laundering.
Trading at 75 Cents
Trading in ZZZZ Best’s stock was halted in over-the-counter trading early today but later resumed. As of late morning, ZZZZ Best’s stock was trading at 75 cents, down $2.75 on 2.6 million shares traded. Earlier this year, ZZZZ Best’s stock traded as high as $18.375.
Minkow, 21, resigned as chief executive of the firm late last week citing “severe medical problems.”
The carpet-cleaning firm’s stock has been falling since a May report by The Times that ZZZZ Best rang up $72,000 in false credit card charges in 1984 and 1985. The article also reported that a Canoga Park flower shop then owned by Charles B. Arrington III, ZZZZ Best’s chief operating officer, also rang up $91,000 in false charges in 1986.
ZZZZ Best has reported officially that as of Jan. 31, the end of the third quarter of the company’s fiscal year, 89% of the company’s $33.3 million in revenue for the first nine months of the fiscal year came from insurance restoration work, involving repair of buildings damaged by fire and water.
Contracts Doubted
But rivals in the restoration business have said the multimillion-dollar contracts announced by ZZZZ Best and Interstate Appraisal Services of Culver City are so large that they have doubts about their genuineness.
Minkow started ZZZZ Best when he was 15, working out of his parents’ garage in Reseda. In May, Minkow announced preliminary unaudited results for the fiscal year that ended April 30 of $50 million in revenue and $5 million in profit for ZZZZ Best.
