Halt Ordered in ZZZZ Best Stock Trading

State officials have suspended trading in the stock of ZZZZ Best, the embattled carpet-cleaning company founded by 21-year-old Barry Minkow, which filed for Chapter 11 bankruptcy protection last week.

Meanwhile, Minkow and his lawyer will appear at a press conference today. Last week Los Angeles police said that Minkow and ZZZZ Best were believed to be part of an organized crime narcotics money-laundering network. Minkow’s lawyer has called the allegations “preposterous.”

The halt in trading, ordered by the California Department of Corporations, applies only to broker-dealers licensed by California. Trading in the stock continued in other states on the over-the-counter market. ZZZZ Best’s stock closed Monday at 62.5 cents per share, down 6.25 cents.

$25-Million Lawsuit

Minkow resigned earlier this month from ZZZZ Best. The company’s management then sued Minkow and others in a $25-million lawsuit charging them with fraud. Police have alleged that the firm’s insurance restoration business, which accounted for 89% of ZZZZ Best’s revenue, was a sham.

Commissioner of Corporations Christine W. Bender issued the trading halt order on Friday after reviewing the firm’s bankruptcy filings and its suit against Minkow. “We cannot conclude that there is complete and accurate information concerning the financial condition of the company available to investors,” she said.

Alan Weinger, supervising counsel for the Department of Corporations, conceded that there are detours around the trading halt. “Yes, someone could drive to Arizona tomorrow and buy the stock.”

In a separate matter, P-B Finance Ltd., a unit of Prudential-Bache, filed a $2-million-plus suit against Minkow.

Borrowed $2 Million

Last April, the suit alleges, Minkow obtained a $5-million line of credit with the securities firm after agreeing to put up as collateral 1.4 million shares of his stock. In May and June, Minkow borrowed at least $2 million and on June 26 he gave P-B a $2-million check in repayment. But, the suit says, the check was drawn on a ZZZZ Best account and postdated to July 10.

The suit says Minkow told P-B that ZZZZ Best owed him at least $2 million and that he was authorized to repay his loan with company money.

Minkow’s attorney, Arthur H. Barens, said the $2 million that Minkow got from P-B was then loaned to ZZZZ Best.

Barens also said that Minkow “never sold a share of his stock.” Some of Minkow’s stock, Barens said, was transferred to Minkow’s P-B account; other shares were used as collateral in a separate bank loan.

Meanwhile, at ZZZZ Best’s Reseda office, the mood is hardly upbeat. The company’s internal auditor, Don Wyatt, said his last payroll check bounced.