Barry Minkow, the youthful entrepreneur accused of turning his carpet cleaning business into a multimillion-dollar stock scam, “lived in physical fear of his safety” from the minute he began taking loans to keep his failing company afloat, his attorneys said Thursday.
“They were not simply implied threats. They were direct threats . . . that the company would be blown up, that the building that housed the company would be blown up, that he would be blown away,” lawyer David E. Kenner told reporters.
The men to whom Minkow was paying “juice” of up to 5% a week on loans for his ZZZZ Best carpet cleaning company--including prominent organized crime figure Jack M. Catain Jr.--constantly reminded him of “what happened to people if they didn’t make those payments,” Kenner said.
Seek Lower Bail
Kenner and Minkow’s other newly hired attorney, Anthony Brooklier, filed a new motion Thursday seeking to reduce Minkow’s $1.5-million bail, saying that much of the $10 million the government claims Minkow may have stashed away--and could use to flee if released--was actually spent long ago on “juice” payments to Catain and others.
“Barry Minkow is not a boy genius. Barry Minkow is a boy who possessed an exceedingly large ego, a boy who was turned into a victim and manipulated for the financial benefit of others,” Kenner said at a news conference called to announce filing of the bail motion.
U.S. District Judge Dickran Tevrizian previously has refused to lower Minkow’s bail.
So far, prosecutors have obtained guilty pleas from six of the 12 people facing federal charges stemming from the inflation of sales figures for ZZZZ Best in a scheme that turned the company into a hot stock on Wall Street. In pleading guilty, several former top officials of ZZZZ Best have identified Minkow as the brains behind the scam.
In Lock-Down Status
In their comments Thursday, Kenner and Brooklier also complained that Minkow was placed in a lock-down status at Terminal Island federal prison six weeks ago after guards’ clothing was found in his cellblock in what officials suspected was part of an escape attempt.
Minkow was cleared in the investigation, but remains in the same 5-foot-by-7-foot cell because of his “high profile” and threats against him as a result of testimony he could provide against others, Kenner said.
Because Minkow is unable to post the $1.5-million bail, it has not been possible for him to go over with his lawyers the “hundreds of thousands of pages” of documents that are a necessary part of his defense, his attorneys said.
Kenner acknowledged that there is evidence that Minkow converted large quantities of ZZZZ Best assets into cash. But he said much of the money was going to pay “usurious” interest rates, ranging from 2% to 5% a week, on loans arranged by Catain, co-defendant Daniel Krowpman and others.
Krowpman alone, a former ZZZZ Best director who pleaded guilty last month to securities fraud, bank fraud and tax charges, was collecting $1,000 a week from Minkow on a relatively small loan, Kenner said.
Catain, a reputed organized crime figure, arranged a series of loans for Minkow before the two men had a falling out and Catain sued Minkow for $1.3 million. Catain died last year shortly after his conviction for conspiracy to sell $3.3 million in counterfeit money.
Minkow, Kenner said, was the “victim” of some of his own former business associates, including Maurice Rind and Richard Schulman, Encino businessmen who, police say, have ties to organized crime. The two men, who have not yet been charged in the case, allegedly arranged financing for ZZZZ Best and helped orchestrate its transformation from a small company based in Minkow’s garage into a publicly held corporation.
“The question is whether these people, with their long experience in the business, were manipulated by the then-19-year-old, Barry Minkow, or whether the reverse was true,” Kenner said.
“I submit to you that if Mr. Minkow wanted to take ZZZZ Best public on his own, he would not know what to do. He would probably have to go to the Yellow Pages,” Kenner said.
Tevrizian is scheduled to hear the new motion for bail on Monday.