Minkow Wooed and Swindled Her, Loan Officer Says
A former Prudential Bache Finance vice president testified Friday that she accepted a $2-million post-dated check from ZZZZ Best carpet cleaning kingpin Barry Minkow after he flew her to Los Angeles, showered her with flowers and took her out for an intimate seaside dinner in Malibu.
Sheri Elowsky, 31, said she was surprised by the attentions from Minkow, who “complimented me on my looks, my intelligence, (and) . . . told me that I was intimidating because I was so bright.” After a “lark” of a weekend in Los Angeles, she said, she called Minkow to tell him she had approved a $225,000 extension on the young entrepreneur’s $5-million credit line with Prudential Bache.
“He ended the conversation by saying, ‘I love you,’ ” said Elowsky, who oversaw some of the most prestigious individual accounts at Prudential Bache’s loan-making subsidiary after a successful career in corporate lending and leveraged buyouts.
Two days later, ZZZZ Best’s stock dropped by nearly 25% in trading of more than 2 million shares. “The price was falling through the floor, and within hours we were partially unsecured,” said Elowsky, describing at Minkow’s federal court fraud trial what was perhaps the ultimate Wall Street romantic nightmare.
Can’t Reach Minkow
Minkow failed to return her frantic phone calls to ZZZZ Best headquarters in Reseda, and his home phone was disconnected, she said.
A day later, she reached two members of ZZZZ Best’s board of directors, who told her that Minkow had resigned the night before “for health reasons” and that the $2-million post-dated check “would not be honored,” she said.
Elowsky said she canceled her plans for the Fourth of July weekend and “locked myself in my house. What do you do? Pace.”
Her boss was already reading a newspaper account of the ZZZZ Best collapse the following Monday morning when Elowsky walked in to to tell him “we were in the hole for $2 million.” She resigned later that day.
Minkow, 22, is on trial in U.S. District Court in Los Angeles on charges of masterminding an elaborate fraud that federal prosecutors say allowed the company to gain millions in loans and stock offerings from firms such as Prudential Bache. He allegedly inflated ZZZZ Best’s sales figures by claiming millions in revenues on non-existent jobs from insurance companies repairing flood and fire damage to buildings.
Prosecutors James Asperger and Gordon Greenberg rested their case late Friday after introducing thousands of exhibits and calling 47 witnesses who testified about the collapse of the company Minkow had transformed from a fledgling operation in his parents’ garage to a widely advertised carpet cleaning giant that was a Wall Street favorite.
Nearly a dozen carpet cleaning customers testified about fraudulent charges on their credit cards charged to ZZZZ Best, and a variety of banking officials, accountants, securities analysts and former ZZZZ Best officials told of how some of the company’s own accountants and board members were unaware until the end that 90% of the company’s supposedly $43-million-a-year insurance restoration business was phony.
In the last nine weeks, a series of witnesses also testified about the charismatic Minkow’s ability to persuade others to invest huge sums. ZZZZ Best board member Michael Malamut said he loaned Minkow $1 million after the young entrepreneur promised--falsely, it turned out--that the loan would be adequately secured by Minkow’s lavish home in Woodland Hills.
Minkow eventually admitted that the insurance business was “a sham,” but said he expected to come out of the entire affair “smelling like a rose” because of his youth, Malamut testified Thursday.
Minkow’s lawyer, David Kenner, contends that Minkow was aware of the fraud but was forced into continuing it by a group of mobsters and stock swindlers who were engineering the scheme and extorting huge sums out of Minkow with threats of violence.
In the case of the Prudential Bache loans, Kenner said, Elowsky approved them not on the basis of Minkow’s attentions but because of his financial statement showing a personal net worth of $75 million to $100 million. When Minkow told Elowsky “I love you,” it was to express his jubilation over the loan approval, not an attempt to woo her, Kenner said.
But Elowsky said Minkow gave her a hug during their second business meeting, when Minkow had offered to fly her to Los Angeles at his own expense to discuss his proposed purchase of the Seattle Mariners baseball team. “I had met the man only once; it kind of surprised me,” she said.
They had lunch the next day, and Minkow talked about coming to see her in New York. “He made a comment that although he spends a lot of money on others, he doesn’t like to spend it on himself. . . . He finally got around to saying maybe he’d stay at my place,” she testified. “I said, ‘Well, I only have a one-bedroom apartment,’ and he kind of started to joke, well, he could stay in the bathtub.”
‘Jumped’ at Chance
On the weekend of June 27, 1987, Minkow again offered to fly her first-class to Los Angeles and pay her expenses if she’d come out--this time, not for business, but for dinner. “I kind of jumped at it,” she said. “It sounded like a nice little lark.”
Elowsky found a large basket of fruit waiting for her in her hotel room, and a bouquet of flowers, both from Minkow. Minkow stopped off again at a roadside flower stand when he picked her up for dinner. “He took care of everything,” she said of the meal at Malibu’s Splash restaurant. “He ordered everything. I never saw a menu. I’m at least used to seeing a menu, but he said he knew what was best.”
When the couple went back to Elowsky’s hotel room in Woodland Hills, Minkow pulled out a checkbook and wrote three checks, she said. Two of the checks were from his personal account to reimburse her for her travel expenses and the other, for $2 million, on ZZZZ Best’s corporate accounts to cover the $1.775 million in unsecured personal loans he already had outstanding and $225,000 he had proposed that evening.
Minkow dated the check for July 13, saying he expected some money to come in from some insurance restoration contracts that would cover it by then, Elowsky said. “I mentioned he should not be using a corporate account to repay personal loans, but he said the company owed him money, it was part of a bonus,” she said.
Elowsky said that although she was very uncomfortable about taking the check, she authorized the $225,000 advance to Minkow on the day after she returned to work in New York.
Losing her job was only the beginning of her troubles stemming from the fateful decision, Elowsky said. The former vice president said she also lost the money she had personally invested in ZZZZ Best through an Individual Retirement Account, and as a final indignity, Minkow’s $836 check for her travel expenses bounced.
