Creditors Called the Shots, Minkow Testifies

Barry Minkow continued to elaborate for a federal jury Thursday his claim that he was forced into a life of crime while still a teen-age entrepreneur building his ZZZZ Best carpet cleaning company.

For the third consecutive day, Minkow focused most of his testimony on his relationship with Daniel Krowpman, a reputed loan shark who loaned him start-up cash for the business--but who then, according to Minkow, intimidated him into a life of petty crime to keep up his loan payments.

Krowpman, a former ZZZZ Best director, pleaded guilty earlier this year in U.S. District Court in Los Angeles to fraud charges for his role in the stock and insurance hoax committed by the Reseda-based firm.

10th Week

Minkow, 22, testified during the 10th week of his trial that his problems with Krowpman, whom he had met while weightlifting at a San Fernando Valley gym, reached a climax in October, 1984, when he was up to his ears in debt while attempting to meet a payroll in three ZZZZ Best offices.

Minkow said he went to a meeting at Krowpman’s home and met with Krowpman and an associate, a hulking individual he knew only as “Mel,” who always wore a cowboy hat, boots and sunglasses.

Minkow said he told Krowpman that he could turn the company around and did not want to break the law to repay debts.

At that point, Minkow testified, the two warned Minkow that there was a contract on his life and that to “buy it back” he had to commit fraud to generate cash. Minkow said Mel then pulled out a revolver.

“He said: ‘You don’t understand. You have no choice,’ ” Minkow said.

Minkow said he began to panic, explaining: “I was paranoid; I was on those steroids. I didn’t know what to do. I tried to appeal to Danny. He said I was responsible for everything that’s gone wrong at ZZZZ Best . . . and I must do what they said. . . .

“The next day I began overcharging customers.”

$43-Million Fraud

Prosecutors say that Minkow himself engineered the $43-million fraud at ZZZZ Best that ranged from placing extra charges on customers’ credit cards to inflating sales figures by fabricating tens of millions of dollars worth of jobs supposedly repairing flood and fire damage to buildings. The company collapsed last year when creditors detected the scheme.

The defense has admitted the fraud but argues that Minkow was the pawn of others.

Under questioning Thursday from his attorney, David Kenner, Minkow recounted how, in May, 1985, he met reputed mobster Jack M. Catain of Tarzana while repairing carpeting in a condominium Catain was buying.

Minkow said that Catain asked “a ton” of questions about his financial problems and, that night, arranged for a $75,000 bailout loan for him.

Just before Catain gave the green light for the loan, Minkow said, he showed Catain and a man who owned a local financing firm his financial statements.

‘Looking and Laughing’

“They were looking and laughing,” Minkow said, indicating that the pair knew his figures were false.

The two men said the statements were “unprofessional” and that they would redo them in order to obtain $25,000 from Center Bank in Woodland Hills and $50,000 from Rancho Bank in San Dimas, Minkow said. In return, Minkow said, he paid Catain a $2,500 cash fee.

Ultimately, Minkow and Catain, who has since died, sued each other over repayment of the loan. And, according to police investigators, it was soon after his association with Catain that Minkow started doing business with several men with East Coast organized crime ties.

Minkow was to continue testifying today.