Barry Minkow, who started the ZZZZ Best carpet cleaning company in his parents’ garage and turned it into a fraudulent $100-million empire, was sentenced Monday to 25 years in prison after admitting he had “enjoyed being a little Mafioso.”
“Today is a great day for this country. The system works. . . . They got the right guy,” Minkow, 23, said in a spirited speech to the judge that suggested the days when his fast-talking charm and ability to inspire people made him a millionaire.
“I see victims here today,” Minkow said, turning to a courtroom filled with investors who were among those who lost tens of millions of dollars when ZZZZ Best collapsed in July, 1987, amid allegations that the company’s books were padded with phantom revenues. “I can only say how sorry I am. I am going to get what I got coming--and I deserve every bit of it.”
$26 Million in Restitution
But U.S. District Judge Dickran Tevrizian, expressing doubts about Minkow’s professions of remorse, imposed the prison term recommended by the prosecution and also ordered him to pay $26 million in restitution for his conviction on 57 counts of fraud and conspiracy.
“I can’t use the word that really describes what you’re trying to level at me. El toro poo-poo, that’s what I’m hearing. . . . I have to ask myself: Is he trying to clean my carpet, or what?” the judge said.
“You’re dangerous because you have this charisma, this gift of gab, this ability to communicate, but you have no conscience,” he told Minkow.
The 25-year prison term was one of the longest ever handed down in Los Angeles in a white-collar crime case. Minkow will become eligible for parole after serving one-third of the sentence.
“We believe the sentence was appropriate,” said Assistant U.S. Atty. Gordon Greenberg, who with co-prosecutor James R. Asperger obtained the convictions of Minkow and 11 ZZZZ Best associates. “Barry Minkow did it the good, old-fashioned way. He earned every day of it.”
In his 10-minute statement at the sentencing hearing, Minkow announced that, as proof of his genuine regret over his crimes, he will not appeal his Dec. 14 conviction. But his lawyer, David E. Kenner, said he will file a motion to seek reconsideration of the sentence.
Minkow, described by prosecutors as one of the most significant white-collar criminals ever prosecuted in the West, started his company at age 15 and had many of his early business meetings in the late afternoon after school.
His talkative charm and natural head for business convinced top-notch accountants, lawyers and investment bankers for more than two years that he had figured out a way to cheaply restore office buildings damaged by fire and flood, a business that was supposedly earning ZZZZ Best up to $43 million a year from insurance companies.
ZZZZ Best also had a legitimate residential carpet cleaning enterprise--eventually opening 21 offices in three states--supported by television ads featuring Minkow confidently promising that his was the honest firm in a competitive field.
Within a few years, Minkow, with the help of several more experienced business colleagues, transformed the private company into a public one and garnered nearly $13 million in a stock offering, obtained millions of dollars in loans from banks across America and talked dozens of private investors--even some ZZZZ Best board members who did not know what he was up to--to pledge their savings with the promise of huge profits.
But, as it turned out, the majority of the lucrative restoration jobs never existed--and neither did the revenues. Within days of Minkow’s resignation in July of 1987, ZZZZ Best collapsed, leaving investors holding thousands of shares of worthless stock.
The ZZZZ Best associates convicted in the case have received sentences ranging from 30 days to eight years in prison for various roles in helping Minkow carry out the fraud.
Throughout his three-month trial in Los Angeles federal court, Minkow claimed he had been manipulated by mobsters and stock swindlers who had taken advantage of his youth and grabbed the hidden reins of power at his company, forcing him to lie to banks and investors to keep their profits coming in. He described being beaten until he coughed up blood and being accompanied constantly by huge thugs masquerading as bodyguards.
But making his first public statements since his nearly two-week-long appearance on the witness stand, Minkow told the judge that he was really using the reputed mobsters with whom he was involved the same way he was using everyone else.
“I’ve learned that it wasn’t money that motivated me, as most people believe, but the attention, power and prestige the money brought me,” Minkow said in a letter to the court. The “same” is true, he said, “for my relationship with organized crime figures. We used each other. . . . Barry Minkow enjoyed being a little Mafioso.”
When he got up to address the court, wearing jail issue blue trousers that were cuffed up to keep them from dragging on the ground, Minkow quickly became animated, waving his arms and, for a moment, holding the courtroom nearly spellbound.
Minkow said he exemplified what he saw as the morality of his generation.
“To me, winning meant everything--everything, at all costs,” he said. “Prestige, power and money. What else was there? And that’s wrong. . . . The attitudes that made me fall and led me to do what I did, they’re wrong.
“If I took all these God-given talents that I had and used them, instead of for the bad, for the good, I’d never be here today. All the young entrepreneurs who said, ‘I want to be like Barry Minkow.’ Now they’re saying, ‘We can’t get bank loans ‘cause of Barry Minkow.’ ”
The defense has said that Minkow does not have anything left of the $2.4 million to $3.3 million he earned while at the helm of ZZZZ Best. But Minkow pledged to use his business talents to pay investors back when he is released from prison.
“Don’t think for a second that I don’t know to the penny how many people I hurt, how I’m going to work for the rest of my life to pay them back,” he said.
Tevrizian said Minkow brought more presence to the podium than some $500,000-a-year trial lawyers. But the judge said it was hard to take Minkow seriously when he admits he lied during his 11 days of testimony about mob beatings and threats from his own friends.
“Every day he’d come into court and testify, and every day was at variance with the previous day,” the judge said. “It was like a game show we were playing, a TV game show. Who could tell the biggest lie?”
Asperger, who had recommended a sentence of at least 25 years, said Southern California has become the “Wild West” of white-collar crime and compared Minkow to such youthful offenders as Billy the Kid and Al Capone, who controlled rackets in Chicago by the age of 25.
“He committed crimes on each and every day for more than five years. The nature of his crimes, I think, is mind-boggling,” the federal prosecutor said. “His motive was simple: greed, and to become the biggest, richest and most famous entrepreneur ever.”
Tevrizian landed a final blow at Minkow when he jokingly referred to a Christmas card the young entrepreneur had sent to the prosecutors, who by then were midway through a rancorous, 3 1/2-month effort to send him to prison.
Said the judge: “You sent the Christmas card to the wrong guy.”