ZZZZ Best Co. Insider Is Ordered to Pay $900,000

A federal judge on Wednesday ordered a former ZZZZ Best Co. official to disgorge profits and pay damages totaling nearly $900,000 stemming from insider trading violations while at the now-defunct carpet cleaning firm.

Jack N. Polevoi of Woodland Hills, who pleaded guilty in June to four counts of stock and tax fraud and other violations and is serving an 18-month prison sentence, was ordered by U.S. District Judge Robert J. Kelleher to disgorge $224,861 in illegal profits plus interest, and pay triple damages of $674,582.

The action against Polevoi, a former ZZZZ Best vice president, was based on findings that in mid-1987 he and his twin brother, Jerry, ordered 54,200 shares of the Reseda firm to be sold short.

At the time, Polevoi had inside knowledge that company founder and Chairman Barry M. Minkow was considering resigning and the firm was “in a state of disarray and chaos.”

Selling short is a method by which an investor seeks to profit from a decline in the stock price, by selling borrowed shares and buying them back later. ZZZZ Best shares fell from more than $5 each at the time the short sales were made to 75 cents when Polevoi completed the transactions.

Polevoi and others also laundered $712,000 in ZZZZ Best corporate funds and bank loans through Las Vegas casinos in the days before the firm collapsed.

The penalty, while large, is dwarfed by the $26 million in illegal profits and restitution charges levied against Minkow. He was found guilty on 57 counts of fraud, conspiracy and other violations, and sentenced to 25 years in prison.