In the Shadow of the ‘80s : Yesterday’s High Rollers Struggle in a New Era of Sobriety


Like other scoundrels caught red-handed, convicted con man Barry Minkow says he has renounced crime and found Jesus--and he’s banking on his dramatic conversion from Judaism to make a comeback.

Sentenced to 25 years in prison in connection with one of the largest Wall Street scams ever, the founder of the ZZZZ Best carpet-cleaning company in the San Fernando Valley may be paroled from federal prison as early as next July, after serving about a third of his term.

He’ll be only 29 and ready for a new career in the public eye: writing and talking about past errors and his redemption through religion. Eventually, he says, he hopes to repay his victims.

Thus are the deeds and misdeeds of the glitzy 1980s transmogrified in the 1990s, as the high rollers of yesteryear struggle to survive in a new era of sobriety. Long gone are the myriad tax shelters, rocketing property values and swelling securities markets that marked the 1980s as a time of easy money unprecedented in American history.


The contrast is especially stark in California, which suffered through the worst recession in the nation following unparalleled real estate inflation. It is here that one easily finds those whose careers symbolized the successes and excesses of the time--and those who now are coping with the decade after.

Legitimate business executives became overextended and endured painful retrenchments. Others started out as legitimate businessmen and became involved in increasingly questionable activities that eventually landed them in trouble. A few seemed headed for trouble from the outset.

Terren Peizer was a financial prodigy who became rich while still in his 20s, working for Michael Milken’s marvelous money machine, as Forbes magazine once dubbed Drexel Burnham Lambert’s junk bond operation in Beverly Hills.

Thomas Spiegel was a controversial trailblazer in the highly uncertain world of banking deregulation. His relatives were majority shareholders in Beverly Hills-based Columbia Savings, once the fastest-growing thrift in the country.


John Peter Galanis was the ultimate promoter in the golden era of tax shelters. Even then, though, Galanis went about his business largely behind the scenes, because of a previous conviction for securities fraud.

Where are they today?

Peizer is quietly prospering, having distanced himself from Milken and Drexel following his testimony about some of the worst financial excesses of the period.

Spiegel will soon face charges that he looted Columbia Savings & Loan, whose failure could ultimately cost taxpayers more than $1 billion. He says he is innocent.

Galanis is back in jail, with little chance of parole any time in the 20th Century.


Terren Peizer would just as soon let go of his past, when he literally worked at Milken’s elbow on the legendary black, X-shaped trading desk from which Milken oversaw his financial empire. From there, Peizer had a ringside seat to a financial circus of junk bonds and debt-financed mergers and acquisitions.

When law enforcement officials cracked down on Drexel, Peizer agreed to testify against Milken in exchange for immunity. In the process, he earned the reputation as “the man who ratted out Mike Milken.”


Peizer denies he gave up Milken to save himself. For one thing, he says, he did nothing illegal. For another, he notes that he was only one of several witnesses who cooperated with prosecutors.

Now a private investor, Peizer still lives in the condo he bought nine years ago, when he came West to sit at Milken’s left hand.

Peizer was brought on to handle the account of money manager David Solomon’s firm, a major customer of Drexel junk bonds. He was entrusted with the blue notebook that detailed the deals between Solomon, Milken and a junk bond mutual fund called the Finsbury Fund.

The transactions included generating false commissions, inflating the prices of bonds and creating phony tax losses for Solomon, wrote author James B. Stewart in his best-selling book, “Den of Thieves.” Details of the transactions are contained in court documents in the Milken case and in Peizer’s testimony.

Peizer says today that he was unaware of the nature of the transactions or their legality: “I didn’t really know why we were doing (any of it). I didn’t have all the information.”

As law enforcement officials closed in, Peizer relinquished control of the blue notebook at Milken’s request. But he says he kept copies of other critical Drexel documents, which helped form the basis of a deal to testify against Milken in exchange for immunity.

After being indicted on 98 counts of securities violations, Milken ultimately pleaded guilty in 1990 to six felony charges, including manipulating stock prices, and served two years in prison. (Through a spokeswoman, Milken declined to comment for this article.)

For his part, Peizer has fared well since that time. Now 34, he manages his own investments through a private holding company, Beachwood Financial, named after his hometown in Ohio.


Peizer has invested heavily in about half a dozen emerging companies, often taking a large stake and sometimes assuming the role of chairman. In March, he traveled to West Africa to study possible investments in mining companies.

Peizer confirmed that he is worth more than $50 million, but he avoids the usual accouterments of wealth such as big houses and expensive cars. He says he prefers the company of old friends and the informality of blue jeans and sweats.

He remains in touch with a few acquaintances from Drexel, whom he declines to identify. As for the mood of those days in Beverly Hills, he says now:

“There was a very Jonestown type of environment. A lot of us used to joke about it: ‘Who drinks the punch, and who didn’t.’ It was like a cult, because Mike Milken made a lot of people very wealthy.”


Thomas Spiegel, the former head of defunct Columbia Savings & Loan, has fallen long and hard since the days when he was the nation’s highest-paid S&L; executive.

He remains free on $1 million bail as he awaits a trial in September on a 60-count federal indictment charging that he looted Columbia to finance his lavish lifestyle. If convicted, Spiegel, now 48, faces fines of more than $10 million--and the prospect of spending virtually the rest of his life in prison.

“He systematically took advantage of the institution,” alleges John Walsh, assistant U.S. attorney and chief of the major frauds section in Los Angeles. “The institution was a victim and, ultimately, (so were) the taxpayers.”

In better days, Spiegel was a wheeler-dealer who schmoozed with people he deemed important and lived a fabulous lifestyle virtually unheard of in the banking industry. His father, who survived a Nazi death camp, had been a highly successful Southern California home builder.

A few hailed the younger Spiegel as a visionary who understood how to operate a savings and loan in a deregulated environment. But most regulators and competitors regarded his securities investments with disdain.

Spiegel invested so much of Columbia’s deposits in junk bonds that the financial institution eventually became Drexel’s single largest customer. Columbia failed in 1991 after the junk bond market crashed, severely eroding the value of its assets.

The failure meant the end of Spiegel’s perks. Out went the corporate jets, chauffeured limousines, ski resort condos and gun collections. Government liquidators disposing of Columbia’s assets evicted him last year from his Beverly Hills mansion.

Spiegel remains on a budget; his assets were frozen in July, 1990, by the Office of Thrift Supervision, which has ordered him to pay back more than $40 million. That covers both money he allegedly looted from Columbia and some of the losses incurred while Spiegel was chief executive, prosecutors said.

Not that Spiegel is impoverished. He has leased a new home only a block south of his old digs on North Palm Drive. And he is allowed to spend $250 an hour for a lawyer and $2,500 a month for office space, according to court records. (Spiegel has vigorously challenged the spending limitations, so far to no avail.)

As he prepares his defense, Spiegel has sublet office space in Westwood from his friend Merv Adelson, a former vice chairman of Time Warner Inc. who was also a friend of Milken’s.

From there, Spiegel administers the Columbia Charitable Foundation, the successor to the savings and loan’s nonprofit foundation. The foundation had $22.7 million in assets at the end of 1992, according to the state Registry of Charitable Trusts.

Through his lawyer, Spiegel denied repeated requests for an interview. When a reporter showed up unannounced at his marble-lined office suite--where he appeared fit, wearing shorts and polo shirt--he refused to comment.

In court documents, Spiegel has steadfastly maintained his innocence.


John Galanis was, to put it mildly, a piece of work: At times so crude he resembled the character played by John Belushi in the film “Animal House,” he once spent more than $15,000 for a dinner party at the tony New York restaurant Lutece.

Jailed once before for securities fraud, Galanis rode the wave of Reagan-era tax laws that allowed investors to write off passive tax losses from real estate developments. The new laws unleashed a torrent of cash from wealthy investors eager to cut their taxes, and it was in this environment that the 300-pound Galanis found himself swimming in money.

Now 51, Galanis was eventually convicted in 1988 of 44 federal counts of racketeering, fraud and other charges in connection with a series of fraudulent tax shelters and oil and real estate investment schemes that occurred nationwide. He later pleaded guilty to New York state charges as well.

Galanis now lives in decidedly modest accommodations on Seaside Avenue in San Pedro, having lost his luxury homes in Rancho Santa Fe and Del Mar as well as his $2.5-million estate in Greenwich, Conn. He’s at the federal prison on Terminal Island, where he is likely to be a resident for at least the next nine years.

Once a lavish spender and epicure of Gargantuan proportions, Galanis is now penniless, his lawyer claims.

At one time called one of the Top 10 white-collar criminals in America, Galanis is estimated to have squandered $150 million from thousands of investors--among them actors Eddie Murphy and Kirstie Alley. His schemes eventually led to the failure of savings and loan institutions he secretly controlled, former prosecutors say.

Galanis was sentenced to 27 years in prison, one of the stiffest sentences ever given a white-collar criminal. He declined to be interviewed for this report.

By now, the major civil suits against Galanis have been settled. In some cases, former investors have had to accept a return of pennies on the dollar.

Galanis now spends his days as an orderly, or janitorial helper, in his cell unit. He also teaches reading classes to other inmates. His lawyer says he is in poor health.

In 1993, the federal parole board upheld a ruling that Galanis had to serve at least 15 years of his sentence. Galanis is still trying to get that reduced. In the meantime, his presumptive parole date is July 30, 2003.

His wife, Chandra, now lives quietly in a modest home in Encinitas with two of Galanis’ four sons, according to Brian Barrett, one of Galanis’ lawyers.

Another of his lawyers, Barry Feiner, said much of the coverage of Galanis’ story has been full of “mischaracterizations.”

“His conviction stemmed primarily from two issues: tax fraud and non-disclosure of his participation. . . . " Feiner said. “In addition, it was never established that Mr. Galanis’ actions were responsible for the closure of any federally insured institutions that would not otherwise have failed.”


Barry Minkow now starts his day at 3 a.m., when he reports to work in the bakery of the Lompoc Federal Prison Camp.

By all accounts, Minkow has been a model prisoner. And his good behavior may result in an early release, now tentatively scheduled for next July.

Minkow freely admits today that he was wrong. “The company and me . . . were both frauds,” he said in a recent videotape detailing his scams.

After starting ZZZZ Best in his parents’ Reseda garage at age 16, Minkow was barely 20 when he sold shares in the firm to the public. Articulate and charming, he was a natural for television and was soon being touted as a Boy Wonder of Wall Street.

Whether because of the times or the credulous reporting by the media, many were taken in by Minkow--not just wealthy investors, but also auditors for a large accounting firm and major banks that lent him--and eventually lost--millions.

But by 1987, the company was revealed as a giant Ponzi scheme. Money from one set of investors was recycled to pay off others. Investors lost as much as $100 million.

Today, Minkow--who was raised in a non-religious Jewish family--attributes his new humility to a conversion to fundamentalist Christianity.

“I ran the wrong way with ZZZZ Best,” he said in a recent telephone interview. “I embarrassed my family. I hurt a lot of people. But Christ says, ‘Get back in the game. . . . Go get ‘em for me.’ . . . And that’s what I’m doing.”

In the last seven years, Minkow has earned bachelor’s and master’s correspondence degrees in religion from Liberty University, founded by Jerry Falwell, in Lynchburg, Va. He is working on a second master’s degree and a doctorate in theology by correspondence with the University of South Africa.

In prison, he teaches courses in apologetics, the religious defense of faith. And as a chaplain’s assistant, he occasionally delivers sermons.

In the meantime, he has appeared without pay in a video produced by the National Assn. of Certified Fraud Examiners, advising accountants how to avoid scams like ZZZZ Best.

On top of all this, he has written a 350-page autobiography, scheduled to be released by a Christian publisher sometime next year. His agent, Clint Horsley, is receiving a $14,500 advance for the book, most of which defrays expenses, Horsley says.

Minkow’s plans include a second book, a speaking tour and, ultimately, a ministry. Any money, aside from modest living expenses, is scheduled to go to a victim’s reimbursement fund, officials say. (At the time of his conviction, Minkow was also ordered to repay victims $26 million out of his future earnings.)

Meanwhile, one of the last remaining investor lawsuits arising from the scam, against the successor to the accounting firm that audited ZZZZ Best, is scheduled to go to trial early next year.

Are people convinced of Minkow’s rehabilitation? “He has the ability to be enormously successful by operating legitimately,” says James R. Asperger, the former U.S. attorney who led the prosecution of Minkow and his cohorts. “Whether he is truly rehabilitated remains to be seen.”