Why is Minkow aiming so low?

The Redeemed Sinner in our popular culture is a mirror-image of the Fallen Saint; each inspires the suspicion that his transformation is never quite complete -- just as the latter’s halo can never be entirely sullied by waywardness, the former’s sin can never be totally expiated.

This thought is prompted by the saga of former white-collar jailbird Barry Minkow, 42, who got back in the news recently by taking the stock of Lennar Corp. down 20% in a single day.

Minkow accomplished this feat by posting online a 30-page screed accusing Lennar of cheating its land development partners for years, and its chief operating officer of making a suspicious deal for a third mortgage on his Laguna Beach home, possibly as a kickback (though to whom and for what isn’t clear). He compared Lennar to Bernie Madoff and Enron, and not in a nice way.

Miami-based Lennar, as one would expect from the nation’s second-biggest home builder, has fired back with both barrels. It denies cheating its partners, characterizes the mortgage as a legitimate deal to finance the COO’s purchase of Lennar shares, and notes that Minkow is working for a man involved in pending litigation against the company. Last week, Lennar sued Minkow and his self-styled investigative outfit, Fraud Discovery Institute, alleging libel.

It’s worth stepping back for a moment to consider Minkow’s career. As a kid from Inglewood, he built his home-grown carpet cleaning company, ZZZZ Best, into a $200-million behemoth. Except it wasn’t. ZZZZ Best was exposed in 1987 as a Ponzi scheme fueled by credit-card fraud and partially financed by a mobster. Minkow, who had taken the company public, claimed a net worth of $90 million and appeared on Oprah as an entrepreneurial whiz kid, served seven years in prison.


The rest of the story is sadly familiar. Minkow experienced a religious epiphany in prison, a phenomenon I like to think of as the Chuck Colson Conversion, after a certain Watergate conspirator. Following his release in 1995, Minkow lined up a pastorate at a Christian church in San Diego and set up Fraud Discovery Institute, the mission of which is to expose investment scams very much like ZZZZ Best.

Minkow’s pitch is based on the principle of setting a thief to catch a thief, the same rationale for FDR’s appointing the stock manipulator Joseph P. Kennedy as the first chairman of the Securities and Exchange Commission. Minkow sometimes talks as though he thinks his past is his best credential as an investigator, constantly referring to himself in conversation as “a former perpetrator of fraud.”

He does know his field. Since getting out of jail, he’s collected a pile of testimonials from the FBI and other law enforcement agencies thanking him for his help exposing investment frauds. Most of these are smallish scams of the Ponzi type, victimizing the elderly, the unwary and in one case a bunch of NFL players with more money than sense.

Occasionally he has trained his gun sights on public companies. Last year he attacked the nutritional supplement companies Usana Health Sciences and Herbalife over their marketing schemes and product safety. He shorted their stocks, which meant he would profit from declines in their shares. The practice isn’t illegal and was designed, he says, to raise funds for his fraud-busting, but it certainly left the purity of his efforts looking a bit adulterated.

Then there’s Lennar, whose shares fell 48% last year even without Minkow’s assistance. Minkow says he hasn’t shorted the stock but is in the fight to help an acquaintance, the aforementioned litigant.

Minkow’s attack on the home builder isn’t as focused as some of his other campaigns, which have addressed issues such as whether a chief executive has all the college degrees he claims and whether there’s too much lead in protein powder. Minkow’s Lennar dossier relies heavily on lawsuits over busted land deals and on the time-honored practice of accepting at face value all plaintiffs’ claims against a defendant (along with the superheated rhetoric in the legal complaints).

As for the $5-million third mortgage on COO Jonathan Jaffe’s Laguna Beach home, Minkow says the September 2007 loan is fishy because the lender, Robert Venneri, supposedly made a profit on some property in Kern County neighboring a Lennar tract, and also lent money to someone who was in a bad deal with Lennar a few years ago. (Yes, it’s that convoluted.) Minkow claims the house can’t be worth enough to cover the mortgage, because there’s been a housing crash. On the other side of the coin, the home is in Emerald Bay, one of the highest-priced developments in Southern California. Warren Buffett is a neighbor.

You certainly can’t determine from Minkow’s evidence that Lennar is crooked. When I told him so, he tried to convince me with a spiel that had the cadence of a con-man’s pitch -- instead of haranguing me about all the suspect maneuvering I was overlooking, he might have been telling me this was my last chance to get in on a fortune at the ground floor.

“What kind of evidence are you willing to accept that will convince you . . . that Lennar is lying?” he said. “If you were on the phone with the people who’ve been hurt by this bully public company. . . .”

The most curious aspect of Minkow’s style as a fraud investigator is his selection of targets. He goes after investment scams almost too small to register on the radar. Or companies like Herbalife, which has faced regulatory actions over its marketing of health supplements, not the gold standard of consumer goods. Lennar is in a business that generates lots of lawsuits, but that’s what the courts are for.

Minkow argues that Lennar victimized the California Public Employees’ Retirement System in a big land deal. But CalPERS, the largest institutional investor in America, needs help like the tyrannosaurus in “Jurassic Park” needs backup.

Surely there are bigger fish for Minkow to fry, given the historic financial crash of the last year. Instead of blithely comparing his targets to Bernie Madoff, let’s see him uncover the next Bernie Madoff. He’s got the smarts and moxie to do it, and that might give him true redemption.


Michael Hiltzik’s column appears Mondays and Thursdays. You can reach him at and read his previous columns at