BULLETIN: Barry Minkow, Ponzi Fraudster Turned Pastor And Investigator After 7 Years In Slammer, Charged Criminally In Stock-Manipulation Scheme

Barry Minkow, who presided over a colossal Ponzi scheme as a young man, spent seven years in federal prison and emerged to become a church pastor and tell the world he no longer was a criminal, has been charged criminally in Florida in a stock-manipulation scheme.

Minkow, 44, allegedly induced law enforcement to open a probe into Lennar Corp., a homebuilder, by lying and then putting himself into position to profit from his lies by “trading Lennar securities for his own personal benefit,” federal prosecutors said.

He was charged with conspiracy to commit securities fraud that involved his misuse of “material nonpublic information,” prosecutors said, saying Minkow had advanced a “shared unlawful plan” to hurt Lennar.

Minkow is expected to plead guilty. He faces a maximum of five years in prison.

After being convicted of operating the ZZZZ Best Ponzi scheme, one of the most notorious fraud cases of the 1980s, Minkow entered prison. He turned to the ministry after his release, and also founded the Fraud Discovery Institute in San Diego.

Cultivating relationships with both the media and law enforcement, he told the world he now was wearing the hat of the fraud-busters, not the hucksters.

Court documents identify him as a confidential FBI informant. But prosecutors now say he orchestrated a slime campaign against Lennar in 2009 with the intent of helping a co-conspirator who claimed he was owed money squeeze cash and stock out of the company.

“When false statements are disseminated to deceive the investing public, whether they’re designed to prop up a company or tear it down, the FBI will dedicate all available resources to bring disseminators of such falsehoods to justice,” said William J. Maddalena, acting special agent in charge of the FBI’s Miami office

As part of the plan, Minkow authored “false and misleading statements” about Lennar, creating news releases, emails and YouTube videos to allege “widespread improprieties in Lennar’s financial reporting and business structure,” prosecutors said.

The false reports artificially depressed Lennar’s stock price, prosecutors said.

Minkow, according to prosecutors, contacted the FBI, the SEC and the IRS in January 2009 with allegations of Lennar’s purported fraud. His acts induced the government to open an investigation.

On March 13, 2009, Minkow contacted the FBI and IRS, confirming to agents that he knew he was “precluded . . . from shorting Lennar stock,” according to the federal complaint, which was filed in the form of an information.

Three days later,  Minkow “misappropriated material nonpublic information” about Lennar and used it to purchase Lennar options through a nominee trading account, prosecutors said.

About the Author

Leave a Reply