Jan. 9 (Bloomberg) -- Lennar Corp., the third-largest U.S. builder by market value, fell 20 percent in New York trading after Barry Minkow’s Fraud Discovery Institute alleged that the company operates joint ventures “like a Ponzi scheme.” Lennar denied the allegations.

Minkow posted his accusations today on a Web site called lenn-ron.com. The company has failed to disclose material transactions, Minkow said on the site. He said he has no financial interest in the stock declining.

“Our joint ventures are not run as a Ponzi scheme,” Chief Executive Officer Stuart Miller said in an interview with Bloomberg Television. “We don’t use the equity in one joint venture to support another joint venture. These are joint ventures on individual properties.”

Minkow served more than seven years in prison, from 1988 to 1995, after being convicted of fraud while running a company called ZZZZ Best Co. Minkow’s group investigates what it suspects to be corporate fraud, according to the Web site.

Lennar said in a statement that Minkow is posting “false and inflammatory accusations” for a “disgruntled litigant” named Nicolas Marsch III, who runs Briarwood Capital LLC. Briarwood was part of a joint venture development project in California with Lennar, according to Minkow.

“We have a litigant who is frustrated,” Miller said in the interview.

Lennar Statement

“This Internet posting was hurriedly made only after evidence surfaced this week in litigation that Marsch and Minkow may have attempted to illegally obtain information relating to Marsch’s legal procedings against Lennar,” the Miami-based company said in the statement. “Lennar continues to investigate acts of wrongdoing by Marsch and Minkow.”

Minkow accused Lennar of concealing debt off its books and misappropriating funds among joint ventures. Lennar’s approach is “sue me if you want to get paid,” Minkow said.

Minkow said in an interview today his report was “based on the public record of multiple claims against Lennar in like situations for breach and fraud.”

Lennar “siphoned cash” from its joint venture with Briarwood and “killed the project,” Minkow said.

Minkow said in the report that neither he nor the Fraud Discovery Institute is shorting the stock or has purchased put options on Lennar. A put option gives the purchaser of the option the right but not the obligation to sell a stock at a specific price by a specified time.

Lennar fell $2.27 to $9.15 at 4 p.m. in New York Stock Exchange composite trading. The shares fell 51 percent last year.

The cost of protecting against a Lennar default jumped the most in more than four years. Credit-default swaps linked to Lennar bonds climbed 95 basis points to 640 basis points, according to broker Phoenix Partners Group. That means it would cost $640,000 a year for five years to protect $10 million of Lennar bonds. A basis point is equal to .01 percentage point.

To contact the reporters on this story: Bob Ivry in New York at bivry@bloomberg.net; Suzanne O’Halloran in New York at at sohalloran@bloomberg.net

Last Updated: January 9, 2009 17:13 EST