Barry Minkow, a convicted confidence man who started a fraud-detection firm and became a minister, pleaded guilty in a case involving home builder Lennar Corp.’s stock and said he would cooperate with investigators.
Minkow, 45, was accused March 24 in Miami of conspiracy to commit securities fraud. He faces as long as five years in prison and may have to pay more than $500 million in restitution, prosecutors said. He is free on bail pending his sentencing June 16.
“My client was deluded and taken advantage of,” Minkow’s lawyer, Alvin Entin, told U.S. District Judge Patricia A. Seitz today at a plea hearing. “That he acted recklessly we don’t dispute at all.”
The plea stems from a dispute in which Minkow’s Fraud Discovery Institute alleged that Miami-based Lennar operated ventures “like a Ponzi scheme.” After the report was released, the company’s stock fell 20 percent in a day.
“We appreciate the good work of the Justice Department in protecting our public securities markets,” Lennar Chief Executive Officer Stuart A. Miller said in a statement.
“Conspiring, lying and manipulating the securities markets to extort money will not be tolerated,” said Lennar attorney Daniel Petrocelli.
Minkow founded his business after serving a prison term for fraud from 1988 to 1995.
The San Diego-based company, whose mission is the exposure of corporate fraud, supports itself by trading against companies where it found executives misrepresented their credentials or allegedly committed other types of fraud.
Minkow’s revelations led to resignations of executives at companies such as Microsemi Corp. and Intrepid Potash Inc.
At today’s hearing, the judge asked Minkow, “How did you get involved in this?”
“I’m not too wise,” Minkow said.
“You need to work on your soul,” the judge said.
“I just don’t want to waste the court’s time” Minkow said. “I know I am guilty.”
In his plea agreement, signed March 22, Minkow acknowledged that he “misappropriated material nonpublic information for his own personal gain by executing numerous trades in options contracts related to securities issued by Lennar Corp.”
Minkow also agreed to work “in an undercover role to contact and negotiate with others suspected and believed to be involved in criminal misconduct.”
Lennar, based in Miami, fell 80 cents, or 4.2 percent, to $18.27 in New York Stock Exchange composite trading at 4:15 p.m.
The case is U.S. v. Minkow, 11-cr-20209, U.S. District Court, Southern District of Florida (Miami).