July 21 (Bloomberg) -- Barry Minkow, a convicted confidence man who started a fraud-detection firm, was sentenced to five years in prison for his role in a stock-manipulation scheme.
Minkow, 45, was also ordered today in Miami federal court to pay $583 million in restitution. U.S. District Judge Patricia Seitz gave Minkow, who pleaded guilty in March to conspiracy to commit securities fraud, 60 days to surrender so he can get his sons settled in school.
Prosecutors said Minkow made false and misleading statements about Miami homebuilder Lennar Corp.’s financial condition to drive down the company’s share price. The U.S. said Minkow also abused his relationship with federal law enforcement agents to get non-public information about Lennar and traded on that information.
“His hubris is what caused this problem,” Minkow’s attorney, Alvin Entin, said today. “His narcissism is what caused this problem. He’s not going to make the same mistake a third time.” Minkow didn’t speak at the hearing except to answer the “yes, ma’am” to judge’s questions.
At age 16, Minkow began a carpet-cleaning company, ZZZZ Best Co., in Southern California. He took it public and the value eventually exceeded $211 million, according to a 1987 Wall Street Journal article.
To make his business appear successful, Minkow prepared fake receipts that fooled auditors and investors. When the scheme fell apart, he was convicted in 1988 of 57 counts of fraud and conspiracy and sentenced to 25 years in prison. He served more than seven years before being released in 1995.
After prison, Minkow founded the Fraud Discovery Institute. The San Diego-based company, whose mission is to expose corporate fraud, said it supported itself by trading against companies where it found executives had misrepresented their credentials or allegedly committed other types of fraud.
He resigned this year as pastor of the San Diego-based Community Bible Church, where he began preaching after leaving prison, according to a letter from the church obtained by Bloomberg.
“He spent his 20s in jail,” Assistant U.S. Attorney Cristina Perez Soto told the judge. “He spent his 30s uncovering fraud and becoming a pastor. In 2009, he was what? Forty-two? And here we are again with a securities case.”
The case is U.S. v. Barry Minkow, 11-cr-20209, U.S. District Court, Southern District of Florida (Miami).
To contact the reporter on this story: Susannah Nesmith in Fort Lauderdale, Florida, at firstname.lastname@example.org.
To contact the editor responsible for this story: Michael Hytha at email@example.com