Jeff Smith noon, March 8
Minkow to Plead Guilty to Insider Trading
The Los Angeles Times is reporting in a story meant for tomorrow (March 17) that Barry Minkow, the former Ponzi schemer who was believed to have become a reformer, will plead guilty to insider trading. He has resigned as minister of San Diego's Community Bible Church. After pulling off the notorious ZZZZ Best Ponzi scheme in the Los Angeles area, Minkow had been sentenced to 25 years in prison in 1987. But he got saved while in prison, and also got two divinity degrees. He got out after seven years. In 1997 he was named senior pastor at Community Bible Church. While there, he spent 40% of his time at the Fraud Discovery Institute, which smelled out corporate scams, several of which were covered favorably by me. Most of those cases I covered involved multi-level marketing companies. Minkow would take short positions in the stocks of companies he was exposing, and would made full revelation of his bets that stocks would go down. He told me recently, however, that he was only breaking even in his shorting activity, and was thinking about giving it up.
The case that got him in trouble was his attack on Florida-based builder, Lennar Corp. (I did not cover that one.) Lennar said that Minkow's attack had driven its stock down 20%. It sued for libel and extortion, and a judge ordered Minkow to pay millions of dollars in sanctions. Minkow's lawyer, Alvin Entin, said that his client shorted Lennar shares on "nonpublic information" -- and that constitutes insider trading. Entin said Minkow took the short position without "consciously thinking about the legality of what he was doing," according to the Times. "Unfortunately, that's not a defense," said the attorney, conceding that prosecutors had a very good case.
The Community Bible Church issued a statement saying, "Today Barry resigned as our senior pastor, as he is no longer qualified to be a pastor. Pastor Barry no longer considers himself above reproach as he has agreed to plead guilty to a criminal count related to the Lennar lawsuit."
Minkow frequently appeared on TV. He put on anti-fraud seminars for government agencies. He was often quoted in the press, including in my columns and blog items. He liked some of what I wrote, but disliked other items.
One column that he did not like, and seems prescient in retrospect, was one of March 15, 2007. William (Bill) Newsome, who had been in the city attorney's office in the Casey Gwinn regime, was a church member who complained that Minkow's Fraud Discovery Institute was located on church property. Newsome worried that the church could have liability if the institute erred. Newsome also was concerned that the church had financial problems that were not being revealed. A couple of years later I asked Newsome about his relationship with the church, and he said he had long since resigned.
I will say once again that the several reports on multi-level marketing companies that Minkow did were very well researched. That's why I did columns on them. Minkow wanted me to tackle the Lennar matter, but I didn't, and one reason is that I feared that he was taking on a very large company on its own turf (Florida). I never even spent much time looking at his various Lennar accusations, because I had decided not to do a column on that one. I have not tried to reach Minkow tonight, but other media are reporting that they haven't been able to get to him.