A quarter century ago, a brilliant L.A. punk named Barry Minkow built a carpet-cleaning business worth hundreds of millions of dollars — on paper. His company, ZZZZ Best, turned out to be an elaborate Ponzi scheme. Minkow had built his phony business by lying to reporters, lying to investors, lying to federal regulators — even lying to Oprah.
But news organizations carried a special dose of blame. They had been so eager for his boy-wonder story that they failed to check even the most basic facts. Instead, they wrote glowing stories, unwittingly propelling Minkow's phony business to lofty heights, costing investors as much as $100 million.
Minkow went to prison for seven years. Afterward, he sought to redeem himself. He became a minister and a fraud fighter, helping the FBI and starting a company dedicated to rooting out corporate wrongdoing. Heartened by the turn of events, some of the nation's largest news organizations have been all too eager to do major stories in recent years on the redemption of Pastor Minkow — which is why the truth about him today is so maddening.
Tens of thousands of pages of court records going back nearly two years show that Minkow is again not to be trusted. He is leveling unproven allegations against major companies, driving their stock prices down and profiting by doing so.
A Miami judge in one of those cases says Minkow has no credibility, that he "will lie, plain and simple." Since January, the Securities and Exchange Commission has been looking into Minkow's activities.
In an interview with the L.A. Weekly, Minkow acknowledged that he has been a "horrible defendant in the case" in Miami, which is a lawsuit that one of the nation's largest home builders filed against Minkow after he accused the company of massive wrongdoing. Minkow said the Miami judge is right in "thinking I'm an ass."
But you would never know about the challenges to his credibility if you rely on the journalists who helped create Barry Minkow 2.0. To their readers and viewers, Minkow is still an upstanding Christian fraud-buster. (Click here for the interview.)
Mark Maremont, a Pulitzer Prize–winning senior editor at The Wall Street Journal, praised Minkow for his fraud-discovery unit and came to rely on him as a source for investigative stories. But after Maremont learned in January that Minkow was once again the subject of SEC scrutiny, he never wrote a word about it.
In a flattering 2005 profile on 60 Minutes, Minkow detailed how he manipulated the media and even duped Oprah Winfrey. "Nobody knew I was a liar and a thief, but I knew," Minkow confessed to correspondent Steve Kroft. But several months ago, when 60 Minutes was presented with evidence that Minkow was being deceitful again, producers had no interest in correcting the record.
Similarly, Fox News has enthusiastically served as one of Minkow's biggest promoters. Minkow appears regularly on the network as a fraud expert.
During a recent interview on Your World With Neil Cavuto, the host aired clips from an upcoming movie starring Minkow in his own redemption story and gushed, "Now you're a big movie star. ... This movie is going to win an Oscar."
To understand Minkow today, you need to turn back the clock to a garage in Reseda 25 years ago.
There, at his parents' home, Minkow hatched his original scheme. He impersonated a customer in a phone call to a local television station, raving about a 16-year-old who cleaned carpets between his algebra and Spanish high school classes.
Five minutes later, Minkow said, a reporter called to arrange an interview.
"When the television piece aired, I got addicted to the recognition," Minkow explained in a chapter he wrote years later for They Thought for Themselves, a book about people who have taken new paths in their lives.
After the television interview, Minkow's carpet-cleaning business took off — or so he claimed. By 1986, at the age of 20, Minkow became the youngest person ever to take a company public. ZZZZ Best was listed on NASDAQ.
On paper, the company — which Minkow claimed had about 1,300 employees in some two dozen offices — was worth nearly $300 million. Minkow lived in a mansion in the exclusive San Fernando Valley gated community of Hidden Hills, with a Ferrari Testarossa in the garage and a gigantic Z painted on the bottom of his swimming pool.
Minkow's personal worth reportedly topped $100 million. In April 1987, he appeared on The Oprah Winfrey Show.
"This television appearance was a watershed for Barry, a vintage performance of his desperate need for attention, his inability to sit still, his astounding capacity to lie with a straight face and the extent to which he succeeded at fooling the world," author Daniel Akst wrote in Wonder Boy: The Kid Who Swindled Wall Street.