Barry Minkow 2.0

Minkow's business had been a Ponzi scheme. He had promised investors hefty returns on multimillion-dollar restorations, but in reality, there was little work. Investors were being repaid with money from new investors.

Minkow had lied and stolen to meet ZZZZ Best's payroll and to expand the business. He took high-interest loans from people with mob ties.

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Scenes of the original fraudster

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More About

• Barry Minkow
• U.S. Securities and Exchange Commission
• Fraud Discovery Institute
• Crime and Law
• Crime

The role the media played in his deception became a large subplot of the Minkow saga. The Los Angeles Business Journal detailed how the press had been duped — and noted that reporters could have found the truth as early as 1985, when court records raised questions about his business long before investors began sinking millions into it.

The story noted that journalists were easy prey for Minkow because they "didn't do the checking, the personal visits, the trudges to the courthouses."

Business Journal reporter Benjamin Mark Cole wrote that as early as December 1985, a reputed L.A. organized-crime figure, Jack Catain, had filed a lawsuit against Minkow, involving financing Catain had arranged. Reporters didn't look into the lawsuit.

News organizations also didn't try to reach disgruntled former employees who had left the company with stories about its suspicious behavior. Nor did reporters look into Minkow's Interstate Appraisal Service office, which supposedly was doing millions of dollars in business but was a hole in the wall, Cole wrote.

In 1988, Minkow was convicted on all 57 fraud and related felony counts, sentenced to 25 years in prison and ordered to repay his victims $26 million. At the time, it was one of the harshest terms handed down in a white-collar crime case.

"Today is a great day for this country," Minkow said in court as he was sentenced. "They got the right guy. I can only say how sorry I am. I am going to get what I got coming — and I deserve every bit of it."

In prison, Minkow claimed to have an epiphany, concluding that there might be "something wrong" with him. He said he began a transformation, contacting his victims and undergoing a jailhouse baptism. He studied religion and began leading prison ministries. His prison sentence was reduced to seven years.

After his release, he became the pastor of a church in San Diego. He started doing fraud-detection training for the FBI, as well as helping IRS agents.

By the summer of 2002, Minkow became more proactive in uncovering financial crimes, creating a new company: the Fraud Discovery Institute. For the next six years, FDI worked on some 20 cases with federal agencies, Minkow said.

In 2007, Minkow began doing fraud investigations of publicly traded companies. He carved out a specialty: outing company executives who inflated academic credentials on their résumés.

His targets included former Herbalife Ltd. president and chief operating officer Gregory Probert and former MGM Mirage CEO J. Terrence Lanni.

Before disclosing such findings publicly, Minkow typically shorted a company's stock or purchased "put" options, which enabled him to make money when the company's stock prices fell after his disclosures.

That practice is legal — provided that the disclosed information is accurate.

Over the years, Minkow has told and retold his story about how easily he duped the press in the 1980s.

In the 60 Minutes interview in May 2005, an animated and laughing Minkow recalled how reporters uncritically covered his "Boy Wonder of Wall Street."

In giving 60 Minutes correspondent Kroft a reason the media should believe him now, Minkow said that as an ex-con, he has no margin for error.

"One report is wrong, I'm done," he said. "And, when you're Barry Minkow and you say something is a fraud, get law enforcement involved, blow the whistle, and you're wrong, it's over. Over.

"It's called one and done."

For two years in the 1980s, Minkow managed to get away with his lies despite mounting evidence that he was a fraud. Today, if you look at the record over the last two years, you will see ample evidence that he is untrustworthy once again — and once again you will find the news media turning a blind eye.

The first indication came when he correctly revealed that Herbalife's president had inflated his résumé. The company's stock dropped after Minkow's disclosure, and he made $50,000 by shorting the stock, according to the San Diego Reader.

But Minkow didn't stop there. He went on to allege that the company's products violated laws on testing and labeling, a claim that also drove down the stock. The company fought back on those accusations and in August 2008, Herbalife issued a press release saying that Minkow had retracted them.

Although Minkow told the Weekly last week that he disagreed with the press release, it was issued on behalf of both Minkow's FDI and Herbalife, and remains on the company's website today.

The settlement with Herbalife's products could have served as his "one and done" in the media's eyes. But it didn't.

Five months after that settlement, in January 2009, Minkow leveled charges against one of the nation's largest home builders, Lennar Corp., which is headquartered in Miami and has many projects under way in California.

Lennar's stock lost more than 20 percent of its value — nearly $500 million — during the two trading days immediately after Minkow and his Fraud Discovery Institute made serious allegations about the company and its top executives.