By Michael Goldstein
By Dennis Romero
By Sarah Fenske
By Matthew Mullins
By Patrick Range McDonald
By LA Weekly
By Dennis Romero
By Simone Wilson
Lennar responded by naming Minkow as a defendant in a libel-and-extortion lawsuit. That lawsuit has unfolded over the last 21 months, leaving an extensive public record that includes statements like this from Florida State Court Judge Gill Freeman: "My main issue is that Mr. Minkow acts as judge and jury and decides what we should and shouldn't know, and he will lie, plain and simple."
Minkow made his claims against Lennar while working for a client who was suing the company in San Diego. According to the court record in the libel-and-extortion case in Miami, Minkow's motive was to bring Lennar to its knees financially, forcing it to settle with the client.
A San Diego court eventually found no merit to that client's claims against Lennar — but by then, Minkow had damaged Lennar's reputation.
Here's what happened:
San Diego developer Nicolas Marsch III filed a lawsuit on Dec. 22, 2006, against Lennar over the development of an exclusive housing project in Rancho Santa Fe known as The Bridges.
Marsch claimed that Lennar owed him hundreds of millions of dollars under the terms of a development deal and accused Lennar of fraudulent accounting and mismanagement of the project.
On July 11, 2008, as the case moved through the court, Marsch sent to Lennar's board of directors a letter charging the company with a litany of misconduct. The letter said that if the company didn't respond to his satisfaction within two weeks, Marsch would air the home builder's "dirty little secrets" and implied the company would be reported to the SEC.
Lennar responded by filing a libel-and-extortion lawsuit against Marsch in Miami.
Marsch also had sued Lennar in a separate lawsuit for tens of millions of dollars, claiming the home-building giant had cut him out of a 50 percent partnership in another Rancho Santa Fe real estate venture called The Lakes.
On Nov. 5, 2008, the same San Diego Superior Court judge overseeing the Bridges lawsuit tossed the Lakes case out of court, saying that Marsch was "inherently incredible."
Angry at the setback and with the Bridges case hurtling toward trial, Marsch turned to Minkow, whom he would later describe in a deposition as someone who operates outside the "conventional justice-system toolbox."
The ex-con reviewed the situation and wrote a memo to Marsch dated Nov. 28, 2008. In it, Minkow recommended an "all-out 'blitzkrieg.' "
Although Minkow had no evidence of wrongdoing by Lennar, he wrote that the company "will have to decide that it is a better business decision to settle [its] case with you in a fair and equitable way rather than deal with the consequences of an all out exposé of their business practices by an investigative company that has direct experience in this very type of exposé that will be carefully sourced and will likely have a devastating impact on their stock price, borrowing power, and ability to secure new joint-venture partners."
In another e-mail, Minkow revealed how much he would charge Marsch for his services: An initial payment of $125,000 would be required through Jan. 9, 2009, with the total reaching at least $1 million and possibly as high as $2 million.
The payments didn't stop there. Bankruptcy court records show that on May 8, 2009, Marsch transferred ownership of his Vail, Colorado, luxury home to Minkow's DegreeFraud.com, LLC, and Jeffrey Sachs, the financier of the pending movie about Minkow's life. The price: Minkow forgave $500,000 that Marsch owed him for his work on the Lennar case, plus Minkow and Sachs paid Marsch $950,000. One month before the transfer, the house was appraised at $10 million, Marsch has testified.
Minkow's Nov. 28 memo also describes his media strategy. Minkow said he would "carefully educate the Associated Press and Bloomberg financial writers assigned to the building industry who have specifically covered Lennar, Inc. with multiple, relevant and easy to comprehend evidence of the company's most blatant abuses."
Two days after sending that memo, Minkow followed up with an e-mail emphasizing the importance of "the feeding of outlets like the AP, Reuters and Bloomberg, media agencies we have had significant experience working with, covering the Lennar, Inc. case and track record of fraud."
On Jan. 9, 2009, Minkow struck. He issued a report on his website citing "10 red flags," accusing Lennar of a massive fraud. Some of those red flags included allegations similar to those in Marsch's lawsuit. Minkow's language was hazy and jumbled, but he used verbiage that relied heavily on the phrase "Ponzi scheme" — which, coming on the heels of the Bernard Madoff scandal that was in the news at the time, spooked investors.
On a YouTube video he made in support of his allegations, Minkow described Lennar as a "financial crime in progress" and called the company a "corporate bully."
As Minkow predicted, the media swooped in. Bloomberg, Reuters and The Wall Street Journal all carried stories.
Lennar's stock tumbled nearly $500 million in two days.
Lennar responded Jan. 12, 2009, with a detailed public rebuttal. The company also added Minkow to the libel-and-extortion suit it was pressing against Marsch.
But news organizations gave little attention to Lennar's rebuttal or news of the lawsuit against Minkow. The Wall Street Journal published a short story quoting Lennar accusing Minkow of making "false and scurrilous" claims, and Minkow as saying, "When you get sued, you know you are right."
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