Barry Minkow 2.0
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.
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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.
The scam fell apart a month later, just as Minkow was closing a deal to become Sears' national authorized carpet-cleaning operator and to sell $18 million in stock. The Los Angeles Times reported that Minkow had run up $72,000 in false credit-card charges. The story grew out of a tip from a homemaker whom Minkow had overcharged by a few hundred dollars.
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.
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.
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."
But neither the Journal nor any other publication dug into Minkow's activities to see whether the supposedly redeemed character whose image they had helped burnish could still be trusted.
Marsch's lawsuit against Lennar went to trial in the spring in San Diego. It concluded last month with a 48-page ruling against Marsch by California Superior Court Judge William R. Nevitt Jr. The judge wrote that Marsch's claims that he was defrauded by Lennar "did not withstand close scrutiny and cross-examination. Ultimately, Mr. Marsch was thoroughly impeached with his own testimony, documents and the testimony of other witnesses."
Nevitt wrote on 22 different occasions that Marsch's testimony and statements were "not credible." Although Marsch sought more than $400 million in damages from Lennar, he did not get a dime and was ordered to pay $12 million in counterclaims.
"There is no evidence of fraud or diversion of funds to other projects," Nevitt wrote.
The judge's decision meant that damaging allegations made public by Minkow on Marsch's behalf in January 2009 had been weighed in a court of law and found to have no basis in fact. But none of the major media organizations that had rushed to disclose details of Minkow's charges against Lennar 18 months ago reported on Nevitt's ruling.
Mark Sustana, Lennar's general counsel, said in a statement to the Weekly this week: "The media rehabilitated Mr. Minkow's image after his imprisonment for fraud, but have shown no interest in investigating his behavior or even reading publicly available court records. This neglect has enabled Mr. Minkow to malign the reputations of U.S. businesses like ours without any showing of proof."
Determined to clear the company's name, Lennar has continued to pursue its libel-and-extortion lawsuit against Minkow and Marsch. Unreported by the media were revelations that came tumbling out through the court record. Some examples:
— Minkow hired a private investigator to look into Lennar with regard to one of his 10 red flags. When the investigator, Paul Palladino, said he found no evidence to prove any wrongdoing, he warned Minkow against going public with an accusation.
Palladino said he was told it was too late. "I was very upset, to put it mildly," that Minkow went forward with the allegations, Palladino said in a deposition.
— Minkow had said under oath that he'd never bet against Lennar's stock by buying put options before leveling allegations against the company.
After being confronted with trading records, Minkow was forced to admit that he had indeed shorted Lennar's stock, twice. The first time was about a month before he issued his FDI report on the company.
— Another investigator hired by Minkow, Terry Gilbeau, said he had hired a "foreign investigator" to look into the private banking records of Lennar executives and that the investigator had found evidence of wrongdoing.
But when pressed by Lennar, Gilbeau said he could not remember the name of the investigator. As for the evidence, Gilbeau had ostensibly written it on the back of a Starbucks napkin and sent the information to Minkow.
When Lennar demanded e-mails and documents from Gilbeau's computer, Gilbeau said it had crashed and he had abandoned it in a San Diego hotel room.
— At one point, Minkow claimed he had untraceable e-mails from an anonymous whistle-blower inside Lennar, alleging improper behavior by company executives — including a document purported to be a confidential company memo. Challenged by Lennar attorneys about the authenticity of the e-mail, Minkow produced still more anonymous e-mails.
The memo turned out to be a fraud.
— Minkow's FDI uses the offices of the San Diego Community Church, where he is senior pastor, to conduct business; uses church employees to perform investigative tasks; and even uses church money to fund his for-profit enterprise. Indeed, the records show that Minkow sent at least $3,000 from the church's PayPal account to an FDI consultant.
— On Aug. 2, the day Minkow was to travel from Los Angeles to Miami to testify in Lennar's lawsuit, he told the court he'd missed a red-eye flight because he had been hospitalized in an emergency room for assorted ailments, including nausea, anxiety, kidney stones, food poisoning and a migraine.
When the judge ordered him to produce hospital records, Minkow was forced to concede that he had lied. Under oath, Minkow admitted that he had not visited the ER but instead stayed at the Ritz-Carlton in Marina del Rey and sought treatment the next day from an anti-aging doctor in San Diego.
Judge Freeman said that Minkow "seems to have absolutely no sense of responsibility for telling the truth," and had exhibited "misfeasance and fraudulent conduct."
"The truth is whatever he decides is important to the moment," Freeman said.
In an interview with the Weekly, Minkow blamed his conduct on a serious health problem that prevented him from traveling to Florida to testify in person.
A judge calling Barry Minkow a liar in open court should be enough to raise any journalist's curiosity. But that has not been the case.
Some newspapers have written brief stories reporting that companies Minkow has challenged are fighting back. But no news organization has undertaken a thorough examination of his claims.
Minkow has targeted at least two companies since the Lennar court case began: Medifast, a diet-food company headquartered in Maryland, and InterOil Corp., an Australian-based company exploring for oil and gas in Papua New Guinea.
Minkow targeted Medifast on Feb. 20, 2009 — six weeks after Lennar accused him of libel and extortion. Minkow said Medifast was a Ponzi scheme. The company's shares tumbled 30 percent. Minkow told the Weekly that he had purchased put options to profit from the declining stock price.
The company filed a $270 million defamation lawsuit against Minkow in February.
On June 26, 2009, Minkow called another company — InterOil Corp. — a "classic case of a Ponzi scheme." He had purchased put options on InterOil's stock, according to the San Diego Reader.
Instead of looking into Minkow's activities, news organizations have ignored the mounting evidence against him in Miami. Here are prime examples:
The Wall Street Journal
One of the first Minkow redemption stories appeared in The Wall Street Journal on Aug. 25, 2003, under the headline "Former White-Collar Felon's Insights Reap Redemption." The story described Minkow's work on behalf of government agencies, including the SEC.
Over the years, Wall Street Journal reporters developed a close relationship with Minkow as they wrote about the companies and executives FDI was accusing of wrongdoing. Many of Minkow's claims in those earlier years were indeed true.
On April 25, 2008, The Wall Street Journal wrote that Minkow caught Herbalife's president's résumé fabrication. The story briefly recapped Minkow's prison record and also mentioned the praise he had won from the FBI in uncovering corporate fraud since his release from prison.
(Many other news organizations have reported those words of praise from the FBI. They derive from a letter written by FBI Special Agent Peter H. Norell on Oct. 24, 2005. Norell lauds Minkow for helping the FBI and other law enforcement agencies to "disrupt and dismantle various financial frauds totaling millions of dollars."
(But here is a detail you won't read in Minkow stories about his FBI connection: Norell was forced to resign from the FBI and pleaded guilty last March to the misdemeanor charge of tapping a government computer in August and September 2005 to get information on a person who owed money to a friend.)
The Journal's story detailing Minkow's allegations against Lennar appeared on Jan. 10, 2009. It was written by reporters Michael Corkery and Mark Maremont.
The story lists Minkow's claims and goes on to recap Minkow's past as a stock-fraud felon and the FBI's praise of his fraud investigations.
The reporters quoted Minkow as saying he was being paid by "an unnamed client" and that he did not hold a put option on the company's stock. Minkow also stated in sworn deposition testimony that he had never shorted Lennar stock, a claim the Miami court record later would reveal as a lie.
The story included Lennar's denials but they were brief, given that the company had only hours to evaluate the allegations before being asked to comment.
The company issued a far more detailed rebuttal on Jan. 12, 2009 — making a case that has stood up since. But The Wall Street Journal didn't report those arguments, despite the enormous damage the company suffered at Minkow's hands.
Indeed, the Journal's reporting came to a near halt for months — even as both Marsch's lawsuit against Lennar and Lennar's lawsuit against Minkow and Marsch generated an extensive public-records trail.
Minkow has continued to put out inflammatory press releases against Lennar, touting the "Top Ten Red Flags for Fraud 2 — The Sequel" and footage from an FDI documentary, Too Big to Go to Jail: The Lennar Story, which purports to demonstrate the company's "alleged nationwide pattern of fraudulent behavior."
The Wall Street Journal took the bait once again. In a March 31 story posted online, the paper reported that Minkow's documentary promises to show "a disturbing pattern of apparent fraudulent behavior ... ranging from the falsification of government documents to the utilization of their joint ventures to conceal debt and siphon cash from unwitting joint-venture partners."
On June 4 of this year, Minkow's relationship with the Journal took a strange turn. Minkow disclosed on his website that FDI had received a "nonpublic subpoena from the SEC." Six companies Minkow had criticized, including Lennar and Herbalife, Medifast and InterOil, had filed SEC complaints against him, the statement said.
Minkow said he was disclosing the subpoena in the interest of full transparency. But the facts suggest that he knew the subpoena was about to become public and that he struck first so as to give it a positive spin.
In explaining the subpoena, Minkow's website defended him in a surprising way. He claimed that five months earlier, in January 2010, he had forwarded to Wall Street Journal senior editor Maremont a copy of the subpoena along with his company's 300-page response to it.
Minkow said Maremont's decision not to write about the subpoena was proof that it was of little consequence. "For six months, The Wall St. Journal decided that it wasn't news," Minkow wrote.
A week later, however, on June 11, 2010, the Journal's sister company, the Dow Jones Newswires, decided the SEC inquiry into Minkow and FDI was news, publishing a story headlined "SEC Probe Into Barry Minkow's Fraud Discovery Institute Continues."
The article, by Maxwell Murphy, said Dow Jones Newswires had reviewed copies of three of the subpoenas and "related materials." It quoted the SEC, saying the "investigation is a nonpublic fact-finding inquiry" intended "to determine whether there have been any violations of the federal securities law."
The story added that the SEC also wanted information on all contacts Minkow and FDI had with about two dozen individuals, including two Dow Jones Newswires reporters, Ben Dummett in Toronto and Michael Rapoport in New York, who had written about InterOil Corp.
But aside from reporting on the subpoena, the story did not look at the mounting evidence in Miami that Minkow was indeed making phony claims about businesses. Also, nowhere did the story address Minkow's claims that Maremont had been in possession of the SEC's subpoena for five months without reporting it.
In an interview with the Weekly last week, Maremont said The Wall Street Journal had not relied on Minkow's credibility when taking tips from him over the years. When Minkow passed along a tip, the Journal checked to see if it was accurate.
"Many things Barry pointed us to have in fact turned out to be real fraud, real abuses, resulting in lots of enforcement actions by authorities," he said.
But the Journal never got to the bottom of Minkow's claims about Lennar in January 2009 before writing its story about his allegations.
Maremont declined to comment about whether he had been told about the SEC subpoena five months before Minkow disclosed it on his website.
A spokeswoman for the newspaper told the Weekly that the Journal was not obligated to look more deeply into the case or Lennar's lawsuit against Minkow.
"There is a fundamental flaw in the argument that we're obliged to write about — or could even possibly write about — every lawsuit filed, including those that may involve sources," said spokeswoman Ashley Huston.
CBS/ 60 Minutes
Minkow's redemption story aired in 2005. It begins with an explanation that Minkow is "back in the spotlight, not for committing fraud but for exposing it."
On camera, Minkow is relaxed and laughs frequently as he tells his story to correspondent Kroft. The segment includes an interview with a federal postal inspector, Tim France, who says Minkow helped him uncover a fraud. France says Minkow was useful but, because of his history, "I have to re-verify everything he has done already." Kroft asks France if he trusts Minkow. France says, "Trust but verify."
Last spring, a CBS News producer received a detailed presentation urging 60 Minutes to take another look at Minkow on the basis of evidence in the Miami lawsuit, a source familiar with the meeting told the Weekly.
60 Minutes did nothing.
A representative of 60 Minutes told the Weekly that the Minkow segment stands up even today.
"I think if you take another look at the wry — even humorous at times — story we did on a famous con man, you'll see that the information you brought to us doesn't change our story or the way we feel about it at all," said Kevin Tedesco, executive director of communications.
The segment is wry, but it unmistakably portrays Minkow as a legitimate fraud-buster.
In fact, 60 Minutes persuaded Minkow to go undercover for the show, using a hidden camera to try to nab a Dallas couple who Minkow alleged were engaged in fraud.
Debby and Eric Berry were running a possible Ponzi scheme through two Dallas companies, Minkow claimed. The companies bankrolled a nonprofit organization called the Nehemiah Fund, promising a 100 percent matching grant for churches willing to put in $500,000 or more.
Minkow said the deal had the markings of a "financial crime in progress" — the same phrase he later used for Lennar. The evidence? "All the red flags," he said.
The Berrys hadn't been charged with any crimes and refused to go on 60 Minutes. But after Minkow issued his report, the Texas Attorney General's Office, the FBI and the Montana auditor's office began investigations, the show reported.
The Texas Attorney General's Office told the Weekly last week that no charges were ever filed because investigators couldn't find sufficient evidence.
Fox News commentator Neil Cavuto is a self-described Minkow fan going back to 2003. (Fox is owned by News Corp., which in August 2007 bought Dow Jones & Co., The Wall Street Journal's parent.)
Cavuto over the years regularly invited Minkow on his show to weigh in on major figures who had fallen from grace. In March 2009 — a month after his allegations against Lennar and two weeks after Medifast — Cavuto invited Minkow onto a panel to discuss discredited financier Bernie Madoff.
Rather than question Minkow, Cavuto gave him the stamp of approval: "You learned the error of your ways. You returned whatever your debt to society many times over, and done enormous amount of good that dwarfs whatever bad you did. And you helped society."
It is unlikely that Minkow's victims in the ZZZZ Best scam concur with Cavuto. They are still owed much of the $26 million in court-ordered restitution — a debt Minkow has said he will be paying off for the rest of his life.
In March, 19 months after the Herbalife "one and done" and 14 months after Lennar began offering evidence of Minkow's questionable activities, Cavuto told viewers that he couldn't praise Minkow enough. In reviewing a trailer for the movie about Minkow's life, Cavuto predicted an Oscar. "It's going to be big, big, big," Cavuto said.
The movie has yet to be released.
Cavuto did not respond to the Weekly's requests for comment, although a Fox News representative said she tried for several days to obtain one from him.
The Orange County Register
On Feb. 23, 2009, six months after the Herbalife retraction and a month after Lennar's detailed rebuttal against Minkow, The Orange County Register published a long, narrative piece on the front page of its Sunday paper, recapping Minkow's life. It was the redemption story all over again.
"In an epoch when much of corporate America seems like a house of cards built on a foundation of fraud, Minkow is on a crusade to render financial justice and find personal redemption," the story said.
In three paragraphs near the end, the story acknowledges Lennar's libel-and-extortion lawsuit against Marsch and Minkow. But coming at the end of a lengthy, glowing story about Minkow, those paragraphs amounted to little more than a jarring non sequitur.
John Gittelsohn, the reporter, quotes Minkow as saying he can't afford to make a false accusation. "For a guy like me, it's one and done."
But the story didn't explore the Herbalife case or the growing court file in the Lennar lawsuit.
Gittelsohn did mention that Minkow had leveled allegations against Medifast, which occurred days before the story ran. It quoted Medifast's CEO, Michael S. McDevitt, saying Minkow is "a liar and can't be trusted."
In the story, Gittelsohn discusses how Minkow deals with the press.
"Once he has the goods, he often prepares a lengthy spiral-bound written report with a glossy cover. He shoots a YouTube video, starring himself. He leaks the story to a financial reporter at a news service, such as Forbes, Bloomberg News or even the Register, who can confirm his research and whose report can impact the market. Then he places his bet and prays things go right," Gittelsohn writes.
Gittelsohn, who now works for Bloomberg in New York, declined to comment to the Weekly.
Los Angeles Times
At the Los Angeles Times, in a column on Jan. 19, 2009, Pulitzer Prize–winning business writer Michael Hiltzik expressed deep skepticism about Minkow's claims.
Hiltzik wrote: "You certainly can't determine from Minkow's evidence that Lennar is crooked.
"When I told him so, he tried to convince me with a spiel that had the cadence of a con man's pitch — instead of haranguing me about all the suspect maneuvering I was overlooking, he might have been telling me this was my last chance to get in on a fortune at the ground floor," Hiltzik wrote.
He said Minkow responded to his skepticism by saying, "What kind of evidence are you willing to accept that will convince you ... that Lennar is lying?"
Hiltzik told the Weekly that he has remained unconvinced, saying while Minkow is good at self-promotion and trotting out testimonials from the FBI, on closer scrutiny he has mainly gone after small-scale scams and easy targets like résumé fabrications.
"There was so much talk and not so much real, solid achievement."
Hiltzik said Minkow expected people to take him at his word that he had had a jailhouse conversion and now just wanted to help out.
"I was just very skeptical. ... I didn't buy it and I didn't see evidence he was all that reformed."
Despite Hiltzik's skepticism in that column, the Times did not follow up to determine if L.A.'s famous fraud had become a menace to businesses.
Minkow told the Weekly last week that he is getting out of the business of investigating public companies and then shorting their stocks, because the investigations are expensive and government regulators, such as the SEC, don't take action.
Daniel Akst, who wrote a book about Minkow, said in an interview last week that the press has more reason to be skeptical of Minkow today because he has admitted to lying to news organizations.
But the media generally have become more "credulous" as newsrooms have shrunk and reporters have less time to do investigative journalism, said Akst, a former Los Angeles Times reporter who is now on the editorial board at Newsday.
Geneva Overholser, director of USC Annenberg's School of Journalism, said news organizations and journalists who have told Minkow's "redemption story" and have reported extensively on his allegations against companies have an obligation to the public to report on challenges to his credibility in court records and settlements as well.
"The story was big when it was a scandal, when [he became] a preacher, but where are the media now?" Overholser asked. "Of course we love a redemption story, but we're supposed to be skeptical. Redemption stories often don't pan out or last for very long."
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