By Beth Barrett
The Weekly reported last month that Barry Minkow, L.A.'s most famous convicted fraudster, once again isn't to be trusted. He was accusing major firms of fraud and financial crimes–and making money at it, even though he couldn't prove his claims.
Now, court records newly obtained by the Weekly show that Minkow tried to have it both ways in his attempted take-down of Lennar Corp., whose plight was detailed by the earlier Weekly story:
After Minkow called Lennar a “financial crime in progress” last year, driving its stock down nearly $500 million, he bought Lennar stock, betting that the supposedly shady home-building giant would prosper. Here are the juicy details:
Minkow is the supposedly reformed fraud king who as a teenager in the mid 1980s duped the news media, investors and federal regulators with his ZZZZ Best carpet cleaning company.
He took the company public, becoming the youngest person ever to do so. He served seven years in prison after the company was revealed as a giant Ponzi scheme.
After his release in 1994, Minkow became a church pastor and a media darling as a reformed fraudster turned fraud buster.
He began making money by buying “short” positions on the stocks of certain companies, then issuing reports critical of those companies, driving their stock prices down.
By buying “short,” Minkow profited when the stock price fell.
The Weekly reported Oct. 14 that court documents in Florida cast major new doubts on Minkow's credibility. Those documents are being generated in a lawsuit Lennar is pushing against Minkow in retaliation for his damaging claims about the company.
Minkow was paid handsomely by a client for his January 2009 report dissing Lennar. It caused the stock price to tank.
But court records now show that he later bought Lennar shares after the price fell. As he explained in a deposition in the lawsuit 10 weeks ago, “I thought the stock was going to go up.”
In other words, Minkow profited by warning investors that Lennar was committing crimes. Then, after investors fled the stock, Minkow bought it–without telling investors he thought the company had growth potential.
Minkow attorney Alvin E. Entin, of the Florida law firm Entin & Della Fera, told the Weekly that in December 2008, a month before Minkow's scathing report on Lennar, and in May 2009, Minkow bought short positions on the company's stock.
In December of last year, Minkow took a “long” position–betting the price would rise.