The redemption of Barry Minkow, a wunderkind business sensation of the 1980s who was exposed as a con man and spent years in prison but later built a new life as a pastor and celebrated fraud-buster, turns out to have been overrated.
On Thursday, the government filed a securities fraud charge against Minkow, which could send him back to prison for five years.
Minkow has agreed to plead guilty to the charge, filed in Miami, and will “take responsibility for what he did,” said Alvin Entin, his attorney.
Minkow, 44, artificially depressed the stock of a home-building company by spreading false information that it was engaged in fraud, the government said in a court filing.
He induced a law enforcement agency to open a criminal investigation of the company and then traded on his knowledge of it, the government said. The Justice Department described Minkow as a “confidential human source” for the FBI.
The case was another dramatic twist in an improbable career.
Minkow became a teenage millionaire as the founder of a carpet-cleaning company called ZZZZ Best, which made a splash on the stock market. But much of the company’s purported revenue was derived from imaginary clients. In a 1996 Washington Post profile, he recounted how he fooled auditors by fabricating checks with a razor blade and correction fluid.
The scam unraveled when ZZZZ Best got caught claiming that it was doing work in a five-story office building in a town where no building was taller than two stories.
After spending several years in prison, Minkow embarked on a new career trying to expose financial scams, and he created a business called the Fraud Discovery Institute.
He taught courses in fraud detection for the FBI and worked closely with a variety of law enforcers — including federal prosecutors, the Securities and Exchange Commission and the Internal Revenue Service, according to a court document.
In 2005, Minkow issued an autobiography titled, “Cleaning Up: One Man’s Redemptive Journey Through the Seductive World of Corporate Crime.”
“Before he was even old enough to drink, he had bank accounts, a Ferrari, a mansion, a multi-million dollar corporation, and a desperate little secret . . . it was all a lie,” the description at Amazon.com says. “Cleaning Up is Barry Minkow’s comeback story — a powerful a tale of redemption and inspiration, of second chances and setting things right.”
In 2008, a client hired Minkow to help in a business dispute with home-builder Lennar Corp. The client said Lennar owed him money from a failed business deal, and he enlisted Minkow to apply pressure on the company, the Justice Department alleged.
Minkow unleashed a barrage of false and misleading statements about Lennar via e-mail and on YouTube, among other channels, according to the government.
Lennar fought back through the courts.
In a December order in the private dispute, a judge severely criticized Minkow’s behavior.
“With full knowledge of the rules and his obligations as a litigant in this Court, Mr. Minkow has withheld key documents, destroyed or discarded important evidence, concealed the identity of material witnesses, willfully violated court orders, and engaged in actions to cloud his misconduct,” Florida Judge Gill S. Freeman wrote. Minkow admitted that he had used funds from the San Diego Community Bible Church to pay a business expense, the judge wrote.
Minkow’s attorney said his client resigned his position as senior pastor a week ago.
In the 1996 Post profile, Minkow said he had turned his life around.
“If you don’t have a change of heart, you are always going to go right back to what you did before,” he said. “In my case, that was fraud.”