The Morning Report
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The days of redemption have ended for Barry Minkow.
The onetime swindler who convinced the media that he was a changed man dedicated to the Lord and the catching of crooks will plead guilty to a charge of insider trading.
Minkow could spend up to five years in prison on a charge of trading on information that wasn’t public, his attorney said in an interview with the Wall Street Journal. San Diego’s Community Bible Church said in a statement that Minkow will step down as its senior pastor.
This won’t be the first time Minkow has been behind bars. As a young man in his teens and early 20s in the 1980s, he raked in tens of millions of investments for his Los Angeles carpet-cleaning company. He was lauded as a financial whiz kid and even showed up on “Oprah,” but his $300 million empire turned out to be a scam, a Ponzi scheme that took from new investors to pay off old ones.
He served seven years in prison. Over the last decade, he made a name for himself as a fraud detector, saying he even worked with the FBI to uncover a swindler. Minkow also tried to profit from the downfall of companies, essentially betting that companies would fall apart as a result of his investigations. If their stock prices dropped, he’d make money.
“If what you have on a company isn’t substantial, then it’s not going to do anything to a stock. The only way we’re successful is if we’re right. You go broke if you’re not right,” he said in a 2009 interview with me. (We also did more about his short-selling practice.)
In 2010, Minkow attempted to expand his fraud-detecting operation by creating a journalism outfit devoted to uncovering corporate fraud. He continued to gain positive media attention. But there were skeptics too.
The LA Weekly did a lengthy investigative piece criticizing the media’s treatment of Minkow:
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.
The article pointed to a libel lawsuit filed against Minkow by Lennar, a Florida home builder that accused him of making up false statements and driving down its stock.
Also last year, the Medifast weight-loss company filed a $270 million complaint against Minkow after its stock dropped following his accusations of corporate wrongdoing.
The guilty plea of insider trading is related to the Lennar company. The Miami Herald said “he’s widely blamed for causing Lennar’s stock price to plunge nearly 20 percent on Jan. 9, 2009.” It’s not clear what undisclosed information he may relied upon but the LA Weekly piece provides a detailed, skeptical account of how he dealt with the company.
Minkow had been serving as senior pastor at Community Bible Church, an evangelical Christian congregation which had 1,200 members in 2009 and operated out of a business park in Kearny Mesa. On Tuesday, LA Weekly reports, the church issued a statement that said: “Today Barry resigned as our senior pastor as he is no longer qualified to be a pastor. Pastor Barry no longer considers himself above reproach as he has agreed to plead guilty to a criminal count related to the Lennar lawsuit.”
LA Weekly adds: “The letter from Minkow’s church elders Tuesday made no mention of a burglary at the church earlier this year in which Minkow claimed thieves stole $50,000. The burglary remains unsolved. The break-in is quite similar to phony burglaries Minkow has said he staged in the 1980s to collect insurance money when he was short on cash.”
When I interviewed Minkow in 2009, he met me in a church office cluttered with books and bodybuilding supplements. (As a young man, he’d turned himself from a skinny kid to a muscle-bound weight lifter.) He proudly showed me a clip from an upcoming Christian movie about his life starring Hollywood names like James Caan, Ving Rhames, Mark Hamill and Talia Shire.
Minkow played himself, although another actor subbed in the scenes of him as a teenager.
In a 2004 interview with me for U.S. News & World Report, Minkow said he’d become born again while serving in prison and made sure to disclose his past to church members from the pulpit.
“When I get up there, I’m worse than anybody in my congregation,” he said. “I always let them know that.”