Barry Minkow
Barry Jay Minkow (born March 17, 1967) is a former businessman, pastor and convicted felon.
While still in high school, he founded ZZZZ Best (pronounced Zee Best), which appeared to be
an immensely successful carpet-cleaning and restoration company. However, it was actually a
front to attract investment for a massive Ponzi scheme. It collapsed in 1987, costing investors
and lenders $100 million—one of the largest investment frauds ever perpetrated by a single
person, as well as one of the largest accounting frauds in history. The scheme is often used as a
case study of accounting fraud.
After being released from jail, Minkow became a preacher and a fraud investigator, and spoke at
schools about ethics. This all came to an end in 2011, when he admitted to helping deliberately
drive down the stock price of homebuilder Lennar and was ordered back to prison.
At first, Minkow struggled to meet basic expenses. Two banks closed his business account
because California law didn't allow minors to sign binding contracts, including checks. He was
also plagued by customer complaints and demands for payment from suppliers. At times, he
found it difficult even to meet payroll. Faced with a shortage of operating capital, he financed his
business via check kiting, stealing and selling his grandmother's jewelry, staging break-ins at his
offices, and running up fraudulent credit card charges.
After that, Minkow branched into the "insurance restoration" business. With the help of Tom
Padgett, an insurance claims adjuster, Minkow forged numerous documents claiming that ZZZZ
Best was involved in numerous restoration projects for Padgett's company. Padgett and Minkow
formed a fake company, Interstate Appraisal Services that verified the details of the restorations
to Minkow's bankers. Flush with loans from these banks, Minkow expanded ZZZZ Best across
Southern California.
Minkow took the company public in January 1986, garnering a spot on NASDAQ. The
accountant who audited the company before it went public didn't visit the insurance restoration
sites himself. Had he done so, he would have discovered that they were mailboxes located
throughout the San Fernando Valley. Minkow retained a 53 percent controlling interest, making
him an instant millionaire on paper. Going public seemingly offered him a way to cover up his
fraudulent activities. Under securities law of the time, he had to retain his personal shares for two
years. He planned to sell a million of his shares to the public in January 1988, believing this
would give him enough money to pay everyone off and go completely legitimate.
On March 30, 2011, Minkow pleaded guilty to one charge of insider trading. He entered a plea
agreement, and instead of the maximum sentence of 30 years, he was sentenced to five years in
prison, and $584 million in damages to Nicholas Marsch, a San Diego developer. He has since
been accused by congregants from his former church of swindling them, a claim the FBI is
currently investigating. Minkow is serving his sentence at Federal Medical Center in Lexington,
Kentucky.