Barry Minkow by the age of 15 had already started his very own carpet-cleaning business.
And by his early 20s, that company was worth upwards of $300 million.
Except it was a giant ponzi scheme.
And after he got caught for this scam, he ran ANOTHER giant scam posing as the pastor
of a church!
ZZZZ Best
If Barry Minkow's life story sounds more like a Hollywood movie, that's because it is!
Minnows' very true story was dramatized in the 2018 crime thriller "Con Man," which centered
around Minkow's various exploits as a scheming businessman.
Before we dive into the juicy twists and turns, let's take a look back at his upbringing to
better understand how he became the infamous con man he is today.
Barry had always been a hustler, even as a young boy in 1970s Los Angeles.
The importance of a strong work ethic was instilled in him throughout his childhood.
His drive to work hard and make a better life for himself and his family became a recurring
theme that characterized his later years.
He got his first job at the ripe old age of 9 when his mother got him a telemarketing
gig at the carpet cleaning company she worked for.
It wasn't anything more than an easy summer job, but Barry was still just 9 years old
at the time, so the fact that he had any type of employment at all was rather remarkable.
While most of his classmates were playing with their toys, Barry was out there making
cold calls for his mother's employer.
Barry refined his skills as a salesman in his teenage years.
With his growing work experience came increased dissatisfaction with his family's low-class
way of living.
The Minkows were, by all accounts, quite poor.
They often struggled to pay the bills, and Barry's parents had to work multiple jobs
just to make ends meet.
Barry was embarrassed by his family's lack of wealth, and he dreamed of making enough
money to change their fortunes.
That's why, as a sophomore in high school, he took the giant leap into the world of entrepreneurship
and started a rug cleaning business of his own called ZZZZ Best. (pronounced Zee-Best)
Nearly 150 competing firms populated the LA carpet cleaning scene, none of which had gained
a significant leg up on the rest.
Barry had become quite familiar with the ins and outs of the carpet-cleaning business over
the last few years, and he was confident he could make ZZZZ Best a household name.
Best Start
With the six thousand dollars he had saved up working nights and summers for his mother's
company, he officially launched ZZZZ Best at 15-years-old.
He wasn't even able to drive a car yet, but he was now the owner of his very own company.
The operation was modest.
He and three other employees set up shop in his parents' garage and used the four phones
they had at their disposal to start calling potential clients.
Minkow sought to differentiate ZZZZ Best from other carpet cleaning companies in the area,
who would often obtain business through a deceptive bait-and-switch that promised customers
better rates than what were actually charged for.
People were wary of this common industry practice at this point, so Minkow knew he had to be
different to get ahead.
Sustainability Model
He offered his clients two-room cleanings for just 40 bucks, a seemingly fair deal that
resulted in very few customer complaints at first.
But Barry struggled to keep ZZZZ Best afloat during these early years, and his inexperience
as a business owner became apparent.
His clients complained about ZZZZ Best's work quality and accused Barry of up-charging them
after the fact.
His troubles didn't stop there.
While many applauded him for starting his own business, banks were not so impressed
with the teen.
Two different banks shut down Barry's business accounts because he was still a minor, and
the carpet suppliers he was doing business with grew tired of the teenager's late payments.
He was forced to rely on cash transactions rather than using credit cards, a necessity
during his early years that later made his illicit dealings easier to conceal from authorities.
His dream of starting a successful business and lifting his family from the depths of
poverty was beginning to fade.
Ethical Decisions
Desperate, Barry engaged in some ethically questionable behavior to bring in enough cash
to keep the lights on.
He started kiting checks, which is a complicated process of continuously writing checks from
different bank accounts.
Simply put, a check kiter will write a check from one bank account for more money than
is actually in that account.
They'll then deposit that check into another account and then withdraw the cash for instant
money.
The Kiter then uses that instant cash to pay off a debt or leaves it in the account to
fool an auditor.
With modern banking and technology, check Kiting is borderline impossible.
But back in the early 80s, it could take days, maybe weeks, before the bank noticed the massive
account overdraft.
If that makes your head spin, then you understand why it can be difficult for banks back then
to detect kiters like Minkow.
In addition to kiting checks, Barry also sold some of his grandmother's jewelry behind her
back and even staged break-ins at the ZZZZ Best office to recoup insurance funds.
He had no problem twisting the rules to keep his dream alive, and these youthful examples
of delinquency and deception were only the beginning of Minkow's descent into a life
of crime.
All In
It's at this point that Barry's story gets a little more nefarious.
The small-time scams turned into a full-on Ponzi scheme once he got involved with an
insurance claims adjuster named Tom Padgett.
When parents warn their children of potential bad influences, they're usually talking about
high school bullies and dropouts, not crooked insurance claims adjusters.
But like everything in Minkow's life up to this point, he was operating far beyond his
years.
With Padgett's assistance, Barry forged several fraudulent documents that falsely claimed
ZZZZ Best worked alongside Padgett's firm on various restoration projects across Southern
California.
The pair even created a fake company called Interstate Appraisal Services to help legitimize
these phony restorations.
Interstate, which was actually just Barry himself, would appraise the details of their
non-existent restoration projects and give banks the impression that everything was on
the up and up.
In reality, it was all a ruse.
But thanks to Minkow and Padgett's carefully spun web of lies and fake companies, prospective
lenders were none the wiser.
ZZZZ Best's new restoration division brought in bundles of cash in the form of bank loans.
With his newfound financial stability, Barry was able to expand his company into multiple
locations across the state of California.
ZZZZ Best wasn't a complete and total sham.
It still was a functioning carpet-cleaning business garnering positive reviews and feedback
from its customers.
Unbeknownst to their clients and the banks that continued to fund their operations, the
vast majority of ZZZZ Best's money was coming from their fake insurance restoration projects.
Roughly 86% of the company's revenue came from these non-existent restorations—or
rather the bank loans they received for them.
Barry would subsequently use new loans to pay back old ones, and the Ponzi cycle continued.
He also kept up his check-kiting scam to secure more fraudulent funding for his growing carpet-cleaning
business.
He even masterminded a $70,000 credit card fraud that wrongly charged multiple ZZZZ Best
customers.
He was able to wiggle his way out of that one by blaming it on rogue employees who had
supposedly been fired.
He then paid back all of his angry clients—all except for one—a homemaker who lost a few
hundred dollars to Barry's scam.
It seemed like the problem had been dealt with, though, so Barry moved on.
Although he was still just a high school student, he was successfully operating a high-level
Ponzi scheme from his parent's garage, and the scamming was only just beginning.
Loan Sharks
Barry graduated in 1985 and focused all of his efforts on ZZZZ Best and the various scams
he was involved in.
Things got even more precarious after Barry accepted a loan from a man named Jack Catain,
Jr.
Despite his rampant scams, he was still strapped for cash and needed some help.
Catain wasn't your average, everyday investor, though.
By 1985, he was infamous among LAPD circles for his involvement in organized crime, not
only in Los Angeles but also in Chicago and Philadelphia.
While Minkow later said he was unaware of Catain's ties to the Mafia, he didn't actually
end his association with the mobster once his criminal background came to light.
It's become obvious at this point that Minkow's moral compass doesn't exactly point north.
If someone offers him money, he's gonna take it.
That's exactly what he did when Catain arrived with cash to bankroll ZZZZ Best's operation.
The two apparently agreed on a deal that awarded Jack Catain 50% of the company's profits in
exchange for the loans he supplied.
The partnership didn't last long before it abruptly imploded.
Catain claimed that Minkow was not giving him his agreed-upon share of the money, while
Minkow asserted that his mobster friend was unreasonably increasing the interest rates
on his loans.
The pair brought their grievances to court, but Catain passed away before any resolution
was reached.
Minkow had taken his first step into the world of organized crime, and you know what they
say: once you're in, you're in for life.
Other corrupt individuals came knocking once Minkow got in bed with the mob.
Much to the dismay of ZZZZ Best's law-abiding employees, convicted felons turned into trusted
advisers when Minkow solicited the help of guys like Maurice Rind and Robert Viggiano.
Rind was one of the company's biggest shareholders but was also convicted of securities fraud
a decade prior.
Viggiano was a convicted jewel thief who served as a close business partner to Minkow.
Although he was swimming with the sharks, Barry lived like a rockstar.
He splurged on over-the-top luxuries he only ever dreamed of as a kid.
He treated himself to a massive Mediterranean-style mansion in a gated Woodland Hills community
that cost him nearly $700,000.
He was definitely the only 19-year old homeowner in the neighborhood.
He traded in his parents' garage for one that fit his two new luxury cars: a white BMW and
a red 1985 Ferrari, which sported "ZZZZ BST" on the license plate.
They went nicely with his girlfriend's black Porsche, which he bought her for her 19th
birthday.
Barry walked around with a gold ring on his finger and gold chains around his neck.
He had officially escaped his previous life and was finally leading the kind of high-flying
existence he had been working towards since 9-years-old.
It was ten years of hard work and endless hustling in the making, but we're sure he'd
tell you it was all worth it.
IPO
It was around this time that Minkow decided to take ZZZZ Best public.
In 1986, they got a spot on the NASDAQ after the auditor that verified them neglected to
visit the fraudulent restoration sites they listed on their books.
If they'd done their due diligence, they would have realized that the majority of ZZZZ Best's
business wasn't real, and the jig would have been up right then and there.
Why this auditor didn't think it was important to visit the sites, we'll never know.
Perhaps a few persuasive mafia members had something to do with it?
Luckily for Minkow and company, that never happened, and once they went public, Minkow
became a millionaire.
He retained 53% of the company, keeping a controlling stake despite his new investors.
Not only did going public make Minkow a very, very rich 20-year old, it also gave him a
potential out from the criminal doings he was caught up in.
His plan, or so he says, was to sell his shares after retaining them for the mandatory two
years required by US securities law.
At that point, he believed he would have the requisite funds to pay off all of his loans
and make ZZZZ Best a legitimate business.
Before that could happen, Minkow agreed to undergo an initial public offering, or IPO,
of ZZZZ Best stock to officially go public.
For an IPO to take place, a company needs to be audited by an independent accountant.
This presented a problem, as much of ZZZZ Best's operations were fraudulent.
To conceal this from the accountants tasked with inspecting his business, Minkow went
to tremendous lengths of theater and deception.
He picked out a brand new office building in Sacramento that had absolutely no affiliation
with Minkow or his company and brought the auditors inside, claiming it had been one
of ZZZZ Best's recent restoration jobs.
He even paid off the building's security guard to take part in the charade.
They forged thousands and thousands of phony financial documents to keep the accountants
fooled, and for a while, it worked.
At 21 years old, Minkow became the youngest person in American history to successfully
lead a company through an IPO.
The future of ZZZZ Best was looking very bright indeed, and Minkow was quickly becoming one
of the hottest names in the business world.
Exposed
In 1987, at the height of ZZZZ Best's rise, the company was worth $280 million, trading
on the NASDAQ at $18 a share.
Barry's personal stock was worth about $100 million on its own.
The company employed over a thousand people who worked at offices in California, Nevada,
and Arizona.
Despite his company's outstanding growth and success, Minkow was still struggling to pay
back some of the loans he had taken for his fake restorations.
While he and his business were worth a lot of money, he didn't have a lot of cash flow
available to pay their expenses, and he couldn't sell his shares until the mandated two-year
period was over.
He came up with a master plan to solve this problem.
A massive merger with a company called KeyServ was put into motion.
KeyServ, which was twice the size of ZZZZ Best, was the official carpet cleaner for
Sears.
Minkow planned to buy the company outright for $25 million, absorbing all of their assets
- and all of their cash.
He believed that KeyServ's revenue would total more than enough to pay off the loans and
legitimize ZZZZ Best even sooner than was originally planned.
KeyServ wasn't the only target of Minkow's aggressive strategy.
He also set his sights on ServiceMaster, which he intended to acquire through a hostile takeover
that would cost between 700 and 800 million dollars.
Minkow still wasn't done.
A deal to purchase the Seattle Mariners Major League Baseball Team was also in the works.
This would all be done in the hopes that Minkow would finally have the capital necessary to
end his Ponzi scheme before it was too late.
Unfortunately for Minkow, it was too late before it even began.
The event that ultimately toppled his house of cards had occurred years prior before Barry
even considered taking ZZZZ Best public.
Remember that homemaker that Minkow scammed a couple hundred dollars from?
Well, believe it or not, that disgruntled individual was the key in exposing all of
Barry's criminal schemes.
Days before the merger with KeyServ was finalized, the LA Times published a story detailing the
homemaker's experiences with ZZZZ Best's credit card scam.
She spoke with many other people who'd been defrauded by Minkow, documenting her findings
in a journal sent to the newspaper.
Barry had assumed the homemaker wouldn't cry over spilled milk and just opted to ignore
her.
Nonetheless, those few hundred dollars were enough for her to spring into action, and
her initiative proved to be Minkow's undoing.
From Under the Rug
As a result of the shocking LA Times exposé, everything Minkow had achieved came crashing
down in one fell swoop.
ZZZZ Best's stock price plummeted 28 percent overnight.
Duped lenders lined up to demand their money back.
Investigations were launched into the company's various operations.
In June of 1987, an independent law firm was brought in to closely inspect ZZZZ Best's
supposed restoration projects.
Not even a week later, Minkow resigned from his post as president and chairman of the
company, citing unknown health problems as the reason behind his departure.
Nobody was fooled.
He left because he knew his schemes were about to be found out, and he didn't want to be
anywhere near ZZZZ Best when that happened.
Once Barry resigned, a new board was formed to conduct a thorough internal investigation.
This investigation quickly uncovered the rampant fraud that Barry had taken part in for years
as the head man at ZZZZ Best.
Just days after his resignation, the company sued Barry, claiming he had fled with $23
million of the company's money, which forced them to file for Chapter 11 bankruptcy.
The LAPD raided the ZZZZ Best office and Minkow's house as well.
In addition to the elaborate Ponzi scheme, authorities also found evidence that the mob
had utilized ZZZZ Best as a money-laundering front.
This came as an ironic shock to many, as Barry Minkow had long been quite vocal in his opposition
to the widespread drug use of the '80s.
He had always forbidden the use of drugs by ZZZZ Best employees, even going so far as
to put up anti-drug posters around the company's offices.
Perhaps he was just trying to throw people off the scent of his ties to organized crime?
Maybe he felt guilty about his secret association with drug money?
Whatever the reason for his particular aversion to drug use, it was all a lie, like everything
else in his life.
Charged
As you probably guessed, Minkow was hit with heavy charges after his schemes were found
out.
He was indicted on 54 counts of racketeering, securities fraud, bank fraud, mail fraud,
tax evasion, money laundering, and embezzlement.
That pretty much covers it all, right?
Minkow tried to portray himself as the victim during the court proceedings, claiming that
he was pressured into turning ZZZZ Best into a Ponzi scheme by mobsters who were secretly
pulling the strings.
Years later, even Minkow himself admitted this was actually false and that he was the
true mastermind behind the fraud.
The jury saw through his lies, and in March of 1989, Barry Minkow was found guilty on
all charges.
He was sentenced to 25 years in federal prison.
In addition to the hefty jail time, Minkow was placed on five years probation and ordered
to pay $26 million in restitution for the victims of his financial crimes.
He pleaded for a lighter sentence, which the judge simply laughed at.
The SEC banned him from serving as the director of a public company ever again.
A teenager had turned his modest carpet-cleaning business into a publicly traded, multi-million
dollar company in a matter of years.
In a matter of days, it was all taken away.
New Beginnings?
While serving his sentence, Minkow turned over a new leaf.
He became a devout Christian, taking part in the prison ministry and seemingly repenting
of his past sins.
His new lease on life got him an early release just seven and a half years into his prison
stay.
He was committed to finally doing something positive with his life.
But unfortunately, you can't teach an old dog new tricks.
As we'll explore in the next video, that dog got back to his old tricks in a hurry.
Barry Minkow's schemes had only just begun.
Click to watch one of these next videos!