New Lease on Life
In case you missed the first part of our deep dive into the crazy life of
infamous con man Barry Minkow, watch Part 1 here.
We left off where Minkow had just turned over a new leaf while serving
out a 25-year prison sentence for his $300 million Ponzi scheme.
Clean Sweep Minkow was released just 7 years
into his prison term. Inside, he had undergone some personal changes, becoming a devout Christian
and founding his very own jailhouse ministry. His new lease on life earned him an early release.
Keep in mind; he was still in his early 20s when he was first locked up. He'd already been
the CEO of a multi-million dollar company and spent 7 years in jail before ever cracking 30.
The world was pretty much his oyster, even though the SEC had banned him from
ever serving as President of a public company again. Nevertheless,
he was still a young man with plenty of paths to take with the rest of his life.
His first order of business was putting pen to paper and telling the world about his rise to
the top of a criminal carpet-cleaning empire. His tell-all book was titled
"Clean Sweep" in a tongue-in-cheek reference to his days cleaning rugs.
It was released in 1995, and in it, Minkow came clean about his many misdeeds while at
the helm of ZZZZ Best, his fraudulent carpet-cleaning business that stole
millions from investors. The book also told of his dramatic change of heart while in prison.
He swore to do right by those he'd had wronged.
100% of the book's proceeds went directly to the victims of his schemes,
and it seemed like Minkow had ditched his old ways and had nothing but good intentions.
Pastor Barry In 1997,
Barry took another big step forward in his effort to distance himself from the sins of
his past. He joined the staff at Community Bible Church in San Diego, California,
becoming their senior pastor just two years after getting out of prison.
During his time in the slammer, Barry had earned a Masters' degree in divinity
from Liberty University's correspondence course offered to inmates, so his qualifications were
up to snuff. Even so, one might question a church's decision to bring on someone with
such a prolific criminal record to lead their congregation. But Minkow got his chance,
nonetheless. Perhaps his redemption story was enough in the eyes of God?
In the sermons he gave at Community Bible on Sunday mornings, Minkow seemed to ignore
the fact that he had once been arrested for running a $300 million scam as he rattled
off biblical lessons to his congregation. His first message actually centered around fraud,
but not the kind of fraud you're thinking of. Rather than talking about Ponzi schemes,
Minkow took aim at the concept of evolution, going to great lengths to
try and disprove Charles Darwin's scientific ideas and making a point to call it a "fraud."
A little ironic coming from the king of fraud himself, wouldn't you say?
Minkow immediately impressed the attendees of Community Bible Church,
who he quickly won over with his command of scripture and confident, easy-going style of
preaching. No one seemed to care that the man behind the cloth was an ex-con who had
very recently been released from jail, and there was no suspicion that Barry might be conducting
another scam through the church. To the folks at Community Bible, he was just Pastor Barry.
Fraud Discovery Institute Minkow's supposed change of
heart went beyond his newfound Christian faith. He got involved in weeding out potential scams
and schemes like the one he had operated for much of his teenage years. It all started when
one of the members of his congregation came to him with concerns about a money management firm
in Orange County called Financial Advisory Consultants, which the churchgoer suspected
was taking part in some sort of financial scam. Minkow agreed to look into the company
to see if they were actually as shady as this person said. Upon doing so, Minkow uncovered a
$300 million pyramid scheme being run by the investment firm. Guess it takes one to know one.
Minkow got more than just a pat on the back for his investigative efforts;
he found a brand new career. After discovering Financial Advisory Consultants' massive scam,
Minkow founded a for-profit organization called The Fraud Discovery Institute, or FDI.
As the name implies, the investigative firm focused on exposing companies that were engaging
in financial fraud. Again, it's more than a little ironic coming from a guy with Minkow's past.
Still, it served as yet another indication that Barry was fully
committed to repenting for his mistakes and actually trying to do some good in the world.
The Fraud Discovery Institute started out exposing small-time scams from penny stock companies you've
probably never heard of. Minkow wanted to build his brand's reputation as genuine fraud-busters.
This strategy seemed to work, as the FDI soon garnered the attention of mainstream media outlets
who found the glorious irony of Minkow unveiling frauds far too delicious to
ignore. The firm was spotlighted in The Wall Street Journal and Bloomberg, both of which
started to publish news of the FBI's findings whenever Minkow came out with a new report.
Barry even got a regular guest spot on Neil Cavuto's show on Fox News
to tell viewers of any new scams he had recently caught wind of.
Minkow's efforts at the Fraud Discovery Institute led to the uncovering of over a billion dollars
in financial scams across the many cases he investigated. As a reward for his good behavior,
his court-ordered probation came to an end in 2002. He was officially a free man,
and he continued to work hard at exposing financial fraud in the business community.
60 Minutes In 2005,
Minkow and his firm reached new heights of fame and prominence after they received
a profile on 60 Minutes. The showcase on primetime television
gave viewers an inside look at the investigative operations of the Fraud Discovery Institute.
Minkow clued the producers of 60 Minutes into the fact that he was hot on the trail
of a Dallas investment firm that he suspected of financial wrongdoing. Seeing this as the perfect
opportunity to create some must-see TV drama, 60 Minutes hooked Minkow up with a hidden camera as
he met with the company in question. He posed as the pastor of a church that wanted to invest
in the Dallas firm, hoping the meeting would lead to the discovery of some sort of scam.
Nothing officially came from the high-profile TV investigation.
Authorities could not uncover sufficient evidence to charge the company of any crime. Still,
Minkow's big moment solidified his reformed image in the eyes of the public. His help in exposing
fraud made him something of a sympathetic figure to many despite his criminal past.
There was even a movie put into production that centered around the redemption arc his
life had taken. The film, originally called "Minkow," went into production
on a budget of $4 million, starring such notable Hollywood actors as James Caan,
Ving Rhames, and Luke Skywalker himself, Mark Hamill. Barry Minkow thought it was best to
play himself in the movie, but the film was never released in its original form.
Before it was ever finished, Minkow's personal redemption story took a dark turn.
Short Selling
What happened, you ask? Well, before we get to that, we should first take a look
at how Minkow was making money through the Fraud Discovery Institute. As we mentioned,
it was a for-profit company, and Barry's meager salary as pastor at Community Bible Church
wasn't enough to satisfy his lust for riches, a lust that was still burning
inside him. He looked to his new fraud-busting business to supplement his income. But how?
The FDI brought in money through the process of short-selling stocks.
In the simplest of terms, shorting stocks is betting against a particular company.
In practice, this involves borrowing stocks of a company that you anticipate will be decreasing in
value very soon. By selling that stock now, you can then buy back the stock once the price has
dropped, replacing the stocks you originally borrowed and pocketing the resulting profit.
Minkow partnered up with a businessman named Sam Antar, who just so happened to be a well-known
scam artist in the '80s, much like Minkow. Together, the pair got to work identifying
potential targets of their stock shorting scheme. Now, it's important to understand that
shorting stock is not technically illegal. What is illegal is a process known as short and distort,
which Minkow and his firm were commonly accused of around this time.
Basically, shorting and distorting involves shorting a company's stock and then spreading
negative rumors and information about that company to ensure the shorted stock yields a profit.
Minkow and Antar were, in essence, doing a version of a short and distort fraud. They were shorting
the stocks of companies being investigated by Minkow's Fraud Discovery Institute,
which were obviously vulnerable to drops in the stock market because of the bad PR
associated with being investigated for fraud.
Minkow had himself a nice little side hustle with his short selling of stocks,
a side hustle that was putting hundreds of thousands of dollars in his pocket at a time.
It became a step-by-step process that Minkow and his associates followed to get their hands on
lots of extra cash. He would target big companies with high stock prices for his FDI investigations,
companies like USANA, Herbalife, and NuSkin.
After launching his investigations and making public comments accusing these companies of
financial malpractice, Minkow would short their stocks. The supposedly reformed hustler netted
quite the profit, as these companies consistently experienced steep plummets in their stock prices
following FDI's declarations against them. The companies would then file lawsuits against Minkow,
but these never went as planned. After sinking thousands and thousands into seemingly endless
legal fees and getting nowhere in the courts, the defamed companies would opt
to settle with Minkow on their own, giving him hefty settlements in exchange for his silence.
Simply put, Minkow shorted your stock, badmouthed your company,
profited off your downfall, and then dared you to sue him. When the lawsuit
inevitably fell through, he happily accepted a cash payout to shut up.
It didn't matter if the claims Minkow made had even a sliver of truth to them.
By taking advantage of the systems in place, he could profit regardless of
the truthfulness of FDI's cries of fraud. In the case of Herbalife, the company ended up
paying Minkow $300,000 just to shut up. So he did, laughing all the way to the bank.
Simply Greed Many would question the
morality of Minkow's greedy business practices. But it didn't matter. He was getting away with it
anyway, and as long as it was lining his pockets with cash, there was no reason for him to stop.
In 2009, Minkow slipped up. His eyes got a little too
big for his wallet when he targeted a big-time real estate company known as Lennar Corporation.
Off the back of a tip given to him by a San Diego real estate developer named Nicolas Marsch,
Minkow decided to short Lennar stock after publicly accusing the company of rampant fraud.
Initially, it worked, as Lennar's stock took a nosedive following Minkow's report.
Nicolas Marsch claimed that Lennar Corp. owed him hundreds of millions of dollars
related to some property he had developed. He took out a $7 million bank loan he planned on
repaying once Lennar finally paid him back. As time passed and Marsch's legal battles
didn't seem to be nearing a conclusion, the bank became increasingly concerned
that, worried they'd never see that $7 Million. If Marsch didn't pay them back, the bank would likely
go under. This meant bad news for the small bank and all of their clients. One of those
clients? None other than everyone's favorite fraud-turned-fraud-buster himself, Mr. Minkow.
Minkow got in touch with Marsch to try and help him in his case against Lennar,
and that's when Minkow's very public fight with the real estate company first materialized.
Minkow was the winner in the court of public opinion. He had become something
of a media darling since reforming his reputation and getting those
all-important spotlights in The Wall Street Journal, and on Fox News and 60 Minutes.
People had thoroughly bought into Minkow's incredible story of redemption,
and they weren't ready to give that up over some shady real estate company in California.
Insider Information Maybe they should have, though. As
it turns out, what Minkow was doing wasn't legal this time. You see, in Minkow's attempt to make
a profit by short-selling Lennar stock, he was using information that had not
been disclosed publicly to inform his stock buying decisions. Nicolas Marsch's lawsuits
against Lennar were not public knowledge, and the fact that Minkow himself knew about it when
shorting their stock caused his actions to fall under the charge of insider trading.
In March of 2011, Minkow pleaded guilty to that single charge of insider trading, although he
claimed to have no idea that his actions were at all illegal. But they were all the same, and he,
therefore, faced major legal consequences yet again. If the case had gone to trial,
he would have faced a minimum of 30 years in federal prison, but his guilty plea knocked
that down to 5. In June, he was ordered to pay a whopping $584 million in damages
to make up for all of the stock Lennar had lost due to his faulty FDI report.
As his whole life was crashing down around him once again, Minkow resigned from his position
as senior pastor at Community Bible Church. However, around the time of his resignation,
a sum of $50,000 was stolen from the church in a mysterious burglary. Minkow had been
known to stage burglaries as part of his ZZZZ Best insurance scams, so there were more than
a few eyebrows raised at the possibility that Minkow himself was behind the robbery.
He denied any involvement in the theft, but he had more pressing matters to attend to, anyway.
After successfully making a new life for himself following his first stint in jail,
Minkow went right back behind bars in September of 2011 because of insider trading.
Can’t Stop Scamming Minkow's troubles weren't through,
either. Several members of the Community Bible congregation came out and said that
their former pastor had scammed them out of a whole lot of money. The accusations detailed
several instances in which Minkow had used church funds and donations from church members for his
personal interests. One such example was an elderly woman who claimed Minkow had swindled
$300,000 from her to help finance that Hollywood biopic we mentioned earlier. He
ultimately embezzled a total of $3 million from the church during his time as pastor.
Minkow pleaded guilty to conspiracy to commit bank fraud, wire fraud, mail fraud,
and defraud the federal government in January 2014 while still serving his insider trading sentence.
This new batch of fraud charges tacked on another 5 years to his prison term.
Once a con, always a con. Minkow couldn't ditch his hustling ways,
no matter how hard he seemed to try or how many people he successfully duped. The many scams he
took part in over four decades finally caught up to him for good, and it's unlikely he'll
ever have a penny to his name again, given the excessive amount of restitution he still owes.
So, what happened with his movie—the one that detailed his triumphant redemption
story—the one where Minkow was playing himself?
Well, rather than be thrown entirely out the window following Minkow's second trip to prison,
the filmmakers decided to make some very significant alterations to the script,
specifically, the film's ending. Justin Baldoni was recast to play a young Minkow,
and the movie ended up having a more comprehensive and critical
outlook on Barry Minkow's life than it initially did. Aptly titled "Con Man,"
the film was released in 2018. Minkow does appear in the movie to portray his middle-aged self.
The end product probably wasn't what Minkow envisioned when he first started working on a
movie about himself. But, like every great film, his life took a series of unforeseen twists and
turns, and a much more critical biopic is simply one of the many consequences he's had to face.
Minkow's Future In June of 2019,
Minkow became a free man once again. But given the crippling weight of restitution
payments and the fact that no one will make the mistake of actually trusting him ever again,
we're pretty sure his scamming days are officially over. But who knows? If anyone
could find their way back into trouble, it seems like Barry Minkow is a likely candidate.
A docu-series about Minkow's various scams is currently in the works by
the creators of the hit reality show Intervention.
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