A few weeks ago, famed fraudster Barry Minkow was on 60 Minutes on CBS. Barry was a mere 22 years old when he was sent to prison for 57 counts of fraud, convicted of defrauding banks and investors with his company ZZZZ Best Carpet cleaning.
At age 20, ZZZZ Best was a $300 million company and Barry was the CEO. His fraud is so notorious, that colleges and universities regularly use the ZZZZ Best story as a case study in accounting classes.
Minkow started the company at age 16, eventually franchised it, and then took it public. He says that financial pressures caused him to lie and cheat, and it all started when he couldn’t pay his payroll. He borrowed money from the mob, fudged the books, and lied to investors about contracts he supposedly had with insurance companies to restore buildings damaged by water and fire. ZZZZ Best claimed it was doing restoration jobs to the tune of $50 million, when the company really wasn’t doing any.
Barry furthered his fraud by utilizing a well-known public accounting firm, and furnishing them with phoney paperwork (22,000 documents) to support the fraudulent numbers. When asked by auditors to see a restoration job, Minkow found a new building in Sacramento, paid a security guard $50 for access, and took the auditors there on a Saturday morning. The site was complete with ZZZZ Best signage and all.
When the fraud finally fell apart, investors lost $26 million on the scam. Barry Minkow spent over 7 years in prison, and he says he had an epiphany there. He came out of prison and got master’s degrees in religion and divinity, and has a church in San Diego.
Now, at age 39, Minkow is helping to expose fraud by going undercover for federal law enforcement agencies with his company Fraud Discovery Institute. The biggest case he helped crack involved Financial Advistory Consultants, a company run by James Lews, who is charged with defrauding investors of $300 million.
In addition to helping solve crimes, Minkow lectures college students, law enforcement officers, and exectives on white collar crime. He has also written a book about himself, called “Cleaning Up.”
Tags: fraudster, ZZZZ Best, fraud, public accounting, prison, Fraud Discovery, white collar crime
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