From Teenage Fraudster To Evangelical Pastor
Luke 19:8[Young teenager commits a multi-million dollar fraud, then gets saved in prison, becomes a pastor and shares his knowledge with others.]
__________________
Barry Minkow picked up the telephone one late spring morning in 1987 and knew right away that the game was up. Until that point, his life had seemed like a movie plot - the skinny 16-year-old from the LA suburbs who starts his own company in his parents' garage, hoping to impress girls, and ends up a celebrated teenage millionaire, paraded on Oprah, and lecturing in business schools. His carpet-cleaning firm, ZZZZ Best, had started with a loan of $1,600; within four years it was employing 1,400 people, and by the time Minkow took it public - crowning him the youngest chief executive on Wall Street by a stretch - the company was worth more than $280 million, and busily diversifying into lucrative restoration jobs on fire-damaged hotels and apartment blocks. He was stunning. The mayor of Los Angeles was so stunned that he declared an official Barry Minkow Day across the city.
So it was only to be expected that envious rivals would want to cause him grief. Perhaps it was even to be expected that he would have a team of fraud investigators on the phone, like he did now, demanding a guided tour of an upmarket apartment building that ZZZZ Best had renovated in Dallas. But there was something about the building in question which certainly wasn't to be expected, which was that it didn't exist.
Not existing, as it turned out, was a recurring problem with the diverse activities of the Minkow empire. In June 1987, two days before it was due to acquire a competitor twice its size for $40 million, ZZZZ Best collapsed - and Minkow, then 20, stood exposed as the perpetrator of a massive stock fraud which the court would later value at $26 million - probably an underestimate. For years he had been frenziedly negotiating slabs of investment worth millions of dollars for bogus projects he never planned to fund - he just needed the cash to pay for his staff, not to mention his Ferrari Testarossa and his mansion in the wealthy community of Woodland Hills.
Minkow ended up serving seven and a half years in prison, still something of a record for a white-collar crime. “Real prison, too,” he points out, “most of that time with a murderer for a cellmate, not 18 months in a golf-course camp.”
And so he has been watching with a certain wry detachment in recent weeks as the behemoths of the US economy - WorldCom, Enron, Arthur Andersen, Global Crossing; now Xerox; now Merck - have become mired in charges of fraud. This is partly because his mind is on higher things these days: for five and a half years he has been the senior pastor of the Community Bible Church in Mira Mesa, California, having found God in jail. (And he knows what you're thinking, by the way. “I'm not allowed to sign cheques and my name isn't on the bank accounts,” he says. “I don't want to be in that position.”)
Mainly, though, it's because he thinks he knows what was going through the minds of Kenneth Lay, Bernie Ebbers and their ilk. The FBI thinks so, too, and has hired him to give seminars to its investigators. Minkow also performs “fraudits” on behalf of the Fraud Discovery Institute, which he co-founded.
“Everyone I met in prison had one thing in common - they never planned on being there,” he says, talking loud and fast and expansively, still with a salesman's charm, using my name at every possible opportunity. “And not one of those companies went into business to defraud. Not one. Neither did I. What people don't realize is that fraud is always a means to an end, never an end in itself. There is always a rationalization: I'm going to do this now, and it's tough, but next week we're gonna get some big carpet-cleaning jobs, whatever, and we're gonna make it back, pay everyone back, nobody's gonna be hurt - and that will be the cure.”
ZZZZ Best started out real enough. Minkow wanted desperately to be popular at school, to find a girlfriend; his twin strategy involved taking steroids to boost his muscles and starting his own business. He chose the logical line of work: his mother had a job cold-calling for a carpet-cleaning firm, and he had an after-school job actually cleaning them. Once he had his own equipment - bought with a loan from a friend - he hired his mother to work the phones, basing the fledgling enterprise in the family garage. Within months, he had more employees and made it on to the local television news, slacking on his schoolwork in his quest to become the carpet-cleaning king of California.
The publicity began to snowball. People magazine caught on, and Oprah, and Newsweek, and the business magazines - and Tom Bradley, the LA mayor, with his plan for a civic celebration of youthful brilliance that caught even Minkow by surprise. “Celebrity was a tool to attract money,” he says. “It isn't like the mayor sent in a team of accountants to audit my books before he declared Barry Minkow Day - but the impression investors got was that he did. When I did Oprah, the impression was given that they'd checked me out, but, of course, they hadn't.
“That's how it works: the bank gives the loan because the numbers were done by Arthur Andersen. Arthur Andersen took on the job because the law firm was one of the Big Ten, and they'd surely have caught on if anything was wrong... And on it goes.”
Everything happened very fast indeed after that. Minkow retained Wall Street lawyers and reputable accountants, using credibility to attract investment and investments to buy credibility. He planned a public stock offering, and ZZZZ Best expanded into “insurance restoration” - renovating buildings damaged by smoke and fire - while Minkow spun tales of 40% profit margins, winning another $15 million investment.
The company finally went public in a blaze of media coverage in 1986, catapulted into a stockmarket as dizzy as one that would follow a decade and a half later on the back of the internet boom. Within weeks, shares in ZZZZ Best soared from an initial offering of $4 to $18. Nobody was in the mood for asking questions - which was unfortunate, because Minkow might have had difficulty answering them.
Ever since the company's earliest days, in fact, he had been stealing to boost growth and make ends meet. It began, as he explains it, with “money orders stolen from the money order place at Rick's Liquor Store in Resada”, but it quickly escalated.
“There are two days in my life I remember especially,” he says. “One is when I first started taking steroids, aged 15. I was in the bathroom, and I remember closing the door and thinking the pill was so small, how could it do the things they said? I took it and I knew I had crossed the line: I wanted to be strong now, who cares if you can't have kids when you're 30? Live for the now. Very existential. Jean-Paul Sartre. Camus.
“And then there was the day I decided: I want to be successful this year. This quarter. Not later. That's when I rationalized. I'd have some big carpet-cleaning jobs coming up, and it would all work out.”
For a long time it did: Minkow had quickly moved on from Rick's Liquor Store to obtaining bank loans on spurious grounds; by the time ZZZZ Best had moved into insurance restoration, he had been operating a massive, precarious pyramid scheme, taking in millions and paying off his early investors with money from later ones. It looked like a house of cards, but Minkow had a cure: the public offering had been part of the plan, a surge of income that would allow him to pay off his investors, and then, as a player on Wall Street, build a legitimate business.
As in the recent corporate scandals, it was not the accountants and the auditors who toppled Minkow's pyramid, although in his case they seem more criminally gullible than conspiring. There were thousands of documents to prove that ZZZZ Best's business was legitimate - they were all faked, of course - but when a team of accountants, undertaking routine due diligence, finally asked to see a restoration project in action, Minkow fooled them with an act that this time made his life truly seem like Hollywood. At the last minute, he rented a half-finished building in San Diego, stationed ZZZZ Best staff to stand around with rolls of carpet nearby, and presented it to the accountants as a typical example of the company in action.
They scared him three months later by asking to see the finished project. He pulled it off again this time by re-renting the still unfinished building and, astonishingly, renovating it from scratch in 20 days [at a cost of $2 million].
Going public had not quite proved the panacea he had hoped, but by now he was within 48 hours of another cure: the acquisition of KeyServe, a rival firm, using a $40 million outside investment masterminded by the junk-bond king Michael Milken.
But then there was the Mafia. Minkow had bumped into a Mafioso on a carpet-cleaning job months previously, and by this point one of his biggest institutional investors was the Genovese crime family of New York. It was investigators chasing the Mob who finally caught up with the chief executive of ZZZZ Best. Then a newspaper excavated an old tale of credit-card fraud - one of Minkow's earlier fundraising plans - and then he got the phone call asking him to demonstrate that he really had undertaken a renovation in Dallas. This time the investigators were on the lookout for fraud, and Minkow, exhausted, did not try to fool them.
“Things go from order to disorder,” Minkow explains today, slipping into seminar mode. “This is one of the laws of what I call fraudodynamics. Let's say Nick Leeson got the one good trading day he needed to cure the fraud. Well, he's reinforced subconsciously the idea that he can do it - faced with pressure, he'll do it again. Do you think Nick Leeson's first trade was a billion? Of course not. And if I could have survived, I would have been able to sell my restricted stock, unload a million shares, get close to $20m in cash, pay off the Ponzi scheme and go forward.”
These days he visits executives while wearing an orange prison jumpsuit, telling them: “Look. I know you think you can be one good trading day away. But if you lie, you're going to be wearing this jumpsuit for eight Super Bowls.”
There is one further lesson from the ZZZZ Best story that Kenneth Lay and Bernie Ebbers might like to consider: you can say sorry, even pay back the people you robbed, and the sky, surprisingly enough, does not fall in. Minkow has been paying back his victims - mostly institutional investors - at a rate of around 95 cents to the dollar ever since he got out of jail, first under the terms of his probation and now, he says, because his religion requires him to. One major creditor has received $100,000 so far; Minkow says he pays between $750 and $2,000 a month into restitution funds. At a recent hearing connected to his probation, the judge who first sentenced him praised the fact that he was “on a straight and narrow path” and thanked him for his annual Christmas card.
“I do some prison visiting, and everybody there tells me: you're an idiot, you're a moron, you served the time, so why pay and get hit twice?” Minkow says. “But God would have you pay back the money even if you did the time. Unfortunately. That's what I hate about my faith. I had to get this faith where there's no way out. I'd love to tell them to take a flying leap.” He sighs. “But I can't.”
=============================
U.S. News and World Report, May 10, 2004, page EE14, by Randy Dotinga:
When former federal prosecutor James Asperger first laid eyes on Barry Minkow in a California courtroom in 1988, he saw all the traits of a financial kingpin in the musclebound “whiz kid” of Wall Street. “He was cocky; he was charismatic; he was arrogant,” Asperger recalls. “His talents and charisma were so strong that he could have succeeded in a legitimate enterprise.”
But he didn't. Minkow was a white-collar crook extraordinaire, a greedy college-age swindler with an eye for the ladies and the loot. Now, 16 years and one prison term after his conviction on fraud charges, Minkow spends his days telling businesses how to watch out for the likes of him -- the old, lawbreaking him, that is. In presentations before everyone from FBI agents to corporate CEOs, Minkow confides the secrets of hiding debt and faking revenue. Follow the money, he says, and, perhaps even more important, follow the postman. “When we go on a job, the first question I ask is who gets the mail. They think I'm crazy,” Minkow says. “I know that to hide debt we had hidden bank accounts nobody knew about.
His company also provides consulting and has exposed an estimated $1 billion in fraud. “I had to do eight Super Bowls in prison,” says Minkow, 38, who lectures in an orange prison jumpsuit. “When you've done that kind of time, you get credibility.”
Minkow began his career with a carpet-cleaning business in his family's Los Angeles garage, which he expanded into a home restoration empire. “Barry represented the perfect Republican dream - a 16-year-old kid starts his own business in the valley while he's still in high school and builds it up into a multimillion-dollar organization,” says journalist Joe Domanick, who wrote a book about Minkow. But Minkow had built his ZZZZBest by defrauding investors. By 1988 he went on trial, at the age of 21. A judge ordered him to pay restitution and handed down a 25-year sentence.
Minkow served nearly eight years and, armed with two master's degrees in religion, now serves as pastor of Community Bible Church, a nondenominational evangelical Christian congregation in San Diego. “Everybody thought I'd he one of those born-again-until-you're-out-again people,” he says, but his faith persisted.
Married to a former makeup artist, he lives modestly in a beach town and just traveled to Guatemala to adopt 1-year-old identical twin boys. His conviction, however, will always follow him. While he's been released from parole, Minkow is still making payments to a bank. And he discloses his past on his church's Web site and from the pulpit. “When I getup there, I'm worse than anybody in my congregation,” he says. “I always let them know that.”
============================
From Barry's church website at http://www.cbcsandiego.com/Pastors/barry.html:
At the age of 16, Barry Minkow started a carpet cleaning company in the family garage. By age 20, he had a 240 million-dollar company and was referred to as the “whiz-kid” of Wall Street. After milking highly educated investors out of millions of dollars, Barry's scam came to a sudden halt when he was arrested in 1987 at the age of 23 and sentenced to 25 years in the federal prison. Against all odds, and with a 26 million-dollar court awarded restitution nailed over his head, Barry decided it was time to make a change.
After accepting Jesus Christ as his personal Savior and receiving God's unmeasurable forgiveness, Barry headed down a new path. It was a path of restitution and comeback. While in prison, Barry accepted the role of heading up the prison's religious services. He spoke to his fellow inmates every Sunday and shared the gospel of grace and mercy that God offers to anyone who will receive it.
During his time in prison, Barry felt the calling of God in his life. With a call to the ministry and an unquenchable fire burning in his heart, he headed his life full speed ahead in that direction. After serving 8 years of his sentence with an unblemished record and with the recommendation of the sentencing judge, Barry was released into society. In the judge's own words, “Barry can do more for his victims out of prison than he can in prison.”
While in prison Barry earned a B.A. and a Masters of Arts degree in Church Ministries (with an emphasis on Theology and Apologetics) from Liberty University. In 1996, he earned yet another degree, a Masters of Divinity, also from Liberty. After his early release from prison, he was called to work as Director of the Bible Institute and Pastor of Evangelism at the Church at Rocky Peak. In March 1997, Barry was called to become the Senior Pastor of Community Bible Church in San Diego, California. Since that time the church has more than doubled its attendance and a tremendous outreach has begun.
*
[Original illustration at this number was a duplicate of HolwickID #19677]
